Real Adoption of Blockchain-Tech: What can we learn from the early winners?
For the last several years blockchain has been the technology that will revolutionize finance, supply chain, ride sharing, social networks, fill in the blank. We are constantly told of the technology’s potential — what it will do — but rarely informed of what it has done or is currently doing.
Now, as we approach a year since the peak of the biggest speculative run-up so far in an industry that thrives on speculation, it’s time to evaluate what has actually been accomplished. What blockchain-based projects are seeing meaningful adoption? How is blockchain actually being used? Answering those questions can help us to determine where the space is headed and which of applications of the technology will see traction going forward.
Just as in the early days of the Internet — where first local intranets, then business to business implementations thrived long before there was widespread adoption of consumer-focused applications — permissioned blockchain-utilizing applications for use by enterprise customers are now seeing significant uptake while public blockchain-utilizing applications designed for average consumers are lagging behind.
There are some extremely promising exceptions, and these exceptions may indicate that in the current technological revolution, widespread consumer adoption will occur more rapidly than in the case of the Internet. But that is again looking at the technology’s potential, so let’s start with the more significant progress that has been made in the enterprise space.
Blockchain as a Service
The hype over “blockchain” reached corporate offices in a big way as leaders scrambled to not miss the boat on a game-changing technology. There was a huge spike in the number of mentions of the word “blockchain” in earnings calls, peaking in Q1 2018. Accordingly, a September report from Juniper revealed that 65 percent of businesses with over 10,000 employees claimed to be considering or actively engaged with blockchain technology.
A September PwC survey of 600 executives meanwhile confirmed that 25 percent have fully live blockchain implementations or pilot programs already underway, with an additional 32 percent saying their companies have blockchain implementations in active development and 20 percent saying they are in a research phase for determining how to best use blockchain technology. In total, only 14 percent of PwC surveyed executives stated that there was no interest in blockchain technology at their companies.
You could say that 2017 was the year of the pilots; from governments, to aid organizations, to multinationals, everyone was testing out the tech to see its potential. Now as we near the end of 2018, many of those proofs of concept have moved into production.
The most common and successful implementations of blockchain for enterprises thus far are those that are tackling endemic problems in industries that involve many competing entities who nevertheless sometimes must cooperate. Two industries frequently deemed low-hanging fruit in this regard are global supply chain and insurance.
In these industries, blockchain is now being leveraged to resolve complex issues around transparency, efficiency, and cost — exactly the pain points cited in the hype of the last few years. Successful pilots run by the likes of Walmart and Maersk in tracking and monitoring products on a global scale have emerged into commercialized platforms that are now market-ready and rapidly gaining adoption. ABI Research has crunched the numbers on the rate of adoption, determining in a report released in October that blockchain as a service will generate more than $10.6 billion in revenue by 2023.
Insurance
Marine insurance has a notoriously complex premium-setting process that dynamically considers cargo (which changes from port-to-port), ship type and state of repair, crew makeup, location of the ship, the flag it’s flying, and so on. The complexity of the process and the number of involved parties means it often takes months to agree on contract terms and years to pay insurance claims. For precisely these reasons, marine insurance was chosen by enterprise blockchain providers as an ideal candidate for a blockchain leveraged solution.
Global professional services firm EY worked with Microsoft, network security expert Guardtime, permissioned blockchain technology provider R3, and global shipping giant A.P. Moller — Maersk to create Insurwave, a product that, according to a report from Microsoft, Maersk is now using to conduct the insurance renewals of its entire fleet of 800 container ships. The product provides Maersk and relevant insurers with “consolidated, accurate vessel data, real-time contract state information, and the ability to better price risk and process claims faster.”
The report quotes Lars Henneberg, Head of Risk Management at A.P. Moller — Maersk:
“With Insurwave, we can send our portfolio to multiple brokers so that we have better access to insurance markets. A simple dashboard gives us a live overview of how our assets are insured, and our brokers and insurers have access to the same overview. If the location, cargo, or other data about our ships change, everyone is notified — no delays, no paperwork, no mistakes. We’re now working on ways to leverage the solution across our full business. It finally feels like insurance is starting to work.”
Already clearly a success, “significant numbers” of shippers, insurers, and brokers have expressed interest in joining the cost saving marine insurance consortium, according to the report.
Supply Chain
International trade relies on a series of inter-dependent contractual events and third-party confirmations of performance coming together to prove that goods have been produced, shipped and delivered and that payment has been made. Legacy database systems have proved insufficient in handling the increasing complexity of modern global supply chains, and blockchain has long been the proposed magic bullet.
IBM, as one of the earliest entrants to the “Blockchain as a Service” space, has been working to implement the technology for enterprise clients looking to improve the efficiencies of their supply-chain. One of the projects to emerge from this initiative is the IBM Food Trust, a system for tracking produce from farm to consumer. Available today globally, IBM Food Trust runs on the IBM Cloud and uses as its foundational technology Hyperledger Fabric, an open source blockchain framework hosted by the Linux Foundation.
According to the IBM Food Trust site, using the service, which is available starting from $100/month, “clients are now able to trace from store back to the farm in 2.2 seconds, where data is available.”
Earlier this year, Walmart completed two pilots of the IBM Food Trust using suppliers of mangoes and pork. Walmart is now using the permissioned blockchain to track at least 25 products from 10 suppliers and has asked all its produce suppliers to enter their data in the system by September 2019.
In an October press release, it was announced that another leading retailer Carrefour — with more than 12,000 stores in 33 countries — will be joining the consortium along with Topco Associates which represents 49 members, reaching over 15,000 stores and 65 million weekly customers
In the end we can conclude that, Blockchain tech works the way it’s supposed to (lives up to the hype) for enterprise clients. Companies are using private-permissioned blockchains developed and managed by enterprise blockchain providers in collaboration with traditional cloud-service database providers like Microsoft and IBM. Groups of companies and stakeholders in specific industries are forming industry-wide consortiums to deploy a single version of the new technology across the industry.
In these consortiums, every participant can see information submitted by other users. An administrator can control which users see what information. In the case of a supply chain, everyone in a retailer’s group can see all the data, but competitors cannot.
After years of hype, it’s safe to say that blockchain does, in fact, have successful use-cases. Blockchain as a service for enterprise customers is so far seeing a much higher level of adoption than consumer facing blockchain-utilizing applications. Moving forward, stakeholders in the decentralization movement would be wise to take note of the features — some of which have been highlighted here — that have brought success to the winners so far.
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