Blockchain Technology for Fintech, Supply Chain Management and Media

Blockchain Investing
Blockchain Investing

Beyond cryptocurrency, blockchain technology is changing the way we do business.

Touted as the defining technology of the next decade, blockchain is quickly moving beyond cryptocurrencies into many real-world applications that have tremendous value for the business world. As we’ve begun to witness, blockchain will expand its capabilities as a secure, anonymous, and decentralized technology into several industries, including the growth of cryptocurrencies, as we push further into the 21st century.

“The blockchain market has grown at a much faster rate than anticipated,” says Jeff Koyen, Strategic Advisor of 360 Blockchain, a company focused on investing in technologies that use blockchain in innovative ways. The blockchain market is expected to be worth more than $7 billion by 2022; Koyen and his team view blockchain as the most disruptive technology since the Internet.

Real-World Utility of Blockchain

Blockchain is the technology that uses a shared ledger to record transactions across a decentralized network of computers. “Decentralized is the key word here,” says Koyen. “Because blockchain has no central authority figures, blockchains are governed by the network operators.”

Before a transaction is recorded to the ledger, an agreement must be reached by the entire network. This means that blockchains are unhackable. For a transaction to be edited retroactively, the same consensus must be reached across the entire network. Thus, hacking is a practical impossibility.

Read“Blockchain Technology: An Introduction for Investors”

One of the failings of the 90s Internet boom was the rush to apply the new technology to industries that weren’t ready to adopt.

“As much as everyone is jumping on blockchain, we don’t think we’ll see blockchain in every industry, in the same way that we saw a flood of companies trying to go online in the late 90s,” Koyen says.

“As it turns out, your local plumber doesn’t really need to be online. There are services that you’d hope the plumber should be a part of, like promoting the business, but does your local plumber or locksmith need a fully responsive mobile website with videos and slideshows? No. And the same goes for blockchain. Not every industry needs to be an early adopter of this technology.”

While the cryptocurrency industry has been riding the blockchain wave over the last 12 months, spaces such as the fintech, supply chain management and media industries stand to benefit from the real-world utility of blockchain.

Financial Technology

One of the fastest growing industries of this decade, the world has welcomed the Fintech industry with open arms. Day-to-day banking, trading and investing have moved online; mobile payments are widely accepted on e-commerce platforms; online currency exchanges, equity funding, and personal finance apps have made it possible for anyone with internet to access the same financial options that were once reserved for those of a certain economic stature. Among companies in Fintech, those benefiting the most are start-ups.

Funding of Fintech start-ups has increased at a CAGR of 41 percent to more than $40 billion in cumulative investment over the last four years, according to PwC’s 2017 Global Fintech Report. The report also cites that 77 percent of its respondents expect to adopt blockchain by 2020.

Those respondents would be joining current blockchain-fintech companies, such as:

  • Bank Hapoalim – Partnering with Microsoft to create a blockchain that manages bank guarantees
  • Augur – A blockchain-based prediction platform for trading financial instruments
  • Aeternity – Using Smart Contracts on the blockchain to secure automated payments
  • Mastercard – Allowing for payments over a blockchain as an alternative to using its credit card
  • ING – Using blockchain to provide safer, more secure transactions

“It’s a very interesting space to watch. It’s clear that blockchain has the potential to make finance more efficient, but the big players are well-established,” said Koyen. “And establishments don’t tend to favor innovation. I’d keep an eye on the startups who want to disrupt, but also know how to play nice with the institutions.”

Blockchains provide users and companies in Fintech a decentralized network to share secure information, and provide the unalterable transfer of data. With the invention of Smart Contracts, blockchains can ensure the obligations of both parties are met before a transaction or agreement is completed.

Smart Contracts, developed by Ethereum (ETH), are a highly programmable and multi-functional system that ensure a transparent, conflict-free way to transfer value from one party to another, without the services of a third-party or middleman. Smart Contracts exist on a blockchain, and they allow for the transfer of all types of data ― not just cryptocurrency.

Not only will the implementation of blockchain in Fintech result in increased security for the user, it will reduce costs for banks, with expected savings between $15-20 million by 2022. Blockchain can reduce a bank’s interaction with parties and intermediaries, reducing costs for maintaining and executing contracts, as well as reducing the cost of bank-to-bank transactions for users. While the benefits of savings and security lead the way, it would all be for nothing if blockchain technology isn’t adopted by the industry on a mass scale.

“Banks make huge profits on financial transactions. If transfers suddenly became instantaneous and worry-free, who would pay a bank to facilitate them?” writes Mike Gault, CEO of cyber security company GuardTime. Gualt’s point, although cynical, is direct. Banks profit from fees, so would a system that stands to eradicate fees be widely adopted by the banks themselves? If blockchain can save the industry from the loss of billions of dollars in fraudulent activity and hacking, Gualt says, then adopting the technology would be justified.

Supply Chain Management

Blockchain technology can provide efficiency and cost savings to the supply chain industry. Leading companies like Walmart and the Danish shipping giant Maersk have partnered with IBM to utilize a blockchain system to maintain secure records and improve the traceability of their products.

