Blockchain technology was invented to create cryptocurrency, but its adoption is rapidly growing in varied industries and governments across the globe, thanks to its capabilities to provide more efficient and secure ways of doing business and governance. The global blockchain technology market size which was valued at $11.14 billion in 2022 is projected to grow from $17.57 billion in 2023 to $469.49 billion by 2030.
As a technology head or CIO of an organization who spearheads digital transformation in your organization, you must be keen to explore the potential of emerging technologies that could impactfully change the way business is run. Most CIOs and technology leaders seem to be eager to know how can the tremendous power of blockchain technology be leveraged to enhance digital experiences and what legacy processes and applications can be replaced by an innovative blockchain approach. Let’s explore.
Blockchain provides solutions to some of the top challenges digital technology leadership faces in technology adoption and transformation, which include transparency, security, traceability, and efficiency.
Arguably, the most fundamental attribute of blockchain is its distributed ledger structure, in which the transactions are registered exactly the same way in multiple locations across various devices concurrently, providing total transparency. Equally critical, if not more, is its fundamental characteristic that the transactions are immutably recorded, enabling participants to view the full history of transactions, in turn making the blockchain framework secure and transparent by virtually eliminating any possibility of forgery and fraud.
Blockchain maintains a trail of the origin and history of each stage of an asset’s journey. It facilitates provenance in almost all industries but is more crucial where the end consumers are worried about environmental or human rights issues encompassing a product or where forgery and counterfeiting pose challenges. Blockchain technology enables sharing of data about the origin and history of a product or process directly with customers, thus making it highly transparent. The supply chain is another area where traceability is helpful to track shipments from origin to destination.
The principles of cryptography and public-private key encryption in blockchain technology allow companies to share records and data in the safest possible way, which ensures that the shared information cannot be tampered with and reaches only the intended person and not elsewhere. Sharing accurate health records on time, educational records among institutions and stakeholders, private contracts among business teams, government sharing digitized biometric records, information, data, and scientists sharing research studies, among many others are examples of the need to share data securely and safely.
In a blockchain framework, there is no central authority that oversees and controls the network and transactions. It is built on the principle of decentralization which refers to controlling and decision-making by decentralized nodes in a distributed network. In a blockchain, data is spread out among several network nodes—computers or devices in the blockchain network—at various locations and not on a central server, making records and the history of a transaction irreversible.
A transaction is recorded into the block only once it is authorized by all the nodes in the network, using the protocol used by the respective blockchain, making the transaction and records extremely secure. It creates an end-to-end encrypted record to help prevent fraud and unauthorized access to records. Privacy is achieved by anonymizing the personal data of the participants. Since the data is stored across a network of computers rather than a single server, it is difficult for hackers to break into the blockchain network.
Transaction processing as we knew till recently is routine, time-consuming, error-prone, and often needs third-party intervention. Blockchain helps streamline this traditional paper-heavy process to speed up the process and enhance efficiency. Storing documentation on the blockchain helps eliminate the need for exchanging paper documents. It also does away with the need to reconcile multiple ledgers, making the completion of transactions much quicker.
The feature of smart contracts - self-executing contracts - in blockchain technology enables automation which improves speed and efficiency. With a smart contract, on meeting pre-defined conditions, the next flow in the transaction or process workflow is automatically initiated, eliminating human intervention as well as the services of third parties like attorneys and consultants. The use cases of smart contracts include automatic settlement of insurance claims, tracking attendance by educational institutions, and digitally buying and selling real estate land titles, among many other wide-range applications across industries.
More and more industries and areas including cross-border payments, money laundering detection, and protection, supply chain and logistics management, voting, accounting, intellectual property rights protection, real estate government records, loyalty tracking, medical record sharing, and online shopping, among countless others, are adopting blockchain in their digital transformation strategy. Let us go over a few of them which are seeing a higher level of adoption of blockchain.
Blockchain enables companies to track every stage of product transit from the order stage to the customer delivery. It also allows businesses to verify their own suppliers and suppliers’ suppliers, ensuring complete visibility and reducing the risk of losses. Blockchain minimizes complexities involved in the end-to-end lifecycle of the product journey. It is not only Amazon or Flipkart that can leverage blockchain in supply chain management, but even small to medium-large online, e-commerce, delivery app, courier, and food grocer companies can benefit from the simplicity of traceability and reliability provided by blockchain technology. A market study has predicted the blockchain supply chains market to grow at a healthy CAGR of 45.55% to reach a valuation of around USD 17.15 Billion by the end of 2030.
Blockchain enables the fastest, safest, and most affordable way for financial institutions to verify KYC/AML for customer onboarding, and replace old paper-heavy processes across global trade, payments and remittance, trade finance, fintech, clearing and settlement, consumer banking, lending, and other transactions. Another advantage of using blockchain in finance is the distributed ledgers that facilitate easy audits and maintain records immutable, unalterable, and free from human errors. It is expected that financial institutions will save on international transactions to the extent of $27 billion on cross-border transactions by the end of 2030, with the use of blockchain technology.
Managing identity free from fraud, forgery, and manipulation is critical for the verification of identity to provide access and KYC in various situations. Blockchain enhances identity management in facilities when it involves data security and sensitive information as well as physical assets worth millions, in KYC checks of banks and financial institutions, and in employee background checks by HR teams, among many others. According to a World Economic Forum report, while banks spent $75 million to develop blockchain identity management technology in 2015, they spent around $400 million in 2019. A Report by Market Research Future has forecasted the Blockchain Identity Management market to grow at a CAGR of 65.6% Between 2022 and 2030, touching approximately USD 6,500 million by 2030.
Blockchain technology has the capability to significantly change the way digital marketing is app[roached in business, enabling more secure, customized, and efficient marketing campaigns. Marketers can engage directly with the customers without the need to spend money on intermediaries, reduce losses arising from fraud, and provide customers with more control over rewards. It also enables marketers to design marketing campaigns offering transparency in the forms of the origin and materials used in their products and whether they comply with the ESG norms and fair practices, by sharing the information directly with the customers.
An increasing number of enterprises are seeking technology tools to solve their complex business operating processes, and the adoption of blockchain is accelerating at a rapid rate. Blockchain has the potential to make a significant impact on the profitability and customer engagement of small businesses in India that contribute 30% of the GDP of the country. According to a LinkedIn report, there are only 28,000 proficient blockchain developers worldwide, compared to over 26 million traditional developers.
The complexity around the programming languages, the wallet interactions, the selection of blockchain protocol, and the inability to integrate with developers existing tools and infrastructure are challenges that need to be addressed by blockchain developers. While it is highly difficult and expensive to hire blockchain developers, Open Platforms offer opportunities for CIOs to hire developers or teams to get applications and tools developed on blockchain technology at a reasonable cost.
