In March 2010, Bitcoin had a value of less than a penny. Less than a decade later, each Bitcoin had a value of almost USD 20,000 and early investors were driving Lamborghinis. And while the excitement around Bitcoin will always be intrinsically tied to the price, its ubiquity drove blockchain, the technology that secures cryptocurrency, into the tech spotlight.
Blockchain skills became one of the most sought-after proficiencies in the world with the demand increasing by almost 2,000 percent from 2017 to 2020.
David Furlonger, Distinguished Research VP at Gartner has said, “60% of CIOs in the Gartner 2019 CIO Agenda Survey said that they expected some level of adoption of blockchain technologies in the next three years.” Whether you’re a Bitcoin bull or bear, there’s no denying that with each new blockchain use case, there’s a building excitement for what’s next for blockchain.
According to Blockchain for Dummies, “Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, a car, cash land) or intangible (intellectual property, patents, copy rights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.”
There are several ways to build a blockchain network: they can be public, where anyone can join, private, where one organization governs the network, permissioned, where participants need to obtain an invitation or permission to join, or built and maintained by a consortium of organizations.
Industries already being transformed by blockchain
Forrester Research, a market research company, has identified four questions for organizations and industries before considering a blockchain solution:
Do multiple parties need to access the same data or write to the data store?
Do all the parties need assurance that the data is valid and hasn’t been tampered with?
Do you rely on an intermediary that adds no value? Or do you rely on a complex, unreliable process to reconcile the transactions of multiple parties, when all should have the same data? Or is there no system available today that does what you require?
Are there good reasons not to have a centralized system?
If the answer to all of these questions is “yes,” a blockchain solution may make sense. Forrester also recommends that industries think big but start small. IBM clients are already transforming their industries by using IBM Blockchain technology and seeing real business outcomes.
Nordea enables small and midsize companies to engage in international trading when it partners with other large European banks to develop a trade financing platform, we.trade, based on the IBM Blockchain Platform running on IBM Cloud.
INBLOCK’s aim is to overcome cryptocurrency technical deficiencies, thereby making digital asset transaction even faster, more convenient and safer by using IBM LinuxONE.
For Kroger, one of the largest grocery retailers in the US, food recalls are quite costly because it often must pull unaffected product from the shelves. By implementing a blockchain with industry-specific IBM Food Trust modules for food traceability, the retailer can work with suppliers to trace food from the farm to its shelves, helping it identify which products to pull, and which are safe for its customers.
NuArca teamed with IBM to implement a blockchain voting network solution based on the IBM Blockchain Platform that allows objecting beneficial owners and their votes to be immediately represented within the proxy voting cycle. This allows proposal supporters to make optimal decisions around whether to spend more and where to spend it to achieve their desired outcome. The blockchain solution preserves OBOs anonymity while ensuring the transparency and auditability of the voting process.
Plastic Bank developed a security-rich, scalable reward system for picking up and recycling plastic — a blockchain banking platform — that runs on the IBM Cloud.
Questions about the future of blockchain
American Banker published five questions looking at where the blockchain industry is headed. The answer to these questions, however, is much simpler than one may guess…blockchain is ready for business and government use today!
Q: What are banks waiting for?
A: Financial institutions have positioned themselves at the forefront of blockchain technology. Cost savings alone, some project, could run in the tens of billions of dollars per year. Settlement times could plunge from days to minutes, almost approaching T+0.
Q: Will regulators get on board?
A: As Jerry Cuomo, Vice President, IBM Blockchain Technology, told congress during the hearing, Beyond Bitcoin: Emerging Applications for Blockchain Technology, “The potential uses for blockchain are far broader than cryptocurrency. IBM has engaged in more than 400 blockchain projects across supply chain, government, healthcare, transportation, insurance, chemicals, petroleum and more. And from those experiences, IBM has developed three key benefits: we believe that blockchain is a transformative technology that could radically change how businesses and government interact, blockchain must be open to encourage broad adoption, innovation and interoperability and blockchain is ready for business and government use today.” These remarks and following recommendations were very well received with one of Jerry’s co-presenters, Frank Yiannas, being selected to become the Deputy Commissioner, Food Policy and Response for the US Food and Drug Administration.
