The New Kid On The Block
This feature was commissioned by and first published in Euro Asia Industry magazine.
From its shady origins as the backbone of anarchic crypto-currency bitcoin, blockchain has emerged as the disruptive technology with revolutionary potential. As it’s widely tipped to impact the fundamentals of everything from the global economy to routine business transactions, Helena Haimes looks behind the hype to examine blockchain as it is now, how it’s tipped to shape the future and the pitfalls that could taint its ascent.
Say the word ‘blockchain’ to anyone with a modicum of interest in tech – startup founder, venture capitalist, tech journalist, IT consultant – and the odds are they’ll have a fair bit to tell you. As technologies go, there are very few that have been talked up quite so much as this darling of the tech press has in the last couple of years. It’s been variously labelled as “the second coming of the internet”, “a platform for truth and trust” and “a new platform to reshape the world of business and transform the old order of human affairs for the better.”
Huge promises indeed. For the uninitiated, the term refers to a vast, ever-growing digital ledger that can be shared among competitors without the need for a central, governing authority. A blockchain’s inherent dependability comes from its very openness – no single contributing party has the ability to tamper with its records as any attempt to mess with it would be detected by all its users. It rose to prominence as the DNA-esque technology underpinning crypto-currency Bitcoin – each time a bitcoin changes hands another block of data is added to the chain, and that chain’s universal viewability is also what safeguards its purity as a digital, self-regulating currency.
“One of the huge drawbacks for those who create digital content and items has been the fact that there is no such thing as an original – digital content can be duplicated pretty much infinitely,” explains Kate Adamson, CEO of digital consultancy and maritime specialists Futurenautics. “What blockchain allows you to do is to give something digital the properties of a physical identity – which means they can be tracked, traded and trusted in the same way physical things can.”
Blockchain in banking
As you’d expect from a technology first designed to underpin a crypto currency, it’s the financial services sector which is leading the blockchain revolution. Banks and financial institutions around the world are racing to be ahead of the pack and cut an extraordinary chunk from existing costs along the way – Santander predicts that the technology could save banks up to $20 billion annually by 2020. Among myriad other possibilities, blockchain promises to hugely simplify routine transactions – from corporate bonds and equities to syndicated loans and OTC derivatives – by replacing numerous, fallible internal ledgers with one highly secure, transparent one. Its inherent openness also offers a potential panacea to larger institutions whose reputations for honesty have suffered a battering over the last decade, thanks to opaque banking practices.
Beyond financial services
But it’s not only the banking and finance sectors that are seizing on blockchain and digital tokens as complete gamechangers. Pop the word into a search engine and you’ll see just how fundamental this technology’s potential impact really is and how many industries it’s predicted to disrupt. Beyond its widely publicised possibilities for financial services, blockchain and digital tokens have also been lauded as revolutionary in an astonishing range of other arenas, from shipping and the energy market to land registries and health care.
“The same technology can be used to securely store ownership records for any kind of asset,” explains fintech consultant and journalist Jesse Norton. “For example, a blockchain can be used as a land registry that unifies real estate information and cannot be tampered with by central authorities.” He cites Ghanaian startup BenBen, a company currently creating a blockchain that allows homeowners to publicly list their properties for sale: “Ultimately the project hopes to eventually allow buyers to pay for and even structure mortgage plans, all without having to deal directly with a property dealer or a banker,” he tells me.
The energy sector
The technology’s unprecedented ability to create vastly increased supply chain transparency and reliability is also creating waves in the energy industry. Blockchain promises to exert its disruptive influence on existing, highly centralised energy grid infrastructure, as Mr Norton explains: “In the UK we have many smaller energy firms in the market, but they’re mostly re-selling energy supplied by the National Grid,” he says. “As renewable energy sources become more attractive to consumers, energy grids will need to become cheaper, more efficient and decentralised.”
Norton points to Australian energy startup Power Ledger as a key example of blockchain used to innovative, ethical and imaginative ends: “(They’re exploring) how blockchain technology can enable algorithms to automatically trade energy resources across smart grids and ensure optimum network performance,” he tells me. Power Ledger’s big aim is to ‘put power in the pockets of electricity consumers’ by allowing them to buy, sell or swap excess solar energy with their neighbours for less than the standardised tariff but more than they’d receive from their usual retailer. Its bespoke system is also designed to enable power meters to communicate directly with the blockchain, removing many hardware trust issues.
