- Once subject to a hype cycle, blockchain technology is beginning to find new markets.
- The possibilities of the blockchain extend beyond bookkeeping, unlocking a new kind of digital currency and asset management system.
- Blockchain’s adoption is being aided by the development of ‘blockchain-as-a-service’, which plugs into computing and cloud infrastructure.
The pathway to mainstream adoption for new technologies often follows a certain pattern. If viewed through the lens of the Hype Cycle, devised by research firm Gartner, the events unfold as follows: a new technology is discovered, it’s quickly hailed as a world changer, these expectations come crashing down to earth, and then – and only then – is its true applicability realised.
Blockchain is one such technology. Until fairly recently, interest in digital currencies and their underlying blockchain technology has remained tepid among businesses and individuals forced to operate in a world where concerns like regulatory compliance and accountability remain prevalent. But the public distributed ledger system is at last finding wider markets. Across many sectors – the travel industry, mining, cloud computing and the financial services – blockchain is moving away from pilot projects and into commercial adoption.
This latency period shouldn’t come as a surprise. For any newly born creature, there are growing pains before it’s truly ready to find its place in the pack. But blockchain’s capabilities extend far beyond joining the herd. Its emerging development ecosystem is seeing the formation of a new herd altogether, while its capabilities with commercial-ready digital currencies and assets has the potential to uncover entirely new, greener pastures.
Particularly exciting is the development of the blockchain as a new tool or interface layer. Often known as blockchain-as-a-service, or BaaS, the implementation empowers ordinary businesses to use the technology to solve their everyday problems.
BaaS plugs into existing cloud-based IT infrastructure services, prominent examples include Amazon Web Services, Microsoft’s Azure and IBM’s Bluemix. (PwC, too, has just unveiled its own suite of blockchain-powered, white-labelled digital asset services.)
From there, it can be developed, tested and deployed in a range of potential applications – anything that might benefit from a shared and secure database of transactions between multiple stakeholders.
Used in this way, BaaS smooths over the previous technical and regulatory hurdles that have obstructed the previous use of digital currencies and other blockchain-based technologies. It also provides much-needed support and a safe ‘fail-fast’ test and learn environment.
Finding new markets
BaaS appears at a time where diverse markets and businesses have begun to adopt the blockchain. Australian travel booking company Webjet recently announced a proof-of-concept system¹ that eliminates data discrepancies – like double-booking a hotel room – that occur on account of the large volume of bookings passing through multiple systems around the world. With a single, permanent and unequivocal record of transactions, disputes should presumably be eliminated.
Elsewhere, Australian mining giant BHP Billiton announced² its intention to shift mineral analysis tracking process – previously a manual affair involving spreadsheets and emails – to a blockchain-based distributed ledger that eliminates the costly mistake of a lost sample.
The Nasdaq stock exchange is also implementing blockchain technology³, combining it with a proprietary cloud platform to facilitate the sale of company shares, recording each transaction while tracking share ownership.
the interface layer
The growing popularity of BaaS reveals a widespread demand for platforms offering an easy interface to a blockchain database. It also unlocks the opportunity for a larger ecosystem of complementary tools and features, building upon the core advantages of blockchain and digital currencies to create additional value.
One example is the integration of identity verification services built into digital wallet – the devices or applications that allow digital currencies to be stored and transacted.
Traditional electronic funds transfers are subject to clearances such as anti-money laundering lists (AML) and Know-Your-Customer (KYC). These regulations help prevent funds from finding their way into the hands of unintended parties and conferring some protection against fraud. However, conforming to these rules is often too costly for smaller businesses looking to offer payment capabilities on their own online platforms.
Identity verification can overcome these hurdles, taking some of the pain out of achieving compliance in the online payments space. PwC’s Digital Asset Services is one example of such a platform that provides identity services to a technology more traditionally associated with anonymity.
Identity verification is but one of many potential new services that can be plugged into a BaaS platform. Others could include analytics or risk management, creating a powerful selling proposition.
The future of the blockchain
will be smart
The potential of blockchain-based tools extends much further than accurate bookkeeping. It can help manage, transact, or convert almost any kind of valuable asset, turning them into programmable ‘smart money’.
Representing various stores of value in any combination, these assets include electronic and fiat currencies, financial instruments, or even loyalty program rewards points.
When maintained by a secure and compliant platform leveraging the transparency of the blockchain, this smart money could be restricted to a certain set of approved usages, making them suitable for government welfare offices or charities involved in humanitarian aid programs.
There’s even the potential for such a system to reduce the high cost of international remittances. Utilising a digital currency as a temporary go-between, incumbent commission-collectors can be bypassed quickly and cheaply, freeing up the flow of money across national borders and reducing the cost of sending money overseas.
It’s likely that 2016 will be looked back on as the year that the blockchain went mainstream. The trend lines are clear: supporting infrastructure is coming online, developer ecosystems are emerging, and businesses in multiple sectors are moving forward with innovative projects.
With a whole new world of blockchain and digital currency solutions now being realised, I expect an accelerating rush to jump aboard the blockchain train, which has been waiting, enticingly, at the station for the better part of the last decade.