Despite all the hype, most people still think of blockchain in terms of its potential. We’re told that blockchain-enabled peer-to-peer payments and smart contracts could mean the end of banks and lawyers. Yet with so few successful projects in production today, such claims won’t become a reality anytime soon.
To truly understand the transformative power of blockchain, you need to look at where the technology is currently succeeding and then imagine the subsequent small steps that will collectively create a giant leap forward.
Where Blockchain Is Succeeding Right Now
In the commercial world, blockchain is already reducing the friction and risk of doing business by facilitating faster transactions, greater transparency and creating instant trust between people who want to do business with each other.
Though there are blockchain projects up-and-running in a range of sectors, from government and sciences to utilities and consumer markets, three of the best practical applications of the technology today are as follows:
- Financial payments: Ripple is using blockchain to enable near-instant cross-border payments for hundreds of financial institutions, at a fraction of the cost of the typical expensive, three-to-five–day transaction settlement period.
- Trade finance: we.trade is a joint venture between thirteen major European banks that is opening up new profit pools and reducing trade risk with blockchain by increasing visibility for all participants with an automated real-time trade process from order to payment.
- Supply chain logistics: The IBM and Maersk collaboration, TradeLens, is using blockchain to digitize and automate millions of supply chain events every week, providing all network participants with real-time tracking and provenance information.
Blockchain has succeeded in these industries because it is solving real problems. It makes these services cheaper and faster, and each party involved in a transaction is confident that the other will uphold their side of the deal. This ultimately gives everyone more time and money to reinvest in growth and explore new business models.
The Power of a Network of Networks
The tangible benefits of these individual business cases convince people to get involved and create a minimal viable ecosystem for the blockchain to start generating value. As the new trust among participants in a cross-border payment or international trade makes the process more credible, efficient and valuable, more business will join the network, increasing its overall value in a snowball effect.
But what if that confidence and integrity is not just confined to each standalone network? What if each of these powerful new networks could interact with each other easily and instantly? This “network of networks” will kickstart the most transformative phase of blockchain adoption. Linking together related blockchain networks will deliver greater benefits than the sum of their individual parts and further eliminate many of the painfully slow and bureaucratic processes that currently restrain global trade.
For example, when GPS tracking tells a supply chain network that a specific shipping container has arrived at the port, the news that all the various goods on board have reached their destination will be automatically communicated to the relevant trade finance blockchain, such as we.trade. That network will, in turn, instruct a financial network like Ripple to generate the required cross-border payments.
Suppliers selling goods will be paid faster and can reinvest that money in new raw materials, especially significant for businesses in emerging markets where high-quality financing is still hard to come by. Importers will get stock off ships and into stores faster, while banks will always know that the process has been authenticated and settled by all participants, reducing their exposure to risk and associated costs.
Fixing the Interoperability Issue
The value of this network of networks does not stop with payments, trade and supply chains. It will be transformative for any interconnected industries where snowballing individual blockchain networks can become an avalanche by working together.
But first, different blockchains must be able to communicate and perform complex operations effectively, at both a business level and protocol level. This requires the industry to adopt processes and platforms that enable interoperability between different blockchain technology and ensure the full potential of a network of networks is realized for everyone.
About the Author
James Wallis is Founder of 7e4 LLC, which provides business advice, analysis, strategic vision and operational plans for businesses that wish to leverage blockchain technology for economic and social good.