Nish Kotecha, Co-Founder & Chairman, Finboot, shares all the other uses for blockchain aside from cryptocurrency.
CONSENSUS is defined as an opinion that all members of a group agree with. That is easier said than done, yet this is the essence of blockchain. “It is made up of a string of “blocks” of information that build on top of one another in an immutable chain.” (Economist). Each block is only added once there is consensus.
I think of the effort required to find a consensus of what to order for dinner in my home… yet blockchain seems to make this effortless because computers don’t have emotional intelligence.
Emotional intelligence can interrupt finding consensus as our bias starts to affect our opinion, approach and comment. Actually, what we need are facts not opinions, particularly in the data exploding world.
“Data is the new oil.” New technologies such as blockchain, the Internet of Things (IoT), Machine Learning (ML) and Artificial Intelligence (AI) are shaping companies of the future and ushering in the fourth industrial revolution. Technology innovation is unlocking and enabling new operating models while also creating new revenue sources – but only if the data can be relied upon and trusted.
So, when we look for “things that blockchain is good for, other than crypto”, we need to ask where it would be useful to have trusted data as opposed to data that may incorporate a bias. Result: Everywhere!
Let’s consider some examples:
We are amid a supply chain crush. At the time of writing, Apple’s share price was being hit by the expected disruption to the iPhone 13 sales caused by the shortage of chips.
The chip shortage has been discussed in depth, but its ramifications are still being felt. Everything is connected, literally; not only chips connecting us to networks, but the chip supply chain itself is connected on the principle of ‘just-in’time’, taking advantage of lower-cost operating environments and labour cost arbitrage. This paradigm is in shock from the pandemic, geopolitics, nationalism and new ‘made locally’ local politics that are closing and changing the doctrine of globalization to de-globalization. Of the many implications, higher prices for the consumer will be the start. The mitigation is to improve operational efficiency through the digitalization of operational processes.
Most organizations are active in two supply chains, one physical and one financial. The financial one has the distinct advantage of being born digital while the physical one remains analogue and, therefore, significantly slower. Nevertheless, both need to be measured, monitored and tracked, so that the data extracted can be analyzed and used to drive the next level of industrial automation, Industry 4.0 and reduce friction – and therefore costs.
Blockchain enables digitalization across enterprises and through a network or multiple interconnecting networks and potentially even competitive networks. It can manage workflow across a network, handle changes in demand, provide an interchange of data securely and transparently and automate processes such as traceability, manufacturing, shipping and payments. Blockchain can help!
ESG is not a checklist but a requirement requiring re-engineering of operational processes and data collection. Data is required to monitor, measure and change to adapt to today’s business needs. The business world is changing, and regulators, consumers and investors expect more information about everything they consume and the companies they patronize. As a result, leaders and forward-thinking companies recognize ESG excellence as a competitive advantage more than just a survival threshold.
With COP26 on the horizon, talk needs to change to action with data being the lens. This will move the conversation forward to one of action rather than platitudes. But that data needs to be accurate and trusted irrespective of the picture it paints.
Every action has an environmental footprint, one we need to identify and minimize. Here blockchain holds the answer. Blockchain can form the foundation for change once the true picture is transparent, benefiting from decentralized permissions and immutability.
Greenwashing is the term used to describe companies or corporates that are promoted as green on the outside but are less so on the inside. Not least as sustainability is the current corporate zeitgeist and a very lucrative marketing tool, remember the Volkswagen emissions scandal? Despite reputational risks, corporations rely on what they are being told too easily, and the recent DWS investigation will regretfully start many.
The issue is one of the speed of data and communication, which lacks accountability and auditability. The data needs to be correct and accurate from the start, collected in a way that is infallible. The data may not support the intended message, but that’s the point; we need accuracy and realism if we are to change our climate trajectory. Corporations may be pushed into presenting a picture but need to have comfort that behind the claim is an auditable link of blocks supporting the presentation. In addition, a blockchain also provides recourse.
It also enables the companies that are genuinely doing what they say to be recognized for their achievements and efforts, not simply dismissed as greenwashing.
Digital Identities/ KYC/AML
Recently the Economist’s article on Financial Crime, referred to a study updating the findings of a book first published in 2014, “Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism.” The study suggests little has changed and makes for eye-watering gaps in our existing Know-your-client (KYC) and Anti-money laundering (AML) processes. KYC and AML checks are a requirement of the banks under the Financial Action Task Force (FATF) 1989, a multilateral agency. However, banks are using standardized risk assessment tools for which the cracks have increased over the years.
Recently, payment providers led by Mastercard have taken on the role of the censorship implementation agency and are starting with the pornography sector. Recently, adult websites were being required to verify age, the identity of anyone featured in their content as well as the person uploading the footage. In addition, they must update their complaints procedure and review all content before publication. Mastercard, the payments goliath with some 30% market share (ex China), is setting a new bar for data collection, management, accountability and auditability.
Blockchain provides the solution to both these use cases. Thinking ahead, imagine connecting the pornographic website customer consent logs with that of the payment facilitator, thereby blocking only payments to those who content has yet to be verified.
David Lewis, former FATF Executive Secretary, recently commented, “Ongoing work includes looking at the challenges and opportunities of digital transformation, and the potential for data pooling by financial institutions, data analytics and data protection.”
A blockchain network of bank customers and valid KYC and periodic AML checks move us towards the objective of the regulators that only those that are approved can participate in the formal banking economy.
Blockchain is not a utopian solution to all data management problems. Any organization seeking to future-proof its data architecture would be remiss if it were not to consider a blockchain-powered enterprise solution.
One of the challenges in today’s blockchain world is which blockchain to use. The vision of an interconnected world of Blockchains, each performing a specific function, requires an ability to connect each network together with the right permissions. According to an IBM Research Institute Report, over 75% of CTOs and CIOs ranked interoperability and integration as a priority for choosing a blockchain technology. Today, this gap can be filled by using a middleware solution that future-proofs the network for tomorrow’s innovations.
- Getting permission for private blockchain
- OpenBrix: the blockchain property platform focusing on transparency and collaboration
- London Blockchain Firms Raise over $500 Million in Equity Funding since 2013
- Women-owned businesses power usastrong.IO to become first blockchain-verified marketplace for made in US
At the time of writing, Bitcoin had a market cap of over US$1.163trn or roughly half of the value of Apple. The speculation of bitcoin is driving interest and increasing adoption of the underlying, exciting technology Blockchain amongst organizations of all types and sizes. Innovation is making blockchain adoption bite-sized, prompting the question… “why would choose to use an alternative?”