Deloitte Report reveals businesses that don’t consider Blockchain ‘Risk Falling Behind’. Blockchain, in many ways, appears to signify the dawn of a new era as it relates to the way we store and exchange value.
In fact, it can be considered one of the biggest technology breakthroughs in recent history, similar to the advent of the Internet in the early 1990s. At that time, the Internet provided a new and more sophisticated way to search and share information, a way that was much more efficient and transparent.
Blockchain technology offers a way of recording transactions or any digital interaction in a way that is designed to be secure, transparent, highly resistant to outages, auditable, and efficient. A blockchain simply shares data you select with specified parties so that they can see the same information you’re seeing at the same time. As such, it carries the possibility of disrupting industries such as financial services, remaking business practices such as accounting and auditing, as well as enabling new business models.
Business blockchains are being used today to help reinvent how transactions are managed
Recently released report by Deloitte, Crunch Time IV: Blockchain for Finance, has revealed that the financial services industry is generating the greatest interest in and activity surrounding blockchain, with applications for both public and permissioned blockchains being explored which could dramatically simplify middle and back-office processes and reduce settlement risk.
The research for this report was conducted and compiled through client experiences and input from professionals who have had client conversations as well as implemented Blockchain capabilities globally.
Blockchain has the potential to reshape processes that are defined inside finance, primarily because of its cost and control benefits. Although, Blockchain is still fairly new, many leaders in the financial services are taking it seriously, making this industry the one most likely to feel the technology’s impacts first. Businesses with challenges such as costly slow or unreliable transactions, or that serve markets with underdeveloped payments systems or large numbers of unbanked customers, have good reason to look closely at blockchain as a useful underlying technology.
Due to the fact that blockchains rely on self-executing smart contracts and that the transactions are irreversible, many auditors and regulators see the technology as a way to save time and improve compliance. Over the next five years, blockchain technology could upend how businesses and marketplaces operate completely. Even more interesting, though, is the impact on the broader business processes that intersect with finance such as supply chain management.
Examples of blockchain applications that are getting underway across different industries and sectors include:
- Consortium of retailers, producers, and freight providers collaborating to ensure the integrity or authenticity of products through blockchain. Products include organic products, jewelry, prescription drugs, and replacement parts.
- In the healthcare sector, an example would be a group of companies working together to track deductibles and out-of-pocket expenses across providers, insurance and prescription plans, pharmacies, life science companies, device manufacturers, patients, and employers.
- Companies, customers, and even regulators are working together to monitor the manufacturing, sales, registration, and maintenance of large-ticket assets in aerospace and defense, transportation, industrial equipment, and electronics.
For many, blockchain is colored by skepticism about cryptocurrencies like Bitcoin, Ether, and Ripple where in those arenas, it seems as though the risks can often outweigh the benefits. That doesn’t mean there aren’t opportunities for pioneers to capture value.
The growth of blockchain technology is driven by many factors such as:
- Benefits from declining costs and rising capabilities in computing, storage, and bandwidth. This enables multiple nodes in a blockchain network to connect and act in a seamless manner.
- Increased globalization and digitization of businesses. Maintaining trust can become expensive, time consuming, and inefficient. Blockchain’s immutability would increase the reliability of data and counterparties with reduced chances of fraud, thereby increasing trust. An example is that of two business parties transacting would not need to maintain their own record of the transaction and would use the blockchain as a single source of truth instead.
- Decentralized business models are becoming more common in a world of the “sharing” economy. However, these models still have large aggregators that control the information and systems, implying unequal redistribution of value among all contributors. Blockchain can democratize the value exchange in sharing-economy businesses by removing the need for centralized aggregators.
While the above factors, among others, seem to be driving blockchain’s adoption, there are certainly some challenges that should be tackled to ensure wider and smooth adoption of the technology.
Those challenges include:
- Low awareness and understanding of blockchain technology. To remedy this, executives can connect with industry thought leaders, get access to existing use cases, or connect with industry associations.
- There is a lack of uniform standards and best practices on blockchain technology even as new blockchain-based solutions are being developed. Industry players would need to collaborate better to build uniform standards and protocols rather than develop their own internal versions.
- Regulations have not kept pace with the advances in technology. Any regulation that recognizes blockchain applications, including smart contracts or digital identities, can provide a big boost to its adoption. Industry players can work in tandem with the regulators to devise enabling regulations in a phased manner. Similarly, smart contracts’ validity is not yet recognized in court, although many states and countries are reportedly working toward it.
Blockchain as a technology seems too valuable to be ignored. It could take a few years before we see wide commercialization of blockchain platforms and applications. While many challenges may remain, from lack of regulatory and legal frameworks to rapid technology changes, from talent gaps to consortium building, it is important to not underestimate the impact of blockchain.
Every transaction platform and fabric that we know today will likely be either improved or replaced by a blockchain-based solution.