Since the birth of Bitcoin in 2008, people the world over have woken up to the transformative potential of blockchains. While there have been obscure applications in the past, the role of blockchains in vastly improving operations and business processes has been realized only recently. The boom of cryptocurrencies is a phenomenon unto itself. A by-product of this has been the proliferation of blockchains, accompanied by in-depth research and application across a wide range of industries. The universality of this technology rests upon its ability to decentralize trust. Alex Villamarin, Chief IT Architect in IBM LATAM, points out that by making transparency absolute, blockchains are helping solve problems across industry sectors without requiring the need for a centralized mediator. A WinterGreen Research report projects that the blockchain market size will grow to USD 60 billion by 2024. A major chunk of this market will be driven by conglomerates and governments. And they have already started making moves.
Large Enterprises using Blockchain
From research to patents to proof-of-concepts to applications, multinational corporations and industry giants have made big inroads in blockchain. As of August 2018, Mastercard, IBM and Alibaba topped the list of companies with maximum patent applications in blockchain and related technologies with 259 patents between them. Bank of America came in a close fourth with 53 patents. Other big names in the list include Google, Visa, Intel, Accenture and Sony. So what does blockchain help with in these mega corporations? Logistics, business processes, rewards programs, corporate governance — you name it. Moreover, since blockchains are essentially datatype agnostic, they find widespread applications. Here are some examples:
IBM’s blockchain-enabled shipping and logistics platform, Tradelens, now carries nearly half of the global shipping data after major ocean carriers CMA CGM and MSC joined it. J P Morgan has developed an inter-bank payment platform known as the Interbank Information Network. Built on blockchain tech, this platform boasts participation of over 340 banks from all over the globe. Goldman Sachs and Morgan Stanley have also been using a blockchain based payment service, developed by IBM in conjunction with CLS. Microsoft has devised means for improving machine learning models using the Ethereum blockchain and smart contracts.
Retail giant Walmart is collaborating with IBM to implement a blockchain solution to improve food quality and safety. Using this, food materials will be securely tracked all the way from their place of production to Walmart’s shopping shelves. China’s biggest e-commerce platform Alibaba is also reportedly planning to use blockchain for supply chain management, particularly for cross-border tracking systems. MasterCard and American Express plan to use blockchain technology in their payment solutions in the near future, which is already apparent from the number of blockchain related patents that they have been filing. The Depository Trust & Clearing Corporation (or DTCC, which provides clearing and settlement services in financial markets) has announced the start of a project to move its credit derivatives worth USD 11 trillion to a permissioned blockchain. In November last year, 15 banks joined DTCC to start testing the platform.
Luxury goods behemoth LVMH, Microsoft and Consensys have launched a joint venture to improve product traceability and fight counterfeits using the Ethereum blockchain. Investor communications company Broadridge Financial Services has started conducting blockchain-based proxy votes (a process for absentee shareholders to vote on corporate resolutions) for greater transparency. Thanks to this, shareholders do not need to go through custodial banks anymore for their votes to count. DLT-based votes happen in realtime and are immutable, thereby improving corporate governance. And any such discussion would be incomplete without a mention of Libra, Facebook’s blockchain powered payment solution, which is supported by leading enterprises such as Visa, MasterCard, eBay, PayPal, Lyft, Spotify, Uber, and many more. Libra’s journey to from idea to fruition will be a learning curve for all fence-sitters.
Global Governments using Blockchain
Public sector corporations and governments across the world are also studying, experimenting and implementing blockchain solutions to raise governance and improve public policy issues. Some of the areas of application include storage of data, reduction in time and abuse of bureaucratic processes, improving social justice and healthcare etc. Kevin Werbach, professor of legal studies and business ethics at Wharton, says that in times of low government credibility, a trustless system like blockchain is valuable. Because of their self-incentive structure to secure the network, blockchains are inherently accountable to themselves which helps already overhead-laden public bodies since they require minimal resources to operate.
Dubai aims to become the “first city fully powered by Blockchain by 2020”. Accordingly, they have set up the Dubai Blockchain Strategy to realize this vision. One of the actionables of this strategy is to move all government document processing (visa applications, bill payments etc.) onto blockchains. Switzerland’s Zug (also known as Crypto Valley) piloted its first blockchain-based e-vote trials last year. Results indicate that the pilot was successful and voters have opted for more blockchain based elections in the future. The Ministry of Education in Tunisia along with the UN World Food Program uses Devery’s blockchain solution to track and safely deliver lunches meant for school children as part of the government’s school meal program. France’s National Council of Clerks (NCC) has successfully deployed a blockchain-based platform built by IBM to manage legal transaction data of companies transparently and in real time.
In the UK, HM Land Registry has recently used a blockchain based prototype to demonstrate how it can simplify the buying and selling of real estate. The British government is also evaluating the feasibility of using blockchain technology in welfare payment systems. In the US, the Department of Energy is funding a project which is assessing the possibility of using a blockchain protocol for validating that devices on their grid aren’t affected by malware. In a separate program, the Customs and Border Protection Committee is planning to use blockchain technology for facilitating international trade. The Indian state of Telangana is planning to utilize blockchain technology to make land records tamper proof. They are also actively supporting the development of blockchain technology, by providing land at subsidized rates and research funding to blockchain startups. And authorities in China are using the tech for supply chain management and food and drug quality assurance.
Path from Uncertainty to Certainty
PwC conducted a survey among 600 corporate executives last year and found that 84% of the organizations were already dabbling with blockchains in some form or the other. However, only 15% showed the urgency to go ahead with live deployed products. One of the major reasons for which companies were holding back on converting their research work into live projects so far was regulatory uncertainty. But with governments testing waters with their blockchain pilots and some even executing projects on ground, these uncertainties have begun to reduce. This is evident from the latest survey by Deloitte which suggests that 53% of the organizations now feel that blockchain tech is a critical priority. This is a 10% increase over last year’s results, and is surely going to bring up the PoC-to-live product conversion rates. So our question is, if you are still not looking into blockchains to improve your enterprise environments, then what are you looking at?
About the Authors:
Rohit Chatterjee is an Analog Design Engineer working at Texas Instruments. Abhijoy Sarkar is a banker-turned-entrepreneur. They are high school friends who lost contact years ago. They reunited over crypto in early 2018 and have been investing through mutual research and shared knowledge. Rohit and Abhijoy wrote this article as freelancers for aXpire via MatchBX.io