The IT industry has an amazing knack for hyping the next big thing every year or two. In recent years we’ve progressed through Big Data, AI, and now — right on cue — it’s time for blockchain to change the world as we know it.
Sorry if that sounds a bit jaded, but it can be hard to sort out truly disruptive technologies and those that are simply being promoted by tech companies and their investors hoping for a big score.
On the subject of blockchain, however, I’m beginning to sense something big in the works. It will take quite a long time to play out, because blockchain attacks the centralized way that we manage, well, just about everything.
What is Blockchain, and Why Should Anyone Care?
What is blockchain? I don’t know about you, but saying it’s a distributed ledger that supports Bitcoin doesn’t get me very excited.
A blockchain … is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data. By design, a blockchain is inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.
So what? I’m looking for real business applications that will benefit consumers and enterprises.
Gartner cautions against irrational exuberance: “Most current uses of blockchain are not disruptive, because the majority of organizations that undertake blockchain projects find it hard to conceive of systems that are outside of their legacy, centralized models (both business models and technology platforms).”
Exactly. Why should large enterprises (think big brands like Amazon) or software makers (Oracle, SAP, Salesforce) support technology that undermines their business models? Amazon wants all of us to become customers and sell us more stuff. Oracle sells databases to big brands so they can centralize and control management of customers, suppliers, employees, etc.
That’s the way it’s been since the invention of the mainframe computer, despite the proliferation of servers and laptops. Sure, we have cloud-based systems now, but continue to use the same old paradigm of centralized control.
Blockchain could change that by providing what some say will be part of a “Web 3.0” infrastructure makeover. Essentially, computers will be treated more like peers or nodes that share power, without a master controller. Over time, it could give rise to new applications that empower consumers and disrupt the hegemony of big brands and big tech.
Blockchain Applications Are Coming
Okay, but I hear you asking: What exactly can blockchain do for me now? According to Al Burgio, founder of blockchain tech firm DigitalBits, cryptocurrencies like Bitcoin are a “primitive” use case. DigitalBits offers a more general-purpose blockchain technology that can be used to “tokenize” physical or digital assets.
Like loyalty points. Think about it. Points are a great example of something of value, offered by a brand via a loyalty program designed to generate customer data and increase retention. If you want to know how many points you have or spend some of them, you have to go back to that one trusted “source of truth.”
Caddle, a Canada-based rewards program, just announced that it will use DigitalBits technology to enable a “secure, decentralized approach to delivering digital assets such as points and rewards directly to consumers.”
Why? More control for users, and less dependency on a centralized system which is vulnerable to attacks. This is one of the key features of blockchain, says Burgio. Instead of one centralized trusted authority, trust is distributed throughout the network by design.
Essentially, the Caddle application can make points behave more like a currency that can be easily exchanged and used. A recent survey found good support for cryptocurrencies:
The survey, which polled 10,000 Canadians in January, found that approximately two-thirds of the respondents would like to see companies expand their customer loyalty programs by rewarding them with cryptocurrency for their purchases. As the alternative asset exchange system grows in popularity, it is evident that adaption and innovation from brands and retailer will follow as the concept becomes more accessible and mainstream.
Earlier this year, Singapore Airline launched the world’s first blockchain-based airline loyalty “digital wallet” capability to allow its KrisFlyer members to use digital miles for transactions at participating retailers.
What else could be done with blockchain? Get ready for a flood of blockchain-enabled applications over the next few years. Burgio says a massive amount of money is being invested in this space. According to a recent Research and Markets report, the global blockchain market will grow from about $411.5 million in 2017 to more than $7 billion by 2022.
“Increasing adoption of Blockchain-as-a-Service, rising cryptocurrency market cap and ICO, simplifying business processes, and creating transparency and immutability are expected to propel the growth of the blockchain market”
Watch This Space
So there you have it. Blockchain could have a huge impact on how businesses and consumers interact. Software makers in the supply chain space could adopt blockchain to improve speed and efficiency. Payment processes in retail could get a makeover. Fraud could be reduced in banking transactions.
And who knows? Blockchain could help spawn the next Amazon.com. Watch this space, this could get very interesting!