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The Long Story Short - What’s the deal with enterprise blockchain?
How are businesses using blockchain?
(Note: companies that could be impacted by the content of this article are listed at the base of the story (desktop version). This article uses third-party references to provide a bullish, bearish and balanced point of view; sources listed in the "Balanced" section)
Businesses are finding that blockchain, the technology behind Bitcoin and other cryptocurrencies, has far wider and more useful applications than creating speculative digital currency markets. Blockchain is essentially a record-keeping system, however, it is unique in that it uses a distributed ledger system making it more tamper-proof than other databases and free from centralized control. While the early iterations of this technology have been overshadowed by cryptocurrency, businesses are now seeing blockchain’s true potential as a tool to solve complex problems and streamline complex processes. Could blockchain lead the next technological revolution or is it all just hot air?
It’s an adaptive tool. Businesses across industries are finding diverse and creative applications for tasks like sorting medical records, trading carbon credits, verifying the ethical sourcing of minerals, or tracking a freshly caught tuna from the South Pacific to your grocery store. A plethora of blockchain startups are racing to convince governments and corporations that blockchain can improve their operations. Major cloud-computing platforms like Amazon, IBM, Microsoft, and Oracle are also experimenting and finding uses for the technology. Some companies offer a scalable blockchain system that could be plugged into any supply chain network; others offer highly customized blockchain systems that meet the unique business needs. The potential applications of this technology are seemingly endless.
Huge potential savings. Finance, in particular, has been identified as an industry where blockchain could streamline operations while enhancing security. In fact, Santander, a bank, estimated that blockchain could save the financial industry up to $20 billion in back-office costs annually. For example, The Depository Trust & Clearing Corp (DTCC) stores the records for $48 trillion worth of stocks, bonds, mutual funds, derivatives, and other assets. On a daily basis the DTCC must maintain records for about 90 million transactions coming from thousands of financial institutions located in 130 different countries. Executives at DTCC believe that blockchain could help them handle this massive database. In a few months DTCC plans to conduct the largest live implementation of blockchain on records related to $10 trillion worth of credit derivatives.
Barriers to implementation. While a blockchain’s inability to be changed or manipulated is its greatest strength, it could also be its greatest weakness. For example, in order to comply with European data-protection laws companies must be able to remove an individual’s data from company servers upon request. Once an individual’s data is added to a blockchain, it is impossible for it to be removed due to the nature of distributed ledger systems. Blockchain could be a very efficient tool in storing medical records, but similar data-protection rules exist for medical data storage in the US creating a big obstacle for implementation. The lack of a “delete button” makes the practical application of the technology very difficult.
For many, it’s not worth the hype. The Bank of Canada abandoned efforts to implement a blockchain system for domestic payments after they found the existing system to be just as efficient and secure. Other firms, whose industries rely on certificates of authenticity like diamonds or luxury handbags, have uses for blockchain-powered certificates. However, blockchain can only reassure customers that the certificates have not been tampered with, but that doesn’t guarantee anything for the underlying item. Again, it’s not much of an improvement on the existing system.
Organizations are investing heavily in the technology. Blockchain may be fueled by its hype or its value, but either way the technology has inspired a massive amount of investment. Crunchbase, a business-information firm, estimates blockchain startups raised $950 million from venture-capital firms in 2017. According to the International Data Corp., total corporate and government spending on blockchain is expected to reach $2.9 billion in 2019 up from $1.5 billion in in 2018, and they expect that by 2022 spending could reach as high as $12.4 billion. With this amount of investment going into the technology, it is reasonable to expect that blockchain will play some role in future businesses.
The promise of the blockchain technology, The Economist, August 30, 2018
Blockchain Goes To Work At Walmart, IBM, Amazon, JPMorgan, Cargill and 45 Other Enterprises, Michael del Castillo, Forbes, April 16, 2019Blockchain, Explained, Luke Fortney, Investopedia, February 10, 2019