Remember how bitcoins turned people into overnight millionaires. While the era fizzled as abruptly as it erupted, it is the underlying technology of bitcoins – Blockchain – that left a lasting impression. Blockchain is hailed as the best invention since the Internet, by many. It is believed to have the potential to change the world as we know it. It is already showing how the technology can disrupt industries, making them more secure, agile and fit for the digital era. But, before we dive in deeper to know how blockchain will disrupt industries, let’s understand how blockchain works.
How Blockchain Works?
The simplest way to explain a blockchain is to imagine a spreadsheet that is being shared by multiple people. But, whenever a change is made in the sheet, all other members know who has made the change and how. The change is made across all copies of the sheet.
In blockchain technology, there is a ledger board showing the changes in real-time. Every record changed/maintained, creates an unalterable block, which means it cannot be changed by a single person. And, multiple such blocks together form the blockchain.
A money transaction is a great example to explain the power of the technology:
- A wants to transfer money to B
- The transaction is seen as a block created online
- This block is visible to every party associated in the transaction
- Once all parties approve and validate the transaction, the block is made part of a chain
- The transaction is now valid and the block becomes part of a chain that cannot be tampered
- It is now a permanent record and the transaction is valid
A Quick Look at 5 Industries that Blockchain will Disrupt
The banking industry could undergo an overhaul with this technology. Maintaining records efficiently has been a problem the finance industry has been facing for years, leading to fraud, over expenditure and other problems. For example, this Accenture report1 explains how blockchain technology can help reduce infrastructure costs for banks by up to 30 percent, saving $8B to $12B in annual costs. With blockchain, banks don’t have to maintain a fragmented database, and a shared ledger board will be seen among the involved participants, which will help reduce costs and also add a layer of security. The payments will be safer as any tampering with the transactions will need the approval of all the parties involved. It will reduce the time taken for the transaction, especially international transactions. For example, Waves – a blockchain platform – has managed to run 190 transactions/second.
Now, the most important part – smart contracts. Smart contracts wherein one has to take into account set rules, penalties and define who the asset will belong to under certain pre-defined conditions. Executing such tasks is definitely complex on paper, and often leads to legal limbo. With blockchain, every part will be well-defined and well-coded, and the implementation will rule out the need for a third-party enforcement team. Trade will be easier with blockchain’s real-time reviewing abilities.
Procurement and Supply Chain
In manufacturing, precisely in the procurement and supply chain domain, blockchain can play a huge role, disrupting the industry in a new fundamental way. One of the biggest problems faced by procurement officers is traceability and transparency of assets across the various stages.
Most companies ask/assign others to do the purchasing on their behalf. And, companies are known to negotiate procurement discounts, which is often based on the volume of purchases. So, it is very difficult to keep a track of the volumes across subsidiaries and every stakeholder in the supply chain network. With smart contracts, blockchain ensures added transparency offers the proof about how goods were sourced and if and how they comply with regulations. Blockchain will help maintain this transparency across the various stages of asset procurement. This essentially means maintaining transparency from origin to the shelf and creating a trustworthy factor for buyers.
The entertainment industry has a major copyright problem. It isn’t easy to put out your music, get a recording deal and then rely on a music company to record, distribute and monetize it. It will be more important as we move forward than ever before. After all, the digital era means increasing creation and consumption of content online. This has also created
Blockchain offers a digital public database that stores all the encrypted records of ownership and also smart contracts are executed which means nothing can be changed without the consent of all stakeholders involved.
It also helps creators solve the payments issue. “Platforms such as Patreon are focused on helping creators raise money from their fans, these platforms are still in the middle as a facilitating platform. The use of crypto-currencies helps eliminate any and all middlemen by securing payment and reducing transaction costs, freeing up a greater portion of each sale for the creator,” points out this Forbes report2. For music distributors, the blockchain would make it simpler to honour licensing agreements and value artists’ contributions.
Blockchain has the capability to transform the real-estate industry in a way like never before. When you rent or purchase a properly, it involves lack of transparency, varied fees, heaps of paperwork and several negotiation transactions. Blockchain will eliminate all of it and ensure that buyers, as well as sellers, can view the previous records. A shared database will make leasing and purchase and sale transactions simpler. It will eliminate the problems caused due to lack of trust among entities. Blockchain will bring additional benefits such as improved property search process, smarter and expedited lease decisions, efficient processing of financing and payments.
In the healthcare industry, it has the ability to securely, keep a comprehensive track of a patient’s health records. A patient’s medical history could be in fragmented across multiple health providers and organizations, but blockchain can hold it all together and help maintain a trackable, transparent and unalterable record without the permission of all parties involved. This essentially means a blockchain-based platform wherein every change made to a patient’s record will be verified, creating transactions that will keep adding to the larger blockchain.