Q: Would a US blockchain sandbox help?
A: “A sandbox can be useful,” said Hester Peirce, a commissioner at the Securities and Exchange Commission. “But you don’t want the parents in the sandbox building the sandcastle. You usually want the kids to figure it out for themselves. It changes the creative process once you have the regulators watching you.”
Q: Are banks even necessary in a blockchain world?
A: Bitcoin mania led some to believe that banks are no longer needed for secure global money transfer. Banks, however, disagree. Research showed, in a joint report between IBM Blockchain and OMFIF, “Beyond the immediate horizon, many industry participants see significant potential for DLT to increase efficiency and reduce reconciliation costs in securities clearing and settlement. A recent joint venture between the Deutsche Bundesbank and Deutsche Borse, which developed a functional prototype of a DLT-based securities settlement platform that achieves delivery v. payment settlement of digital coins and securities, represents progress in this area.”
Q: Who’s to blame if blockchain goes bad?
A: American Banker states, “If blockchain were to replace the current financial system, developers could face the same fiduciary liability as banks do. What that duty would look like is a contentious debate within the industry. Some say it comes down to prioritizing between ‘duty of care’ and ‘duty of loyalty.’ The first is about doing no harm, but the second is about serving a customer’s best interest.”
Five predictions for the future of blockchain
While looking to the far future of blockchain is extremely exciting, new innovations are constantly entering the market promising bigger and bolder uses of the technology. As active blockchain networks continue to bring real transformative change to a number of industries, the IBM Blockchain team predicted the following five trends in the near future:
1. Pragmatic governance models will emerge
In 2020, we’ll start to see new governance models that enable large and diverse consortia to approach decision-making, permissioning schemes, and even payments more efficiently. These models will help to standardize information from different sources and capture new and more robust data sets. 68 percent of CTOs and CIOs even expect to see a scalable governance model for interactions across multiple blockchain networks to be an important feature of their organization’s blockchain environment in the next one to three years.
2. Interconnectivity comes one step closer to reality
Though reaching interconnectivity at the maximized level might be years away — and the definition of interoperability can take many forms — we find that 83 percent of organizations today believe assurance of governance and standards that allow interconnectivity and interoperability among permissioned and permissionless blockchain networks to be an important factor to join an industry-wide blockchain network, with more than one-fifth believing it to be essential. Although there’s still work to be done on this front, this year as more emerging networks attain critical mass, we’ll find that more members of a single network will expect (if not demand) guidance on integration between different protocols.
3. Adjacent technologies will combine with blockchain to create a next level advantage
Combining adjacent technologies with blockchain will help us to do things that haven’t been done before. More trustworthy data from the blockchain will better inform and strengthen underlying algorithms. Blockchain will help keep that data secure and audit each and every step in the decision-making process, enabling sharper insights driven by data that network participants trust.
4. Validation tools will begin to combat fraudulent data sources
With a need for heightened data protection mechanisms, this year, blockchain solutions will use validation tools along with crypto-anchors, IoT beacons and oracles, mechanisms that link digital assets to the physical world by injecting outside data into networks. This will improve trust and remove the dependency on human data entry, which is often prone to error and fraud.
5. Central banks will expand into wholesale and retail Central Bank Digital Currencies (CBDCs)
With countries in Asia, the Middle East and the Caribbean beginning to experiment with CBDCs in real time, there is no doubt that they will continue to gain momentum in the new year and redefine payments in several ways. For one, CBDCs will see continued expansion in wholesale CDBCs, with some initial forays in retail CBDCs. Moreover, we find there will be increased interest in tokenization and digitization of other types of assets and securities such as central bond debentures for treasury bonds.