“The issue of being able to track and trace where food comes from, and how it flows from the farm to the table, has always been something organisations and companies have had an interest in,” explains Walmart’s VP of food safety Frank Yiannis. The idea to involve IBM and its blockchain platform came after Yiannis tasked his team with the mission of tracing the origins of a packet of mangos he randomly plucked from a Walmart near company headquarters in Fayetteville, Arkansas. Yiannis tells it took his team six days, 18 hours, and 26 minutes ― a near eternity if there was an outbreak of a foodborne illness, and extremely costly if Walmart had to pull every packet of mangos from its shelves. When Walmart used a new method ― IBM’s blockchain ― to track the mangos, they saw results “in about two seconds,” as well as a full breakdown of each step along the fruit’s journey, from cultivation to storage to delivery.

“We envision a blockchain solution for food transparency to be collaborative, and we want as many people in food production to be involved and engaged in that,” says Yiannis. Walmart has since begun a second blockchain trial that involves tracking pork from China.

Maersk, the world’s largest container shipping firm, recently announced that it is partnering with IBM on the development of a blockchain-based platform to help speed up trade, and save billions of dollars. As long as the two companies can engage the industry to sign up, the new platform will manage and track tens of millions of shipping containers globally by digitizing the supply chain process from end to end.

Blockchain can provide the supply chain industry with a range of benefits, like optimizing transactions and trading relationships with secure networks; using a shared ledger that’s updated and validated in real time with each participant, to reduce fraud; allowing for equal and fair visibility of activities from the distributor, and revealing the location of a product at any point in time, as well as its current condition; improving inventory management, minimizing courier costs, reducing delays from paperwork, identifying issues faster, and increasing consumer and partner trust.

“In less than five years, we’ll see blockchain technology integrated into every major global supply chain,” said Koyen.

Media and Content Creation

In June 1999, users of the popular music sharing platform Napster began illegally transferring songs using peer-to-peer technology. When musicians and record labels realized the industry was losing millions of dollars in sales, they sued Napster, and the company was shut down in July 2001, ending its two-year reign as the greatest threat to intellectual property the music industry had ever seen.

While the music industry today is somewhat monetized, the issues of theft among intellectual property are still relevant, especially in the world of social media and content creation like blogging, videography and photography, as well as with the use of personal data and user insights. Blockchain can provide users with the technology to protect their content from unauthorized use, and allow users to get paid from companies or other parties using their content.

“For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords. But for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem,” says CEO of Kodak Jeff Clarke during a recent announcement of Kodak’s new platform KODAKOne. The once-prolific photography company is using blockchain technology to create an “encrypted, digital ledger of rights ownership for photographers to register both new and archive work that they can then license within the platform.”

The KODAKOne platform aims to reward users similar to Steemit ― the social media platform using blockchain where users can publish content and get rewarded in cryptocurrency when other users ‘like’, or ‘upvote’, their content. Combining social media and intellectual property on a secure blockchain ensures content creators can post articles, videos, images, or any original work and get paid for it ― a problem the digital content industry has struggled to find a solution for since the rise of social media.

Even industry giants like YouTube, that profit from users posting and sharing free content, have taken steps toward eliminating unauthorized use of content. In April 2017, YouTube changed its ad structure policy so only channels or creators who have a minimum of 10,000 lifetime views are paid for producing content. The move was made to weed out users who steal content and repost on their own channels.

Sharing and engaging with content are fundamental to the rise of media today. While what Napster started nearly 20 years ago was both illegal and unethical, it did set in motion a course of action that has led us to the beginning of a new digital era, one that protects the rights of user generated content, and allows anyone to create a business and generate revenue from their art on as level of a playing field as there will ever been. Blockchain can also enhance the privacy of user data that Google, Facebook, and companies alike profit from.

“It may seem unlikely that a startup could come along and upend a massive entity like YouTube or iTunes,” said Koyen, “but that’s what record labels thought in the 1990s, too. Whether it’s music, movies or journalism, decentralized distribution of media content is the future.”

What Investors Should Know

Blockchain is today’s most exciting space for investors. While industry experts are certain blockchain will play a significant role in our future, we are far from reaching the limit of its capabilities. Investors who are looking for opportunities would be wise to exercise patience with the development of the technology, while also considering the criticisms that exist, like the issue of energy consumption, for instance.

“The industry needs to learn how to optimize energy consumption,” Koyen says, “and one way to do that is to only apply blockchain only to industries that have compelling reasons to use it. Early adoption is exciting, but it’s not the right strategy for everyone.”

Investors should be leery of companies that spread themselves thin by attempting to apply blockchain to a wide range of industries. Focusing on a company that has expertise in a specific number of industries will provide investors with more opportunity for profit.

This INNspired article is sponsored by 360 Blockchain Inc (CSE:CODE; FWB:C5B; OTCPINK:BKLLF). This article was written according to INN editorial standards to educate investors.

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