A mixed picture for maritime
As futurists and tech enthusiasts extol blockchain’s many virtues and the digital age becomes ever more a reality, it’s important to note that the future for some sectors is looking much shakier. As an industry that historically relies on ‘real’ assets for its profits, shipping and maritime is going through a particularly difficult adjustment period at the moment, as Ms Adamson explains: “The reality is that the traditional link between global GDP growth and the growth in seaborne volumes is decoupling, and that’s very serious for anyone in shipping,” she tells me. “(That) is connected to the rise of Industry 4.0 and the increasing appetite for digital products and services – which don’t need to be shipped anywhere….it’s logical therefore that any technology which allows digital properties to participate in a physical economy is likely to exacerbate that situation.”
Adamson also predicts tough times ahead as the culture of increased transparency and compliance within the industry’s supply chains becomes the status quo. As expectations increase, she predicts an industry wide increase in blockchain implementation that could see mixed reactions: “Companies like Provenance and Blockverify are a window into how companies are going to deliver against the expectations of hyper-vigilant consumers in future,” she says. “Shipping – which has a proud tradition of telling everyone as little as is humanly possible – isn’t ready for the kind of transparency they’re going to have to deliver. That’s going to be a toughie.”
There is a positive flip side for worried ship operators, however. Blockchain’s huge potential to increase transparency also means it could profoundly impact the form of existing regulation with extraordinary results, as Ms Adamson explains: “Blockchain has the potential to usher in an era of truly smart regulation that’s good not just for the industry, but for everyone,” she says. “The fall in the cost of deep-sea connectivity, together with the emerging Internet of Things and blockchain, could transform the way that the maritime industry is regulated and compliance reported and enforced. A vessel which reported real-time data on everything from the emissions coming out of the stack to the rest hours of the crew and the temperature in its holds, and negotiated in real-time with sea-traffic management the same way aircraft do with air traffic control, would be revolutionary. Blockchain could be a foundational part of that. ”
UK-based marine freight forwarders Marine Transport International is one operator who has started to embrace blockchain with gusto. In 2016, MIT announced the deployment of its groundbreaking public blockchain, which it anticipates will enable unprecedentedly secure and open dissemination of shipping container information. The technology will also ease compliance with recently introduced, more stringent Verified Gross Mass (VGM) regulations related to packed containers, providing a permanent record visible to port officials, shippers and cargo owners.
While blockchain’s enormous potential for increased trust, transparency and ease of transactions is undeniably exciting, the increased efficiency that accompanies it will inevitably cause some casualties for those unwilling or unable to keep up. “As blockchains automatically fulfil the functions of many trusted intermediaries in the global financial services sector, it’s inevitable that automation will make certain jobs redundant,” Mr Norton explains. “Similarly, regulators who are unable or unwilling to delve into esoteric code and engage with regtech solutions may soon find that their control over the growth of these technologies is extremely limited.”
Unsurprisingly for a relatively young technology born from such shady beginnings, the other big issue that’s raising its head is to do with governance. The Internet has had time to develop a solid system of regulation, from the Internet Governance Forum that creates government policy to the W3C consortium which establishes its standards. There are warnings that the very chaos and reckless attitude that allowed blockchain to develop in the first place could prove destructive if it’s not kept in check through widely agreed structures and processes.
The loudest note, though, remains a resoundingly positive one. The blockchain’s power to reduce all our reliance on third parties, along with its facilitation of an open, traceable and unfalsifiable audit trail in a vast range of business and consumer contexts, means it is here to stay. It only remains for businesspeople as yet unversed in the technology to start familiarising themselves with it, and quickly. “My advice to anyone developing strategy for a business, regardless of the industry, is to get a working understanding of what blockchain does,” advises Ms Adamson. “As companies begin their digital transformations they all come up against the same kind of problems when they begin to merge physical and digital. Blockchain may just have an answer.”