As a B2B News Network reader, you may be familiar with the emerging fintech called blockchain. We’ve written about it several times including regular updates to our primer on the subject. But its influence on B2B is undoubtedly worth probing deeper.
Blockchain will not remain a purely fintech phenomenon and has set itself up for wider B2B applications in the second half of the twenty-teens, and thus our solution profile examines what has yet to come about.
According to Vivek Wadhwa, Stanford University Fellow, blockchain has the potential of a transformative technology, as he told Bloomberg TV in late December 2015. For example, he cited the scenario whereby using blockchain, investors could eliminate the middleman on a real estate transaction and avoid thousands of dollars in escrow fees.
“Blockchain technology is very good as a B2B payment method, bypassing banks; it really lowers barriers for B2B payments,” says Michael Dunworth, CEO and cofounder, Snapcard, a blockchain and bitcoin technology startup. “Now that value can be moved in real time, companies don’t have to have huge amounts of working capital sprinkled across multiple geographies to work with customers. Using blockchain, we’re able to move actual value from one country to another and not sustain cash floats in multiple currencies.”
However, outside of fintech applications, blockchain has yet to make its impact felt. Although B2B experts feel that potential will soon be realized.
“Outside of actual blockchain companies, none are presently using it for B2B on an open, mainstream basis,” says Rik Willard, founder and managing director, Agentic Group, which promotes and tracks blockchain applications inside and outside of fintech. “There are tests such as Nasdaq or development deals such as IBM and JP Morgan. However, there is no company using the technology to the extent that they have measurable data.”
Willard goes on to state that blockchain development has not quite caught up with its potential reality. But by the middle of 2016, he foresees that law firms will institute blockchain technology in the form of smart contracts, disrupting how law firms operate and empowering B2B transactions by dismantling layers of inefficiencies in the deal-making process.
According to blockchain infrastructure company Cambridge Blockchain, smart contracts are digitally signed documents that govern how such data may be released, powered by an engine to run the smart contract code.
“Cryptographic proofs of all information are stored on an identity blockchain shared by all system participants,” says Matthew Commons, CEO of Cambridge Blockchain. “The resulting system allows the selective release of personal information to only authorized counterparties on a controlled, as-needed basis.”
Big Data and process efficiency
Other early B2B applications that will become beneficiaries of blockchain include the supply chain, verification of ownership, Big Data and process efficiency improvements, according to experts. Some even compare possibilities of blockchain to early expectations of the Internet itself for business use.
“It will continue advances in fintech because that is where the immediate demand is,” says Ian Worrall, CEO, Encrypted Labs, a blockchain technology firm focused on financial systems and data security. “But once more business-minded individuals understand other industries can benefit from this technology we will shift into blockchain solutions for managing Big Data security and creating process efficiencies through smart contracts and automation.”
A large problem inhibiting its growth is managing the vast amount of data that will be stored, according to Worrall. However, he thinks the answer will lie in leveraging distributed system technologies such as permissioned-server networks (i.e., private blockchains) or utilizing the bitcoin blockchain.
Blockchain kills your father’s killer app
Indeed, bitcoin is the present killer feature of blockchain, according to Dan Storbaek, CEO, Skarpline, builder of online collaboration tools. With its unequalled power to provide unique identification, verifying individual financial transactions is the least of its uses. Storbaek predicts that blockchain could prove applicable as a way to prove everyone’s personal identity worldwide and in the process replace the most commonly relied upon method today, email, the Internet 1.0 killer app.
“Email is quietly being squeezed on all sides, but the ‘email address’ remains the killer feature of electronic mail,” Storbaek says. “While social login is making inroads as a login tool, having your private information logged and used by private companies has severe flaws in the long run. Blockchain has the potential to become a global, open and secure way for B2B industries to collect and share personal data across apps and individuals.”
In addition to offering unique identifiers for people, B2B companies can utilize blockchain to give their products singular trackability. That would enable them to pinpoint genuine articles from fakes, helping to reduce to fraud in vendor support generated by phony goods, according to Storbaek.
Development and adoption of blockchain
For blockchain technology to actually develop and become widely adopted, its open source basis must cut across many industry players. Accordingly, Linux Foundation announced in late December 2015 that some of the biggest IT and fintech titans including Accenture, Cisco, Fujitsu, IBM, Intel, JP Morgan, London Stock Exchange, VMware and Wells Fargo have joined forces to catalyze its progress. By collaborating, these founders of the Hyperledger open source blockchain project hope to create an enterprise-grade open ledger system for fast and permanent recording of everything from monetary and commodity exchanges to shipment records to production logs related to product recalls, according to the organization.
“Development and adoption of blockchain technology is not achievable by any one company or industry, therefore an open source and collaborative development strategy is necessary,” says Jim Zemlin, executive director, Linux Foundation. “Thanks to many founding members, the open ledger framework is underway.”
Issues in producing the necessary open source codebase lay in the sheer volume of programming involved. No single B2B technology company—no matter how large—has all the technology resources required to do this alone.
“A key aspect of blockchain is inter-corporate collaboration between networks of Big Data companies,” Worrall says. “This is crucial because the larger one company’s datacenter becomes, the harder it is to manage and secure. To do so efficiently would involve competitors working together.”
Not only does this facilitate management of data but also secures it more effectively through distributed storage encryption, according to Worrall. This can be applied to the Internet of Things (IoT), healthcare, and government records as well as most Big Data enterprises.
Swiss Army knife of technology
For all the open source feel-goodness involved with blockchain, the bottom line remains the bottom line. Cold, hard cash implications drive all the considerations in the technology. Chief among those is the cost effectiveness of the distributed ledger concept.
“The economic applications of blockchain technology are immense,” says Micah Winkelspecht, founder and CEO of Gem, refiner of blockchain technology for smart networks. “Blockchains introduce new data management infrastructure that will propel a services revolution in industries such as banking and finance, government, healthcare and super logistics.”
According to Winkelspecht, blockchain can be a database, protocol and application all at once—a veritable Swiss Army knife of technology. It is also sometimes referred to as a shared write database or a distributed ledger, he explains.
“Blockchains store data in order of confirmation, bundling transactions into blocks and tacking the most recent block to a chain,” Winkelspecht says. “Employee identity management for large multinational corporations or access to patient healthcare records could utilize blockchains to eliminate redundancies and false entries to the data and offer layered information access points to third parties without compromising information security.”
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