The potential for blockchain technology to bring about widespread change has been predicted since 2011 and the emergence of Bitcoin. But it was this year when the concept really started to capture people’s attention.
Perhaps spurred on by the meteoric rise in price of Bitcoin – the first tangible example of a blockchain technology – hype grew around encrypted, distributed ledgers in the financial sector.
Blockchain-focused financial services startups raised $240 million in venture funding during the first half of the year. However, its potential was beginning to be recognised across other sectors and industries.
2018 is likely to see a continuation of this trend of innovation and disruption. Here are the five key ways this is likely to happen.
1. More use outside of finance
While it’s implications for the financial sector might seem most apparent, any industry or organisation in which recording and oversight of transactions is necessary could benefit. In healthcare, IDC Health Insights predicts that 20% of organisations will have moved beyond pilot projects and will have operationalised blockchain by 2020, so 2018 should see significant progress in that direction.
In recruitment and HR, blockchain CVs have been developed which will streamline the selection process by verifying candidates’ qualifications and relevant experience.
Legal work which involves tracking transfer of ownership – for example intellectual property law, or rea estate deeds – will also be made more efficient through implementation of distributed ledgers. Next year we should expect to see inroads by innovators in the legal field making this a reality.
Meanwhile in manufacturing and industry, the Blockchain Research Institute, the founders of which include IBM, Pepsi Co and FedEx, say it expects blockchain to become the “second generation” of the digital revolution following the development of the internet. It has highlighted work by electronics manufacturer Foxconn to use blockchain to track transactions in its supply chain.
2. Blockchain meets the Internet of Things
Though this sounds like a clash of the buzzwords, serious thinking is going into how these technologies could be made to work together to improve business processes, and day-to-day life.
Security is one reason they are a good fit – blockchain’s encrypted and trustless nature makes it a viable option when it comes to keeping the ever-growing number of connected devices in our homes and offices safe. Research envisages that blockchain compute power that is used to “mine” Bitcoin could be put to use safeguarding our smart homes from a new generation of cyber-burglars looking to break in and steal our data.
Another proposed use is that the cryptocurrencies built on blockchains would prove ideal for automated micro-transactions made between machines. As well as recording machine activity on the ledger for record-keeping and analytical purposes, machines could effectively “pay” each other when smart machines operated by one organisation interact and transact with those owned by others. This is likely to be further down the road, but it is likely we will see research and breakthroughs in this area in 2018.
3. Smart contracts will come into their own
“Smart contracts” are another possibility brought about by blockchain – the idea is that contracts will execute automatically when conditions are filled, meaning payments will be made, or deliveries dispatched, or anything else in business which is typically defined by a contract.
Blockchains make smart contracts possible because of their consensus-driven nature. Once agreed-on conditions are met, then the contract is filled. This could mean paying bonuses when targets are hit, or despatching an order once a payment has hit your account.
Insurers AIG are piloting a blockchain smart contract system to oversee the creation of complex insurance policies which require international cooperation, and we should expect more to follow in their steps next year.
4. State-Sanctioned Crypto Currencies?
Putin was the first – with the recent announcement of the “Crypto Rouble” – but it was inevitable that politicians would at some point start to consider the advantages of blockchain-derived currencies. In the wake of Bitcoin, it has often seemed that nation states have been lacking in their enthusiasm for this particular application – and probably with good cause. Bitcoin was after all envisaged as a way of creating a tradeable currency which couldn’t be manipulated by governments. Some such as China have been outright hostile – refusing to allow exchanges to operate in their borders and issuing warnings about the high risk of investing in cryptocurrencies. 2018 however could be the year that governments finally get on board the blockchain bandwagon – as its potential for creating efficiencies in both financial and public services become more apparent.
5. A large number of blockchain initiatives will fail.
Blockchain undoubtedly has the potential to be revolutionary. But like anything revolutionary it can be dangerous – in this case, mainly because rushing in without clear expectations of what you want to achieve is likely to be a costly waste of time.
With any hyped technology (and blockchain is certainly hyped) there is a danger that the compulsion to avoid missing out can prompt action which is overly hasty or badly conceived. The important thing to remember is that, as with AI and Big Data, it is something which will change the world forever, but it is likely to be a gradual process. Without a doubt, every aspect of business is constantly affected and reinvented by technology, but there are always false starts and failures along the way.
Those who avoid this fate will be those who set out with a clear understanding of what they are trying to achieve, and a strategy in place for getting there.