While there still continues to be an ongoing debate around the value of cryptocurrencies, with well-known CEOs such as Jamie Dimon claiming it is a fraud and many others wondering if there is any practical use for them. An opinion that is far less controversial is the value of the blockchain. This distributed ledger technology keeps records of economic transactions, and while it was initially built to manage bitcoin transactions, it isn’t limited to digital currencies but can be applied to anything of value.
Deloitte recently reported that the number of blockchain-related projects on GitHub clocked in at more than 26,000 in 2016. We are just in the infancy of discovering how the blockchain can be utilized outside of digital currency, and that is sure to have a major impact across a variety of sectors.
The first and most obvious sector in which the blockchain is already being applied is financial services. Bankchains are picking up in popularity as the blockchain makes transactions public record and removes any risk that payments won’t go through, eliminating the necessity of a third party to oversee this process, potentially making banks obsolete in the future.
Blockchain startups such as Ripio provide a peer-to-peer lending platform to extend credit lending globally. The utilization of tokens and “smart contracts” ensures that each loan is secure and that all parties involved are accounted for. This includes a co-signer who agrees to repay the loan in the case that the borrower defaults.
The consumer discretionary sector is expected to get shaken up again, at first it was the trend towards e-commerce, and now disruption will be caused by the blockchain. Most retailers pay big bucks to hire advertising agencies that act as a liaison between the company and potential customers. These ad companies rely heavily on consumer data from the likes of Amazon (AMZN) and Google (GOOG) to develop the most efficient ways to market to each individual in a target audience. By providing secure decentralized ledgers, the blockchain is giving consumers control over which information they want to share. As such, a whole slew of blockchain applications have cropped up in this space, many that facilitate better connections between retailers and customers. Incentive- based platforms like NAU give individuals cryptocurrencies in return for their data, and for inviting others to share their data. Or companies like Bitclave that eliminate the advertising middleman in order to directly connect a business to its customers.
Other potential benefits to retailers include using the blockchain as an additional, and potentially less expensive way for customers to pay for merchandise. Currently, most retailers pay roughly 2% transaction fees for all purchases made with a credit card. Bitpay is a startup in this space that helps retailers integrate bitcoin payment options. There are impediments to this becoming more widely accepted due to the extreme volatility of digital currencies and the ongoing debate over value. However, if these cryptocurrencies could keep transaction fees lower than current credit card rates, this could be a boon for retailers.
Application of the blockchain could also revolutionize supply chain management. It’s ability to closely track individual goods as they make their way from the supplier to the customer by keeping a thorough and secure record of serial numbers and transportations would lead to a more efficient logistics process and get products into consumers’ hands more quickly. This will also help reduce the circulation of fake goods, making counterfeiting more difficult by keeping a record of every step of the supply chain process and fully documenting the journey of a product through secure labeling and tracking. This is useful for the loads of consignment markets that have cropped up such as TheRealReal, Thredup and Rebag that have to assure the authenticity of designer items. It will also will help with event ticket sales for third-party distribution platforms such as Stubhub and in guaranteeing the safety of food and wellness products.
The future for the blockchain seems endless, but we are only in the first inning. While financial services and consumer discretionary appear to be the most easily disrupted sectors in the early days, there is no doubt several more applications will be discovered as this technology develops.