How the Blockchain will lead disruption across industry..(5/5)

The first four blogposts in this series have covered the business foundations and the technology behind both Bitcoin and it’s core technology platform – Blockchain.This final post will bring it all together and will cover business models that will either be created or upended as part of this potentially immense disruption.

Though Bitcoin the currency has had the lion’s share of media and public interest over the past few years, it is no longer a point of contention to say that Blockchain technology platform is the more valuable invention & one that will drive industry wide change. In the last post, we discussed how Blockchain can be leveraged as a design pattern to create digitally native & truly distributed applications.

Will there be one Blockchain to conquer them all? Not at all, the kind or flavor of blockchain will be dictated by the business need. One could have a public blockchain used by Government or a private blockchain/ sidechain used by a globally distributed organization/holding company or even vertical blockchains – run by a given industry like Banking & financial services, Retail, Manufacturing. IoT, Healthcare or Govt .

To be sure, the current state of Blockchain still has a high degree of technology challenges (throughput, latency, overall size of the blockchain, lack of developer friendly APIs, multiple forks etc) that must be overcome before it becomes mainstream but all open source technologies eventually get there especially from a throughput, latency & performance standpoint.

However, the obvious commercial success players of Red Hat, Hortonworks & Pivotal Labs across sectors as diverse as operating systems, middleware, workflow engines, the full data stack & cloud computing only bears this out. Mature, stable and feature rich open source technologies outlast commercial & proprietary platforms from an adoption standpoint. Blockchain and it’s growing ecosystem are no different.

At a minimum any application developed using the blockchain as a foundation will have the below inherent technology abilities –

  • Support massive (read global) scale  of deployment – well above and beyond what we term “Big Data”. Any app built on a Blockchain API will inherently be deployable & distributable at massive massive scale
  • Highest degree of trust and security due to cryptography thus eliminating the need for trusted third parties, intermediaries, hierarchies and unnecessary regulatory regimes
  • The ability to provide transparent access to individuals or applications with the right permissions by using a simple (digital) private key
  • Support complete programmability of any artifact (e.g a contract, a deed, a financial instrument, a medication record etc) stored in it
  • Provide complete audit-ability in terms of ownership and access tracking

BC_Evolution

Illustration: Blockchain as the foundation for gradual disruption across Verticals

Given the capabilities shown in the above diagram, the true promise of Blockchain would be to be serve as the seamless economic layer that would be the underlying infrastructure for a whole layer of usecases across industry sectors.

When development in 2.0 streams matures with projects like Ethereum (and even Ripple) enabling developers to create manner kind of application or script (e.g digital currency, fileserving, messaging etc) in away that it can natively  run on a blockchain-like infrastructure. Ethereum , for one, deserves a huge mention as they’re essentially providing digital currency capabilities with smart contracts baked in from the get go.

Established players like Banks are not sitting still. They’ve begun forming consortiums like R3 and also have begun investing into players like Chain who are applying an enterprise model to Blockchain.

To enumerate some of these innovation led blockchain usecases –

FSI, Retail & Insurance – The financial industry is built on a system intermediaries across the spectrum, ranging from Clearing Houses to Payment Processor Networks. Intermediaries  facilitate trust and also to make overall communication secure. However, eliminating or reducing the usage of third parties can save hundreds of billions of dollars every year while facilitating real time interactions e.g. settlements – which is virtually unheard of.

  • Institutional (macro) digital payments,
  • Consumer (micro) & retail payments
  • Eliminate or simplify Capital Markets across the spectrum. E.g financial trading brokering & near real time settlement & clearing in all manners of instruments – equities, fixed income, derivatives etc;  (which the DTCC paper is referring to)
  • Vastly simplify the signing & authentication of digital documents by turning them into smart contracts s e.g. Financial contracts
  • Vastly simplify Chain of Custody & Asset tracking
  • Trade Clearing & Settlement (eliminate the middleman as well as settlement time with current system of paper certificates)
  • Automatic applications and claims management
  • Shrinking the insurance industry value chain across P&C,Life & Health
  • Eliminate the escrow system in mortgage banking. Blockchain will change the face of Mortgage banking which is a significant percentage of any Financial supermarket. Eg JP Morgan, BofA etc
  • Drive the digital transformation by automating and digitizing entire processes e.g home buying
  • Radically simplify Compliance challenges – KYC(Know Your Customer), BSA (Bank Secrecy Act), Fraud & Risk Data Consortiums layered on Blockchain
  • Blockchain oriented applications & data architectures as a way of enhancing well understood usecases around AML, Risk (esp Credit Risk etc), Digital Banking etc – futuristic.
  • The fraud detection space is a no brainer for blockchain.

HealthcareA global patient record system as well as population health management systems can save millions of lives every year while removing a lot of systemic inefficiency that plagues healthcare and life sciences across a spectrum of usecases.

  • Creating Blockchain based EMR’s that span local and regional jurisdictions
  • Anonymize EMR data and feed it into druge discovery and clinical trial processes
  • Speeded up drug discovery & drug trials right from identification of populations to enabling individuals to volunteer for trails
  • Population Health Management within national and local jurisdictions
  • Making the healthcare delivery and pharma sectors much more efficient. e.g Improving availability of medicine supply chains
  • Assessing global diseases outbreak in seconds across the planet..creating a realtime understanding of illness across the globe
  • Improving genome sequencing
  • As a whole, improve preventive medicine

TelecomThe Telecom industry suffers from extreme customer dissatisfaction due to the amount of time taken to provision new services as well as with delays in providing instantly available and highly responsive applications.

