While blockchain may have cut its teeth on the cryptocurrency Bitcoin, the distributed electronic ledger technology is quickly making inroads across a variety of industries.
That’s mainly because of its innate security and its potential for improving systems operations all while reducing costs and creating new revenue streams.
David Schatsky, a managing director at consultancy Deloitte LLP, believes blockchain’s diversity speaks to its versatility in addressing business needs, but “the impact that blockchain will have on businesses in various industries is not yet fully understood.”
In 2017, blockchain technology started to become a key business focus for many industries, something a Deloitte survey conducted in 2016 had predicted.
That online survey of 308 blockchain-knowledgeable senior executives at organizations with $500 million or more in annual revenue found many placed it among their company’s highest priorities. Thirty-six percent believed blockchain could improve systems operations, either by reducing costs or increasing speed, and 37% cited blockchain’s superior security features as the main advantage. The remaining 24% saw its potential to enable new business models and revenue streams.
Although 39% of senior executives at large U.S. companies had little or no knowledge about blockchain technology, the rest said their knowledge ranged from “broad to expert – and 55% of that group said their company would be at a competitive disadvantage if it failed to adopt the technology.
The bottom line: both the understanding of and commitment to blockchain varies by industry. But most see it as disruptive.
“It is fair to say that industry is still confused to a degree about the potential for blockchain,” David Schatsky, managing director of Deloitte LLP, said in a statement last summer. “More than a quarter of surveyed knowledgeable execs say their companies view blockchain as a critical, top-five priority. But about a third consider the technology overhyped.”
Those already embracing blockchain are finding a new independence in their ability to transmit both sensitive data and money securely, enabling a new business dynamic.
Blockchain is a decentralized electronic, encrypted ledger or database platform — in other words, a way to immutably store digital data so that it can be securely shared across networks and users. As a peer-to-peer network, combined with a distributed time-stamping server, blockchain databases can be managed autonomously. There’s no need for an administrator; the users are the administrator.
Blockchain eliminates huge amounts of recordkeeping, which can get confusing when there are multiple parties involved in a transaction, according to Saurabh Gupta, vice president of strategy at IT services company Genpact. “Blockchain and distributed ledgers may eventually be the method for integrating the entire commercial world’s record keeping,” he said.
Blockchain distributed ledgers can be used to automatically execute business contracts. The peer-to-peer database first captures all terms and conditions between an organization and its customers, then uses data gleaned across distributed nodes or servers to determine when those conditions have been met and payment is authorized.
For example, IBM, AIG and Standard Chartered Bank just announced a pilot project to streamline one of the most complex types of policies in the insurance industry – a multinational policy.
The three companies created a master policy written in the UK, and that includes three local insurance policies in the U.S., Singapore and Kenya, into a “smart contract” based on blockchain technology that provides a shared view of policy data and documentation in real-time.
The solution is structured so that multiple parties in the network — including brokers, regulators and auditors — can collaborate more effectively and efficiently, according to IBM. The solution gives all of the parties a unified view of policy and payment data and documentation so that they can make informed business decisions based on a common set of trusted data.
“It is designed to infuse trust and transparency into the insurance underwriting process across borders,” an IBM spokesperson wrote in an email to Computerworld. “When critical data about the policy is stored on the blockchain, all permissioned parties in the network have a single view of the data, and no single party can make changes without the consensus of other members.”
Because it’s based on blockchain:
- It provides the ability to record and track events and associated payments in each country related to the insurance policy.
- No one party can modify, delete or even append any record without the consensus from others on the network.
- This level of transparency helps reduce fraud and errors, as well as the need for the parties to contact each other to view policy and payment data and the status of policies.
Blockchain-based smart contracts can be used to automatically execute payments between financial institutions.
Accenture recently released a report that claimed blockchain technology could reduce infrastructure costs for eight of the world’s 10 largest investment banks by an average of 30%, “translating to $8 billion to $12 billion in annual cost savings for those banks.”
Payments, clearance and settlement in the financial services industry — including stock markets — is rife with inefficiencies because each organization in the process maintains its own data and must communicate with the others through electronic messaging about where it is in the process. Because of that, settlement typically takes two days. In turn, delays in settlements force banks to set aside money that could otherwise be invested.
With its ability to instantly share data with each organization involved in a blockchain database or ledger, the technology reduces or eliminates the need for reconciliation, confirmation and trade break analysis as key parts of a more efficient and effective clearance and settlement process, according to Accenture.
Enabling businesses to avoid transaction fees
Most payment systems are administered by financial institutions, such as banks. When money is transferred between businesses, there’s typically a fee associated with it — especially for small to mid-sized businesses.
Large enterprises have always enjoyed an advantage in the global market, be it the capital to absorb the cost of transfer fees (or getting lower fees), better intellectual property protection, and a host of other advantages that come with having more capital and greater influence.
Blockchain technology helps level the playing field, enabling SMBs to compete in that global market.
For example, the B2B payment service Veem leverages blockchain to allow its SMB customers to transfer funds internally for no fee; that compares to larger banks that charge around $50 per wire transaction.
Veem’s CEO Marwan Forzley believes blockchain is an opportunity to “remove the middle man from international transactions, which directly impacts the experience of paying suppliers and contractors, the timing of these transactions and the fees that are directly impacting the SMBs bottom line.”
