Blockchain was driven into the tech spotlight by the unbelievably swift rise in price of Bitcoin, the cryptocurrency the technology secures.
Worth less than penny in 2010, in less than a decade each Bitcoin was valued at almost $20,000.
Yet blockchain’s incredible potential goes far beyond cryptocurrencies.
As a shared, immutable ledger, blockchain facilitates the process of recording transactions and tracking assets throughout a business network.
Virtually anything of value can be tracked and traded, whether it’s something tangible, like a house or land, or intangible, such as intellectual property, patents, and branding, ultimately reducing risk and cutting costs for everyone involved.
60% of CIOs said they expected some level of adoption of blockchain technologies in the next three years,1 while from 2017 to 2020, blockchain skills became one of the most sought-after proficiencies in the world, with demand increasing by almost 2,000%.
Ever new uses for blockchain are being regularly discovered and developed, ensuring high levels of excitement and anticipation continue to surround what is obviously an increasingly bright future.
Five questions concerning blockchain’s future
Five relevant questions have been put together by American Banker.
Q: What are banks waiting for?
A: Financial institutions have positioned themselves at the forefront of blockchain technology. Cost savings alone could run into 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: IBM has engaged in more than 400 blockchain projects across supply chain, government, healthcare, transportation, insurance, chemicals, petroleum, and more.
A transformative technology, blockchain could radically change how businesses and government interact, but it must be open to encourage broad adoption, innovation and interoperability.
Q: Would a US blockchain ‘sandbox’ help?
A: Although agreeing that some form of control is essential, Hester Peirce, a commissioner at the Securities and Exchange Commission, also added, “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: While bitcoin mania led some to believe banks are no longer needed for secure global money transfer, banks themselves beg to differ. Many industry participants see significant potential for DLT to increase efficiency and reduce reconciliation costs in securities clearing and settlement. A functional prototype of a DLT-based securities settlement platform that achieves delivery via payment settlement of digital coins and securities represents progress in this area.
Q: Who’s to blame if blockchain goes bad?
A: Developers could face the same fiduciary liability as banks do if blockchain were to replace the current financial system. It comes down to prioritising 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 blockchain’s future
New innovations are constantly entering the market promising bigger and bolder uses of blockchain technology.
Pragmatic governance models will emerge
In 2020, we’ll start to see new governance models that help to standardise information from different sources and capture new and more robust data sets.
This will enable large and diverse consortia to approach decision-making, permissioning schemes, and even payments more efficiently.
Interconnectivity comes one step closer to reality
As more emerging networks attain critical mass, evermore members of a single network will expect (if not demand) guidance on integration between different protocols.
83% of organisations said they believe it’s important to have the assurance of governance and standards allowing interconnectivity and interoperability among permissioned and permissionless blockchain networks.
Adjacent technologies will combine with blockchain to create a next level advantage
Combining adjacent technologies with blockchain will lead to more trustworthy data, strengthening and better informing the underlying algorithms.
Enabling sharper insights driven by data that network participants trust, blockchain will help keep data secure, while auditing each and every step in the decision-making process.
Validation tools will begin to combat fraudulent data sources
To improve trust and remove the dependency on error-prone human data entry, blockchain solutions will utilise validation tools along with crypto-anchors, IoT beacons, and oracles, linking digital assets to the physical world by injecting outside data into networks.
Central banks will expand into wholesale and retail CBDCs
Central Bank Digital Currencies (CBDCs) will continue to gain momentum and redefine payments in several ways.
For instance, there will be increased interest in tokenisation and digitisation of other types of assets and securities, such as central bond debentures for treasury bonds.
Five questions to ask yourself
Before considering a blockchain solution, any organisation should ask themselves the following questions.
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?
Have you discovered that there’s no system that entirely fulfils your requirements?
Are there good reasons not to have a centralised system?
If you answer ‘Yes’ to all these questions, a blockchain solution probably makes sense.
Organisations worldwide are already transforming their industries and seeing real business outcomes by using IBM Blockchain technology.