  • Enabling easy discovery and signup of telco services. e.g cellphone contracts
  • Simplified service provisioning
  • Easier monetization of digital services and applications
  • Simplify all manner of financial billing
  • Reduce delays in customer on boarding, preference detection and network provisioning

Travel & EntertainmentThe Travel industry is perceived to have a very low degree of transparency with regard to prices and availability of bookings. It is also built upon a system of reward points that keep customers loyal. Both these areas are highly inefficient and are areas of lock-in for customers. The entertainment industry on the other hand relies on intermediaries like iTunes and Cable companies leading to heartburn among artists. The Blockchain model provides freedom of choice to both artistes and consumers.

  • Move rewards to an online system of Bitcoin-like rewards and tracking
  • With strong digital IP tracking – completely replace the current recording industry by enabling groups of artists to register, self publish & collect payment on their creations
  • Migrating Physical asset keys to the BC – Hotel keys, Auto rental records etc
  • Signing & authentication of digital documents by using smart tokens e.g. Contracts
  • Enable embedding of smart contracts in actual physical objects. E.g Lock access to a credit card if the user defaults on the account etc
  • Instant and on demand access to entertainment
  • Easy flight bookings
  • Connected airports and hotels

GovernmentSimplified record keeping for government can save tens of billions of dollars in corruption in the developing world and can lead to better services for the global population.

  • Serve as the authoritative registry for all kinds of record keeping & attestations – births, deaths, marriages, property deeds etc; hugely eliminate corruption in developing countries
  • All manner of notary services
  • Enable banking services for underbanked populations
  • Eliminate some of the current pain in the current electoral process with e-Voting
  • Improve the effectiveness of charity..everything in the blockchain is auditable and it is tamper proof

IoT 

Blockchain and IoT are a marriage made in heaven. Facilitate the entire lifecycle of IoT applications. E.g A private blockchain for connected car that will enable secure and realtime interactions ranging from device registration, user authentication, smart contracts to exchange services among one another and location info to track safety

Manufacturing – The manufacturing industry is moving to a virtual world across the lifecycle, ranging from product development to production as systems become more interactive and intelligent. The blockchain can serve as a plant level, regional level and global supply chain level ledger that will dramatically cut costs and drive more efficient just in time (JIT) processes.

  • Improve operational efficiency by improving visibility into core processes
  • Improving value chains themselves by applying advanced analytics onto data inside manufacturing specific blockchains
  • Match supply and demand across organizations
  • Enable better usage of plant capacity
  • Drive liquid marketplaces

The list of use cases goes on.

The Blockchain opportunity for Technology vendors

Where it gets very interesting is in marrying all these capabilities to a Big Data stack. At about 30 GB[1], the current Blockchain is too small for a massively scalable HDFS (Hadoop Distributed File System) like deployment but it is very conceivable that It could grow based on business and technology requirements for increased capabilities. Case in point is the famous debate on increasing the block size as away to dramatically scale the throughput  to match a commercial payment network like VISA’s.

It is very conceivable that in a few years, some of the blockchain variants could rise to Petabyte scale thus spurring interest from players in the Big Data, Application Development and Cloud Computing space .

The other two massive areas of opportunity in my view are creating distributed apps (DApps) that are blockchain & cloud native but written using Hadoop semantics (Storm, Spark etc);

The other area is of course Data Science & Predictive Analytics across all of the above areas.

IT and Management strategy in the face of Blockchain Disruption –

The creation of smart services on a Blockchain-like infrastructure will further depend on the vertical industries that these products serve as well as requirements for the platforms that host them. There is an increased need to watch innovation very closely as it can rapidly put established organizations out of business very soon. The list of such technologies is long… Cloud Computing, Big Data, Mobility, IoT, 3D printing etc.

For a recent list, please see my previous post on Gartner’s top tech trends for 2016 – http://www.vamsitalkstech.com/?p=1244

Blockchain as a platform for innovation is more akin to Big Data than Cloud. How so? In that it essentially changes not just infrastructure (like with Cloud) but also the very nature of the business services themselves – as with Big Data.

My recommendation for industry practitioners would be to follow the below rough process ,which is common to every two speed IT process focused on reaping business benefits from strategic technologies. The definition of ‘strategic’ as in an emerging technology trend that will impact Iong term business thus influencing plans & budgets.

  1. Examine existing business usecases or pain points that could benefit from a decentralized model. These could services being offered by startups or other players unencumbered by legacy investments
  2. Develop architectural and business expertise in this space by developing small prototypes
  3. Begin targeted proof of concepts that are incremental in nature and are intended to offer capabilities to early adopter customers
  4. Partner with commercial vendors in this space; also keep regulators informed of your intentions and get their buy in
  5. Put plans in place to gradually operationalize and mass market these capabilities

As blockchain projects leave the labs and move slowly into proof of concepts and ultimately into production systems, it behooves industry players to look into the technology to a) offer disruptive services in their vertical b) augment existing applications.

Blockchain has the potential to change any industry & the way it does business. Enterprise CXO’s need to look to apply it as a tool in any business venture where data, transparency of business dealings & security are key.

References

[1] “The Blockchain Economy” – Melanie Swann – O’Reilly Press
[2] https://bitcoin.org/en/developer-reference
[3]”Mastering Bitcoin” – Andreas Antonopoulus – O’Reilly Press
[4] https://en.wikipedia.org/wiki/Block_chain_(database)