Sharing patient data, ensuring doctors get paid
While electronic healthcare records (EHRs) have helped in the centralization of patient data to some extent, sharing that sensitive information with various healthcare providers, such as medical specialists, can be difficult at best because EHR platforms are not standardized across organizations.
Healthcare organizations could use the cryptographically secure, decentralized blockchain ledger to pre-authorize the sharing of a patient’s information.
Last year, the MIT Media Lab and Beth Israel Deaconess Medical Center tested a proof-of-concept that shared information about patient medications through a blockchain ledger called MedRec. MedRec was based on the Ethereum blockchain platform for smart contracts.
In their analysis paper, titled “A Case Study for Blockchain in Healthcare,” the MIT and Beth Israel Deaconess Medical Center researchers found blockchain “could contribute to secure, interoperable EHR systems.”
In addition, healthcare IT vendors and the U.S. government are exploring blockchain’s potential. Earlier this year, IBM’s Watson Health artificial intelligence unit signed a two-year joint-development agreement with the U.S. Food and Drug Administration (FDA) to explore using blockchain technology to securely share patient data for medical research and other purposes.
IBM Watson Health and the FDA plan to explore the exchange of patient-level data from several sources, including electronic medical records (EMRs), clinical trials, genomic data and health data from mobile devices, wearables and the “Internet of Things.” The initial focus will be on oncology-related information.
Healthcare is also hampered with an inefficient payment system, where insurance companies fight with providers.
“Insurance companies have already given prior approval based on medical necessity or preauthorization and I’ve got to fight collect it…, really?” said Gene Thomas, CIO of Memorial Hospital, a 445-bed facility in Gulfport, Miss. “Depending on who you talk to, 17 cents, 21 cents… of every healthcare dollar is spent on collections. Are you kidding me?”
Underpinning a shared ledger where all parties involved in a healthcare insurance contract — patient, provider and payer — all see the same information at the same time, blockchain has the potential of smoothing out the “arduous, high cost, high friction process.
“Everyone’s posting to the same thing, it’s all transparent. I’ve got high hopes that if there’s any place blockhchain could actually have an impact in healthcare, it’s on [the] revenue cycle side,” Thomas said.
In light of that need, Deloitte’s report found that healthcare and life sciences have the most aggressive deployment plans for blockchain of any industry, with 35% of survey respondents indicating their organization plans to deploy blockchain within the next year.
Timestamping is the process of wrapping metadata or other information in a block of an ongoing blockchain, which creates an unchangeable or immutable record tied to everything that comes after it in the chain. Think of it as satisfying a public notary’s function.
For example, Swiss company Gmelius has created a Gmail Stamping app that’s essentially a secure way to verify the integrity of an email using the Ethereum blockchain open-source platform. (Gmelius detailed the blockchain architecture it’s using in a PDF.)
Gmelius’ app is a Chrome browser extension that is available in the Google webstore. Once downloaded, it offers several capabilities for Gmail users, including removing Google ads, scheduling emails to send at later times and dates, and blocking senders from seeing whether you’ve read their email.
But it’s Gmelius’ email stamping feature that takes advantage of blockchain to authenticate the origin of an an electronic message.
Upon hitting send in Outlook, the original email – including its headers, subject line, body and attachments – is encoded using the base64 binary-to-text encoding scheme and converted into a hash using the SHA2-512 hashing algorithm. The email is then signed using Gmelius’s proprietary 512-bit RSA key. Encrypting the hash allows the email to become part of an anonymous transaction anchored onto an electronic ledger via the Ethereum open-source blockchain platform.
The blockchain-based application proves the existence, integrity and ownership of any email sent, which would enable it to be used for business purposes such as legal contracts.
This spring, Gmelius also plans to release a blockchain-based app that will allows users to electronically sign documents attached to emails using blockchain’s smart contract feature.
Selling energy through microgrids
Because of blockchain, residents of the Park Slope area of Brooklyn are now able to sell power generated from rooftop solar panels via a microgrid enabled by a blockchain ledger that records every transaction made with a local utility.
The physical microgrid, set up by Siemens Digital Grid Division, includes network control systems, converters, lithium-ion battery storage and smart electric meters. In case of another hurricane like Sandy in 2012, residents on the microgrid would continue to have power for a time — even during a blackout — as they could switch to battery reserves.
A microgrid is a form of distributed energy generation that can function independently from the traditional, centralized regional power grid; it can enable towns, small cities or corporations to develop their own energy sources and power storage systems (via lithium-ion or flow batteries), distribute that energy and even sell excess power back to local utilities.
The Brooklyn Microgrid blockchain database is a web-based bookkeeping system that uses cryptographic technology to save energy data in a way that is both inexpensive and forgery-proof, the companies said.
The Brooklyn Microgrid enables residents to sell energy back to the local utility — a process known as “net metering” — and it allows those without solar panels to purchase green power credits from their neighbors. The blockchain platform for the microgrid is enabled by Brooklyn-based energy startup LO3 Energy.
The same blockchain technology that allows residential solar power users to sell excess power back to utilities can do the same for businesses seeking to lower their electricity costs.