Why Big Tech Firms Are Ignoring Blockchain (For Now)
Emmanuel Babalola, the Africa director for cryptocurrency exchange Binance, told Cointelegraph that with each passing month, the number of cross-collaborations taking place between local blockchain/crypto firms and various mainstream entities has continued to grow. Babalola said that most forward-looking tech companies are vying to gain exposure within the region, all while trying to help people across the continent embrace and realize the true utility of blockchain.
Why Big Tech Firms Are Ignoring Blockchain (For Now)
Thus, it will be interesting to see how things shape out for the continent from here on out, especially since many of the nations within the region are known to suffer from an extremely high level of red tape. With many governments fast realizing the potential that crypto and blockchain possess, however, it would not be surprising to see countries making way for more foreign investment from established firms operating within this rapidly maturing sector.
Strong words, but how true are they? Does blockchain technology really apply to the supply-chain world? Can it solve your supply-chain problems and increase your profitability? These are some of the very practical questions we've been asked by supply-chain executives. Our goals are to give you a clearer understanding of what blockchain technology is all about, and to save you the time of studying, testing, and assessing its value to your operations.
Blockchain is an internet-based technology that is prized for its ability to publicly validate, record, and distribute transactions in immutable, encrypted ledgers. The technology was invented to support transactions in bitcoin, a digital cryptocurrency that operates independently from a central bank. In essence, blockchain technology provides the platform for creating and distributing the ledger, or record, of every bitcoin transaction to thousands, if not millions, of computers linked to networks in all parts of the world.
Because the transactions and ledgers are encrypted, blockchain technology offers more security than the banking model, and its instantaneous transmission via the internet eliminates banks' two- to three-day clearing process and accompanying costs for transferring money from one account to another. The term "blockchain" is derived from the "blocks" of validated and immutable transactions and how they link together in chronological order to form a chain (exhibit). Hence the term "blockchain."
In most cases, today's supply chains operate at-scale without blockchain technology. Even so, the technology has excited the IT and supply-chain worlds. It has also inspired many articles and prompted established IT players and start-ups to initiate promising pilot projects, including:
Let's start with a reality check: As most practitioners know, many of today's supply chains have good data, which they are able to transfer across supply chain tiers at close to real time speed. To assess blockchain technology's value at stake for the supply chain world, we looked at three areas where it could add value:
Produce is a good example of a complex supply chain where, occasionally, the parties are not always known, such as produce supply chains that source from thousands of growers and farmers, and move goods through multiple distribution points before they reach retail shelves. As the goods often change hands, a permissionless blockchain is a valid solution for tracing and verifying the grower or farmer who supplied the produce. Walmart's pork traceability is a good example, with a huge number of pig farmers at its lowest tier of supply. But, while Walmart may be one of a handful of companies that can drive this at scale, most supply chains need to assess the cost-benefits of investing in technology to collect and validate data from the lower levels.
In adopting blockchain technology for its supply chain, a company must first decide on the type of blockchain it would need to build. Recall that the bitcoin approach is a permissionless blockchain populated with parties that are not known or trusted. It resides in the public domain and uses a consensus verification protocol to establish trust in each block. There is no central database or central governance in these blockchains.
These solutions do not carry the additional burden of some of the technical complexities that blockchain can raise (see sidebar, "Getting technical"). Thus, we maintain that when all parties in extended supply chains are known and trusted, a blockchain solution is probably not needed, as these known and trusted parties can be relied upon to provide a single, real-time version of the truth. In such a situation, centralized solutions like a cloud-portal, or decentralized peer-to-peer connections would suffice.
Generating standards. Despite the emergence of platforms such as Hyperledger (used by IBM, Walmart, and Maersk) and Ethereum (used by BHP), no comprehensive supply-chain standards are in place for blockchain solutions or providers. This means there are no definitive answers to questions like how to solve for consensus (immutability) on blocks, and which encryption technology to use; the absence of such standards would add complexities that could hinder, not help, the supply-chain world.
For supply chains where participants are not known or trusted, blockchain technology can add trust, transparency, and traceability. Almost by definition, these supply chains are complex, multi-tiered, involve many parties, and they operate in a regulated environment that demands a higher level of traceability.
However, for supply chains with known and trusted players, a centralized database approach is generally more than adequate. This does not mean that all these supply chains currently follow a true end-to-end approach, and in fact, many of them use siloed databases that contain data with only limited traceability. Thus, many of these supply chains do not need blockchain technology to solve such issues, as they can leverage existing technologies that are better suited to their high-volume transactions, either on their own or with partners.
It's too early to estimate the costs of operating blockchain technology in the supply-chain world, and compare them with other technologies. No doubt, IT companies will be at the ready to provide this information.
A number of companies are exploring the benefits of leveraging blockchain technology in adjacent areas, such as introducing smart contracts, bringing more rigor to purchase order payments or demand chains where "real demand" signals can propagate the upstream supply chain faster. While we salute the power and the promise of blockchain technology, we advise the supply-chain world to take the time to measure its suitability against other, possibly simpler, and less costly technologies.
Sliding in the middle of those banks is U.S. tech giant Apple, the only company in the technology industry to make it into the top ten largest public companies, with $247 billion in sales and $367 billion in assets. Apple too had been largely silent about any potential blockchain projects, until CoinDesk reported on a patent filed by the company for using blockchain technology to timestamp data. While the company itself has been mostly mum on its blockchain work, Apple cofounder Steve Wozniak is an increasingly vocal proponent of cryptocurrencies, though he left the firm years ago.
October saw the three main card networks invest in bitcoin-related companies, which comes on the heels of major banks exploring the use of bitcoin and blockchain technology to solve some industry pain points.
Nasdaq has unveiled its blockchain technology initiative. The platform uses blockchain technology to issue shares for privately held companies on the Nasdaq Private Market and record their transfers. Clients receive a comprehensive record of issuance and transfer.
Why the sudden interest in "blockchains" and "distributed ledgers"? After all, much of the technology and ideas used by Bitcoin, Ethereum and even Git, the open-source system for managing software updates, have been around for more than a decade. Public-key cryptography has existed since the mid-70s. Consensus algorithms such as PBFT and DLS used in distributed computing and distributed databases have likewise been under development and in production environments for decades.
But what if institutions could use elements of a blockchain, such as public/private key cryptography to sign transactions and atomically settle registered assets without a third party? What if reconciliation and auditability could be cryptographically proven within the data structure itself, thereby reducing the need for some of the existing back-office services? What if financial institutions could share one common ledger that was specifically designed for their regulated operating environments? A well-designed and built shared ledger could make all that possible. Conceivably, as one report from Santander predicts, up to $20 billion could be saved per year by using some of this non-Bitcoin-specific distributed ledger and blockchain technology.
Law firms should adopt new technologies that will help them grow and increase their efficiency and profitability. Big-data technologies facilitate the storage and review of data for processes such as mergers and acquisitions. Machine-learning algorithms and bot technologies make it possible to classify or generate documents without human intervention. Blockchain has been used to track transactions in the legal sector and eDiscovery has enabled firms in the United States to obtain advantageous court assignments. In the future, the use of these five disruptive technologies will be the factor that distinguishes the most competitive organizations in the legal sector.
A competitive edge can be the difference between failure and success.