October 7, 2017
When I was first doing research on the non-financial use cases of blockchain technology with particular examples to continue our diligent following on how it can be applied in FinServ and beyond, 21 seemed like a big deal. No number would surprise me today though – the Global Blockchain Benchmarking Study by Dr. Garrick Hileman and Michel Rauchs published by the Cambridge Center for Alternative Finance (there is also one on cryptocurrency), lists 45+ use cases for blockchain technology in an extensive publication exploring the maturity, benefits, challenges in adoption of the technology, along with outlining the landscape. And today, I’d like to highlight two sides to this outstanding study – a technological capability and a business need.
In other words, where does an exploration of a technological capability stop making business sense, and starts being a research for the sake of research?
Almost every single one of the 122 pages of the report will be worth your time, but I would like to emphasize the distillation offered at the end of the study, where authors list the following use cases of blockchain technology:
Tax filing
3D printing
Asset management
Authentication
Business licensing & authorization
Business process re-engineering
Commercial distribution management
Crowdfunding
Digital manufacturing
Document management & exchange system
Education
Electronic patient records management
Energy credits
Fraud prevention in Internet of Things
Government account settlement & reconciliation
Increased liquidity in inefficient markets with low volumes through the use of smart contracts Internet of Things
Issuance of equity shares
Logistics
Loyalty points and rewards
Mortgages
Prevention of cyber fraud and hacks
Real property purchase
Smart utility grids
Supply chain management
Training and development Uniform Commercial Code (UCC) filings
Real-time gross settlement (RTGS) system
Remittances
Interbank payments
Asset transfer
Clearing and settlement of securities
Financial messaging system
Syndicated loans
Trade finance
Transfer, clearing, and settlement of securities
Official government identification documents management
Land registry
Business incorporation records
Birth and death certificates
Supply chain cargo tracking
Traceability of food products
Tracking car fleets
Tracking of funds
Shareholder voting
Transaction monitoring
Humanitarian cash-based transfer
Mobile money transfers
Retail purchases
Salary and bill payments
Wow! Did Marvel reserve the movie rights for a Blockchain Superhero already?
On a serious note, while the report is definitely a must-read and I wanted to share it with our audience, this list is not the main reason – it is the scale of efforts and hype that concerns. In a rally to apply blockchain technology everywhere imaginable and unimaginable, we may forget to ask if every theoretical use case for the technology has a sustainable future in our society, and makes business sense. And the next piece I’d like to share today is another side of the coin well worth looking at:
Indeed, virtually everyone has heard the claim that blockchain will revolutionize business and redefine companies and economies. Although we share the enthusiasm for its potential, we worry about the hype. It’s not just security issues (such as the 2014 collapse of one Bitcoin exchange and the more recent hacks of others) that concern us. Our experience studying technological innovation tells us that if there’s to be a blockchain revolution, many barriers—technological, governance, organizational, and even societal—will have to fall. It would be a mistake to rush headlong into blockchain innovation without understanding how it is likely to take hold
True blockchain-led transformation of business and government, we believe, is still many years away. That’s because blockchain is not a disruptive technology, which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly. Blockchain is a foundational technology: It has the potential to create new foundations for our economic and social systems. But while the impact will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure. The process of adoption will be gradual and steady, not sudden, as waves of technological and institutional change gain momentum. That insight and its strategic implications are what we’ll explore in this article.
There is no argument on the importance of exploration of opportunities that blockchain technology opens to businesses – in a variety of cases, the technology indeed will breed a new generation of businesses operating with an unprecedented efficiency to create value.
Transformative scenarios will take off last, but they will also deliver enormous value. Two areas where they could have a profound impact: large-scale public identity systems for such functions as passport control, and algorithm-driven decision making in the prevention of money laundering and in complex financial transactions that involve many parties. We expect these applications won’t reach broad adoption and critical mass for at least another decade and probably more.
Transformative applications will also give rise to new platform-level players that will coordinate and govern the new ecosystems. These will be the Googles and Facebooks of the next generation. It will require patience to realize such opportunities. Though it may be premature to start making significant investments in them now, developing the required foundations for them—tools and standards—is still worthwhile.
The piece by Iansiti and Lakhani is brilliant. An important takeaway from both publications is that every generation of fundamental transformation comes slowly – it requires a massive adoption and cross-operability of the underlying infrastructure.
…it took more than 30 years for TCP/IP to move through all the phases—single use, localized use, substitution, and transformation—and reshape the economy. Today more than half the world’s most valuable public companies have internet-driven, platform-based business models. The very foundations of our economy have changed.
With blockchain technology use cases, it’s important to tame the hype around potential in favor of hard work and laying ground for the Googles and Facebooks of the new world. No use case is of use if the infrastructure is not ready.