Enterprise blockchain – or ‘private blockchains’ – are on the rise. In fact, Deloitte’s 2018 global blockchain survey found 95% of companies across different industries were investing in blockchain tech projects. And while there is criticism across the spectrum – for and against enterprise blockchain as well as whether companies should even invest into it – almost every industry is making a concerted effort to weave it into its infrastructure.
With the birth of Bitcoin, the earliest form of cryptocurrency and an example of the first practical use-case for blockchain, it comes as no surprise that the financial industry is paving the way for blockchain innovation. Given the sheer volume of transactions that take place on a daily basis, the financial market is ripe for disruption and in dire need of efficient solutions. Whether it is improving trade finance or streamlining the KYC process, blockchain can reduce extra business costs, remove intermediaries and ensure safety and security throughout.
Here are a few formalised examples of enterprise blockchain adoption by major financial institutions:
- The Australian Securities Exchange (ASX) will replace the existing Clearing House Electronic Subregister System (CHESS) with a distributed ledger system by 2020. The ASX CEO claims that this system will enable customers to develop new services and reduce costs.
- JP Morgan Chase made several power moves in the space in what appears to be the beginnings of its own mini blockchain ecosystem. Following the launch of the JPM Coin, a digital coin for instant payments, the company is also testing a new privacy protocol, zero-knowledge proofs (ZKPs) which will encrypt blockchain data more efficiently. It is designed for their private ETH blockchain, Quorum.
- IBM launched the “Blockchain World Wire” – a global blockchain payments network that allows financial institutions to use pegged cryptocurrencies as a bridge asset between any two fiat currencies, like the dollar and euro, for near real-time settlement. It is the first of its kind to integrate payment messaging, clearing and settlement on a single network. Its goal is to revolutionise the way the cross-border payments process so that underserved countries get access to money right away.
This is just the tip of a very large iceberg when it comes to other players investing and/or implementing enterprise solutions to streamline financial transactions. To add to the mix, Visa, the Royal Bank of Canada (RBC), Santander, Goldman Sachs and others are developing platforms of their own.
One of the most popular industries associated with the blockchain world is supply chain, or the flow of goods and services. Industry leaders like Leanne Kemp, CEO of Everledger, a global digital ledger that protects items of value (diamonds, for example), have long touted the ways in which the technology can revolutionise traditional supply chains.
The supply chain process has many different steps, forming an assembly line of tasks that need immediate attention. The blockchain can store, record and track these processes more seamlessly, thereby speeding up the flow and cost reconciliations among different parties.
This can be applied to many different subsets of supply chain and below are several examples:
- Supply Chain Finance: Alipay’s parent company Ant Financial announced a new supply chain finance subsidiary called Ant Shuanglian Technology (translation: ‘Ant Double Chain’) to provide financing for SMEs (small and medium sized enterprises) who have large corporate customers. Ant claims that traditional supply chain finance companies would only finance 15% of suppliers. But with blockchain, 85% of suppliers can receive financing. Similar companies to do this include Ping An’s OneConnect and Tradeshift.
- Food Supply Chains: In collaboration with SAP, Bumble Bee Foods launched a blockchain platform to monitor the supply chain of yellow fin tuna from Indonesia to end customers, accessing origin and shipping info using a smart device. Another organization which has implemented a similar food supply chain program is The United States National Pork Board to keep tabs on the pork supply chain process.
- Circular Supply Chains: Accenture is teaming up with Mastercard, cloud computing firm, Amazon Web Services, blockchain supply chain company, and Everledger, to better manage inventory, waste elimination and boost sustainability. It will allow customers to find small-scale suppliers and growers and create a rewards program for sustainable practices with direct payments.
Real estate is a budding frontier for enterprise blockchain as there are major benefits in direct peer-to-peer transactions on a digital network. Traded assets can increase in value by driving out costs and eliminating middlemen, through the use of smart contracts. Blockchain can potentially ‘fractionalise’ an existing property into smaller units of ownership which are represented by ‘tokens’ or digital shares. This can create an attractive alternative funding arrangement for both buyers and sellers and ultimately improve overall liquidity for this new market.
The real estate industry popularised the application of ‘tokenisation’ which means the entire value of a property is digitally represented on a blockchain network (such as Ethereum) in the form of tokens.
Many companies have already jumped on this bandwagon. Below are some recent transactions:
- Three Swiss firms conducted a blockchain-based real estate transaction for nearly $3 million. Blockchain property transaction platform blockimmo Ltd, proptech company Elea Labs Ltd and digital assets service firm Swiss Crypto Tokens Ltd tokenised a property consisting of 18 apartments and a restaurant on the Ethereum network. It was supported by Swiss Crypto Tokens’ stablecoin and pegged to the Swiss Franc, the CryptoFranc (XCHF) to remedy price fluctuation risk.
- Blockchain-based real estate platform RealBlocks closed a seed funding round with Morgan Creek Digital for a decentralised platform that tokenises shares of private equity funds. It also allows real estate investors to sell shares in both domestic and international markets.
Healthcare is another important industry which is constantly under fire, fuelling a never-ending political debate that has plagued the US for years. With a laundry list of fundamental issues stemming from outrageous costs to insurance fraud, we owe it to our society to offer some relief.
One company that is trying to innovate and streamline the health care system is Change Healthcare, which runs a clearing house for insurance claims, processing over 30 million transactions per day. Owned by giant pharma distribution company, McKesson, Change Healthcare uses blockchain to address patient eligibility in real time by storing policy coverage information logic in a smart contract. Given the data siloes that exist between providers and insurance companies, this type of service is highly in-demand.
Moving on to advertising, digital ad fraud is an enormous problem for the advertising industry, estimated to result in over $10 billion in annual losses. Blockchain solutions are emerging to create greater ad campaign transparency and combat bot-based impression fraud. Blockchain provides a single source of truth for the number of impressions delivered, eliminating disputes between marketing platforms, publishers and advertisers and improving effectiveness.
Surprisingly, there are many companies tackling this problem and even payment-related problems in the industry. For example:
- Anheuser-Busch InBev (AB InBev), the world’s largest producer and distributor of beer is partnering with a start-up, Kiip, to write ad impression data to Ethereum in hourly batches. This will save time for media buyers and increase transparency in ad programs.
- A ‘micro-consortium’ among IBM, the digital advertising firm Mediaocean, and major consumer products firms Kimberly-Clark, Kellogg’s, and Unilever are leveraging a custom version of Hyperledger Fabric to record impression level data as well as related transactional data like purchase orders and payments. Hyperledger is an open source project hosted by The Linux Foundation.
- AdLedger, a new consortium that includes several industry players, including Salon Media, IPG Mediabrands, iSpot.tv, Tegna, Publicis Media, Mad Network, group m, and the International Advertising Bureau (IAB), aims to also use the Hyperledger blockchain to gain insight into ad campaign effectiveness.
Problems with enterprise blockchain
Many people take issue with enterprise blockchains because they are private and there is still centralisation around who can participate on the network. This is quite different from public or permission-less blockchains, like Bitcoin, which is open to the public.
However, for large corporations that need to have total control of their business, this is a positive thing. It helps them keep track of transactions on the network, KYC (Know Your Customer) regulations, and achieve faster consensus, which offers more privacy, security and scalability.
That said, while it is the flavour of the year, enterprise blockchain still has a long way to go before it goes mainstream. There is still a long road ahead for perfecting the use of smart contracts and the level of complexity they can currently handle. We know that blockchain technology works but there are still some kinks to work out before mass adoption comes to any single industry.
Founder and CEO of Distributed Credit Chain
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.