Spend any amount of time in the blockchain sector and you’ll find hundreds of articles on ways blockchain technology will be “a game-changer.” Where this content goes wrong is that it’s light on how it will change the game and why there’s a game at all. Many claims on what blockchain technology currently does include desired outcomes. Here’s why this is a mistake.
Like any technology, it takes a lot of time for the value to finally emerge. Take photography for example. Since the beginning, the point has always been the same. It captures a copy of the truth — however selective — and keeps it forever.
Just like blockchain, early photography was not user-friendly, cheap, fast, or widely adopted. It was none of the above really until very recently with our smartphone cameras and social media. Think of blockchain today as photography circa 1860 — technically limited, reserved for specialists, and complicated to use.
At the time, many critics objected because an existing medium — painting — captured moments just fine.
Of course, the business benefits of photography are clear to us today in hindsight. The global medical imaging market — a spinoff of photography — is worth $25.7 billion in 2019 according to a recent Markets and Markets report. If Instagram were a stand-alone company Bloomberg estimates it would be worth more than $100 billion.
As I mentioned, the fundamental reason we still take pictures has not changed in photography’s nearly 200-year history. What has changed is in the fine details, specific use cases, and major advances in usability. We’re still figuring all this out for blockchain tech.
Blockchain as a tamper-proof audit trail
What blockchains do is clear — they record a tamper-proof audit trail and distribute a current copy to everyone who’s interested in seeing it. Whether that’s in an open forum like Ethereum or in a private group like the Linux Foundation’s Hyperledger Fabric, blockchain use cases are largely the same.
What isn’t as clear yet is why.
Thousands of Medium articles and blogs beat the dead horse of how blockchain will fix the world’s problems. This is mostly nonsense, of course. The one reason to use a blockchain is to establish an audit trail, especially if you don’t trust the other actors you’re working with. If you share data with people you trust or don’t share much data at all, use a database. This has been our line from the beginning.
Whether you’re tracking authentic pharmaceuticals, tokenizing assets or researching art provenance, tamper-proof auditing matters and can significantly reduce liability and overhead. Just how to pull it off needs time to hammer out.
We’ve tinkered with several of these use-case puzzles in in-house proofs of concept applications and in apps for our clients. To explore exactly how blockchain technology will grow existing businesses and spinoff new industries, it’s often important to try to build out a proof of concept first.
Here’s an overview of some of our POC projects and some ways to apply blockchain technology to business.
Shared record keeping
One blockchian use case is in keeping track of records and who has access to them. In one of our in-house proof of concept applications, our team created an app to demonstrate how to build a medical record storage system for patients and their doctors with Hyperledger Fabric.
Patients use their private keys to access a patient portal and grant and revoke access to doctors. In turn, doctors use their keys to enter a doctor’s portal where they can add records of procedures.
The system shows how blockchain plays a role in securing patient data and can improve some inefficiencies in the current system especially, in the cost to secure medical data. The system’s built-in security allows patients, doctors, and administrators to seamlessly coordinate over the application.
Supply chain tracking
Another excellent use for a tamper-proof audit trail is in supply chain tracking. One of the areas where we believe this will have a big impact is in the pharmaceutical supply chain. In our supply chain POC, we explored the role of Ethereum smart contracts in verifying that a product has been shipped from a valid source and that it traveled through the supply chain in the right conditions.
Counterfeiting and mishandled drugs account for billions of dollars of losses to Big Pharma each year. Ensuring that consumers get exactly what they’re paying for and verifying that it’s not harmful is the main benefit to this use case.
Additional use cases in the supply chain sector are in food tracking. As with pharmaceuticals, tracking food to its source can help regulators verify that fish, for example, were properly harvested and is the species the package claims. It can also help retailers contain outbreaks of food-borne illness by quickly pinpointing which farm your spinach came from.
Walmart together with IBM has already launched a Hyperledger-based application, FoodTrack to accurately audit the source of leafy greens in its stores.
Blockchain logistics offer significant utility in handling complex supply chains efficiently.
Payments and remittances
Among the first blockchain use cases were in the payments. Cryptocurrency lends itself well to cross-border and digital payment systems. Bitcoin especially has captured a competitive advantage for a niche market. Bitcoin, however, is more of a philosophical choice than a practical one. Other blockchain protocols offer better usability and scalability, especially at scale.
We’ve designed a remittance service using the Stellar protocol as an example of a system that will transfer money quickly and cheaply across borders. Cryptocurrency enables fast money transfers anywhere in the world. With cryptographic guarantees, blockchain technology facilitates peer-to-peer payments by making sure users can’t spend their tokens twice — something other payments processors use banks and credit rating agencies to do.
This, of course, removes money transfer services from the transaction, significantly reducing the cost to transfer money internationally. When end users can trust that the counterparty is good for the money, it enables more trustworthy peer-to-peer payments.
Another Espeo project — Promise — incorporates blockchain payments to facilitate charitable giving. An open and transparent ledger helps charities avoid damage to their reputation. Users can clearly see where their donations go and what it’s used for.
Obviously, this system still needs an infrastructure surrounding it to work properly and become profitable, but the proof of concept demonstrates how these systems will look.
Along with payments, blockchain enables asset trading, especially in securities and derivatives markets. One of our main blockchain projects, derivatives trading platform CloseCross uses a blockchain backend to verify that the trading predictions are accurate and counted fairly.
The app incorporates both on and off-chain transactions to bring derivatives trading to a wider range of people traditionally excluded from this market.
Provenance and asset management
In a similar thread as supply chain management, provenance is one of the blockchain use cases that makes sense. Just as you can use a blockchain to track a carrot back to its source, you can also track a history of ownership for a variety of assets.
Fine art provenance, gaming, luxury goods, and real estate markets are cases where a blockchain system will work. Immutable ledgers of transactions and tokens to represent ownership or verify authenticity are several of the features to incorporate in these business cases.
Real estate tokenization is one field where there has been considerable development. Representing parts of real estate assets with ERC tokens enable fractional ownership and open investment to more people.
Artists, especially digital artists can use blockchain technology to register and edition unique work and make it more difficult to copy. Scarcity, of course, creates a market and artists and collectors stand to profit. Editioning digital art is currently not possible with existing technologies.
Blockchain-based loyalty point systems could also deliver benefits to end-users who may not trust the company to follow through on their promises to actually reward loyalty. A token ecosystem could make it considerably more user-friendly to cash in your loyalty points. It can also create a secondary market for rewards.
Gabrotech, one of our clients did just that and offers its users a system to hold companies accountable with immutable rewards points.
Tamper-proof auditing can secure these systems and attract more users with more frictionless rewards systems.
I hope if you’ve taken anything away from this article, it’s a better understanding of the fundamental feature of blockchain systems — tamper-proof auditing — and how it drives to blockchain use cases.
Shared record-keeping, supply chain management, provenance, and payments are particularly salient now with existing blockchain tech to build apps around. Other use cases will take more time to work out — especially considering usability for a general audience. Don’t let it discourage you, this is a normal and healthy part of any technological innovation.
As more businesses find blockchain use cases, new ways to innovate will continue to emerge. Blockchain is here to stay, but an honest assessment of what it is — and what it isn’t — is vital to use it right.