Blockchain has been gaining traction like no other technology this year. However, no one is really certain if it can deliver on its promising potential. [shutterstock: 795095212, Production Perig]
The disruptive potential of blockchain technology is enormous. It makes it possible to replace intermediaries in various business scenarios. That’s why banks and insurances are considered as pioneers in blockchain: to turn the threat into a chance.
Blockchain technology is fascinating for laymen and experts alike. It has a lot of potential to revolutionize how contracts and the corresponding relationships are managed. Not only banks and insurances recognized the potential of this technology. Now, a lot of other industries are also researching blockchain.
These are the results of a recent Luenendonk survey concerning the application of blockchain technology in major companies and corporations.
In general, the interviewed CIOs and business decision makers stated that they were “still confused, but on a higher level”. The results of the survey show that it is important for companies to study blockchain technologies and to evaluate if they can be an asset to their business processes.
Blockchain technologies still in the hype phase
Many managers believe that blockchain is still too technologically immature to be deployed in enterprise environments and serve as a base for business-critical and complex processes. Especially because of efficiency, the effort of data integration and a lack in standards, some companies still hesitate to make investments.
However, almost every major corporation experiments on blockchain technology and is searching for use cases to optimize business processes right now. One of the biggest challenges companies have to tackle here is that some blockchain transactions need an enormous amount of computing power. Moreover, some use cases are exciting, but just not economical.
Furthermore, the IT landscapes of most companies still have not yet reached the necessary technological maturity to guarantee a seamless integration of data into the blockchain.
These impeding factors, however, will vanish after some time for two reasons. On the one hand, companies are progressing rapidly on their path to a modern IT landscape.
On the other hand, blockchain is gaining momentum, because major IT service providers like Accenture, DXC or NTT Data are offering Blockchain as a Service, a relatively cost-efficient possibility to develop use cases without having to purchase the technology.
The blockchain has the potential to substantially contribute to completely new business processes and shape collaboration between companies.
A good example are smart contracts. Regarding e-mobility, major energy providers and car manufacturers are currently working on the creating of a charging infrastructure for electronic vehicles. Charging electronic vehicles via induction at traffic lights and the corresponding billing is a typical field of application of blockchain. Billing data is transferred via vehicle sensors into the blockchain. The currencies used for payments are Bitcoin or Ethereum.
The advantage of smart contracts is the security of customer data as well as the unchangeability of data once its incorporated in the blockchain. This builds trust for a new kind of digital collaboration. Additionally, smart contracts establish trust between the different parties of a contract by guaranteeing the secure transfer of data.
53 percent of managers interviewed in the aforementioned survey stated that the creation of an ecosystem concerning digital business models is an additional value that blockchain brings to the table. Yet again, it establishes trust between different parties.
No IoT without blockchain
Especially regarding the Internet of Things, many companies are experimenting with new business models, for example to connect household appliances with each other, to manage production and supply chains, and to connect vehicles with the Internet.
Consequently, 49 percent of respondents see the potential of blockchain to incorporate partners more into their business models and to be able to make the necessary data transfer comply with their own security requirements as well as the ones of authorities.
Regarding the incorporation of business partners, especially industrial corporations think that blockchain has the potential to make the entire value chain transparent and to be able to track goods more efficiently.
The respondents see the biggest potential of blockchain as quick wins. 61 percent believe that the level of automation of services can be increased with the technology. Especially respondents coming from the banking (84.2 percent), trade (80 percent) as well as insurance (76.5 percent) industries think this is an important reason for blockchain research.
Current use cases in the banking industry
While most of the surveyed industries are still evaluating and looking for use cases, financial service providers are already much further ahead. 36 percent of interviewed banks leverage blockchain in the area of clearing of transaction processes, for example to secure the clearing of trade transactions more efficiently.
Another relevant field of application seems to be value networks, meaning constellations in which banks are acting as intermediaries for securing and carrying out of loan and trade transactions. Banks guarantee with a letter of credit that the customer really pays the purchase price to the vendor.
Because many trade transactions happen between strangers, the blockchain can be an interesting alternative to previous processes. 60 percent of interviewed banks are currently evaluating the application of blockchain in this area, and are planning a rollout in the next months.
Current use cases in the insurance industry
The insurance industry is as interested in blockchain as the banking industry.
31 percent of insurances in which blockchain is already a relevant part of corporate strategy use the technology to insure weather and harvest risks. 46 percent use blockchain in this same application area at least selectively. 23 percent are planning to do so in the near future.
Optimizing claims management is another area of use in which most insurances already use blockchain in part. For example, the combination of blockchain and artificial intelligence would make insurance fraud nearly impossible, as the data of the two contract parties is stored unchangeably.
Especially if third parties like damage evaluators or mechanics are getting involved, insurances can guarantee a fair claims settlement.
Use cases in the manufacturing industry
Furthermore, blockchain technology can be a useful asset in the manufacturing industry, especially in supply chain logistics. Using cryptographic signatures, the identity of things can be confirmed in every transport phase and even after sale.
The decentral structure of blockchain can also be used to make tracking goods transparent and secure. Especially concerning foods like meat and fish as well as pharmaceuticals, this is a clear advantage. Neglected cold chains and expired cancer medication would be ancient history.
Furthermore, inspection authorities (customs, health departments, etc.) would be able to inspect the whole system instead of just a little section. However, the computing power needed for transactions and to create public blocks is currently way too high. Additionally, use cases are not always economical if seen from a controlling perspective.
For this exact reason, ever more data bases used for creating blocks are built in cold regions like Scandinavia to reduce the energy consumption of cooling systems.
Conclusion and prospects
Blockchain is simultaneously reality and hype. It holds enormous potential, but a lot of uncertainties as well.
Regarding its technological maturity, blockchain is just starting to develop and many questions concerning efficiency, future standards and data integration as well as transfer are still unanswered. However, major industrial corporations like Bosch, Daimler and Siemens invest a lot of money into blockchain technology right now.
If blockchain technology will catch on remains to be seen. At least there is a good chance that it might, seeing as a lot of time and money are invested right now in building up know-how and creating new use cases for blockchain.