Thanks to all the media attention surrounding Bitcoin and other cryptocurrencies, blockchain technology is usually associated with finance. But it's too narrow a vision of the true capacity of this technology – the concept of a digitally signed and distributed accounting book is universally applicable to business processes.
Blockchain technology is an objective and technologically effective way of eliminating the interplay of many types of exchanges. And when a stage of a process becomes non-essential, the suppression becomes obvious, giving companies immense potential for streamlining operations in many ways; we already see technology appearing in industries such as retail supply chains and more.
To put it simply, blockchain technology will proliferate in industries at a speed that will leave consumers and business leaders struggling to keep up. The change in the air has the potential to cannibalize existing sources of income and create new sources of revenue; companies that are not starting to implement it will soon lose competitiveness.
Capitalizing on the Blockchain
Executives implementing the blockchain in their businesses begin to see several operational improvements, including:
1. Lower operating costs: The blockchain plays the role of intermediary, so it is not necessary to have an intermediary to facilitate direct transactions. Smart contracts streamline processes making them more profitable for businesses.
2. Reduced defects: A shared register improves the confidence of buyers and sellers . This can be a boon for legitimate businesses.
3. Decrease in cycle times: Smart contracts operate on an IFTTT basis . In other words, if the agreed conditions are met (as verified by each node on the network), an action is triggered automatically and instantly. This greatly reduces the verification times, which can ruin the running speeds.
These benefits are important, but they may not be as revolutionary as one of the most important changes that the bank brings: opening new streams for revenue generation.
Consider, for example, SWIFT, a financial messaging service provider: In 2017, SWIFT launched a Proof of Concept designed to streamline cross-border payments. This is important because these payments account for nearly half of global payments. The current protocol is slow, especially for unbanked people, and exchange rates can fluctuate considerably between the time a payment is sent and the one that is received.
Unbanked individuals themselves present another opportunity for blockchain technology to create new sources of revenue. For example, it is easier to get a cell phone than a bank account. For this reason, there are almost five times more mobile phones in the world than bank accounts ( 5 billion against 1.2 billion ). This means that telecommunication service providers can take advantage of this imbalance by accepting cryptocurrencies for remittances. Not only will they generate more revenue, but they will also save money on bank transaction fees.
We also see this technology overflowing in entertainment. Smart contracts – legal agreements based on blockchain technology that automatically pay artists' royalties – are about to revolutionize the music industry.
Two of the biggest pain points in music are digital rights management and royalty payments. An analysis by the Institute for Policy Innovation estimates that global piracy costs the music industry $ 12.5 billion a year . This is due to the fact that companies are broadcasting songs and that consumers are listening without one or the other party paying, but Blockchain has the potential to become the basic aggregator that solves these problems. With a distributed ledger containing defined terms for the use of a saved file, each transfer and read can be followed. This streamlines the process to ensure that the artist and the recording studio can accurately track the scope of a song and collect revenue accordingly.
In going further, several organizations, including large utility companies, are working to develop blockchain energy solutions for a peer-to-peer energy network – a concept never before seen in existence. This seems to be a natural evolution as many homes and commercial buildings are now equipped with solar panels producing energy. In fact, power companies could cut bankers out of the equation much like telecoms and simply trade energy with consumers on the blockchain.
This is about as distilled as the model can become, since cryptocurrency token values are affected by the amount of energy consumed to generate them. The article above from The Guardian notes that several startups, like Power Ledger, are working on a platform for this. Another, LO3 Energy, is launching a green energy micro grid in Brooklyn, New York, based on blockchain technology.
And what does this mean for businesses? Apparently, some existing sources of income may be at risk as the prevalence of blockchain increases. Banks, for example, can find much of their transaction costs significantly reduced (or even eliminated) because of the blockchain technology that replaces them as an intermediary – forcing banks to look for new revenue opportunities . In the digital world, companies will probably see cross-disciplinary issues emerge; for example, telecommunication and Internet service providers have a good knowledge of customers, which could be exploited for financial products.
While cryptocurrency draws all media attention, the underlying blockchain technology is quickly adopted in more industries than you can imagine. If this pace of progress and investment is maintained, it will be extremely disturbing in just a few years. Business leaders need to start paying attention and launching pilot programs as quickly as possible to embrace this change.
Blockchain technology goes far beyond cryptocurrence and will disrupt much more than financial institutions. Use cases abound, and the benefits are clear – and if that's the case, what's stopping you from starting?