Practical Blockchain Applications

The rise, fall and rise of Bitcoin is one of the defining examples of how the economy is driven by technology. It’s perhaps matched only by the advent of the internet and the personal computer. While Bitcoin is in some ways a mainstream currency today and millions of individuals and companies trade in and follow the ups and downs of bitcoin and NFTs, little is known about the distributed ledger technology (DLT) on which transactions and balances are recorded.

That public distributed ledger is blockchain. Along with bitcoin, blockchain first appeared in a 2008 whitepaper authored by the anonymous individual or group known as Satoshi Nakamoto. A decade and a half later, the potential blockchain applications beyond cryptocurrency are becoming clearer. Industries from retail and finances to education to healthcare and government are examining blockchain, intrigued by its promise of security and efficiency.

The question that governments, businesses and public institutions are asking is whether blockchain is useful enough to enable multiple industries to change the way business is done? That question can only be answered by looking at some practical blockchain applications. But first, it’s imperative to have a basic understanding of the technology itself.

What is blockchain technology and how does it work?

Blockchain is a way of recording information that makes it extremely challenging or impossible to change or delete. This way, it eliminates the risk of malicious actors cheating the system.

A blockchain is a digital ledger of transactions that is duplicated and distributed across a network of computer systems. Each block in the chain contains a set number of encoded transactions. Every block consists of a cryptographic hash of the previous block (forming a chain, like a linked list) along with a timestamp. Consequently, once a transaction is recorded, it becomes immutable and irreversible – data in any block can’t be altered without altering subsequent blocks. These blocks are then replicated to all computer systems across the peer-to-peer network.

Non-repudiation is one of blockchain’s primary benefits. The ledger is essentially unchangeable – records can’t be faked, modified or erased.

Research by IDC found that companies spent $6.6 billion on blockchain companies in 2021. Further, they estimated that this spend will grow at a CAGR of 48% up to 2024.

“This is an important time in the blockchain market as enterprises across markets and industries continue to increase their investment in the technology,” said James Wester, former Research Director, Worldwide Blockchain Strategies at IDC. 

“The pandemic highlighted the need for more resilient, more transparent supply chains, healthcare delivery, financial services, and so much more, and enterprises around the world have been investing in blockchain to provide that resiliency and transparency.”

“What is also very important right now is that we are seeing real interest and investment by corporations, financial institutions, and even governments in areas they previously viewed with some uncertainty such as cryptocurrencies, digital assets, central bank digital currencies, decentralized finance and stablecoins,” Wester added. 

“This investment will have major implications in a very short time on everything from retail to financial services to capital markets.”

Even with more than a decade of existence, the potential of blockchain technology beyond cryptocurrency or its cost-benefit advantage over existing technologies in different use cases isn’t completely obvious today. This warrants deeper digging into its applications in different industries.

Blockchain in Finance

The global financial services industry is fraught with expensive mistakes, human error, and unfortunately, corruption. Blockchain tech provides a secure, tamper-proof and efficient way of logging financial transactions – this can have a huge positive impact on the finance industry. A Financial Times article estimated that the asset management industry could slash costs by $2.7 billion a year by embracing blockchain.

Practical applications of blockchain in the financial services industry include onboarding, recordkeeping, client screening, data management, security, privacy and trade processing. Banks can also benefit from blockchain owing to its potential in speeding up back office settlement systems. Many banks are tying up with private blockchain creators to implement distributed ledgers for use in banking.

Then there is payment processing. For one, blockchains such as Polygon have shown that transactions can be settled in split seconds – for less than $0.01. This is a huge cost and time saving over Visa, Mastercard and Amex.

Blockchain also reduces the number of intermediaries in international money transfers. This results in cheaper and faster international payments. For instance, Banco Santander launched the world’s first blockchain-based money transfer service “Santander One Pay FX” in 2018. It used Ripple’s blockchain solution to enable customers to make same-day or next-day international payments – the bank no longer needed to manually settle transactions.

Blockchain and Smart Contracts

Legal contracts and agreements are a given in the business world, whether that be transferring the title of a property or entering into a partnership with a vendor. Customizable, self-executing contracts powered by blockchain – or “smart” contracts – can help parties gain, keep and transfer ownership rights as well as deliver on agreements while maintaining full privacy.

A smart contract is just like a regular contract; the key difference is that rules are unambiguously enforced in real-time on a blockchain. Further, there is no need for a middleman to “guarantee” or “enforce” the contract. This saves time and money for all parties while ensuring full compliance with the terms of the contract.

Different sectors such as real estate, healthcare and even the government are fast discovering the benefits of smart contracts. In industries where ambiguity is an issue or it isn’t easy to trace or confirm the source. For example, in the entertainment industry, conflicts around copyright and royalties are commonplace. Blockchain provides a traceable, verifiable sequence of records in such cases.

Blockchain in Insurance

The insurance industry is constantly subject to costly mistakes, scams, and false claims. According to the FBI, more than $40 billion vanishes through fraud every year – and that doesn’t even include the health sector!

Blockchain can streamline and secure the claims process by automating the time-consuming and effort-intensive process of validation. Smart contracts ensure customers and insurers both have full transparency into the verification process, weeding out multiple claims and unreliable paper records.

A real-world example is openIDL – a network run on IBM Blockchain by the American Association of Insurance Services (AAIS) to automate insurance regulatory reporting and streamline compliance requirements. It has resulted in increased efficiency and productivity for both insurers and state departments.

In another example, fifteen insurers in India have started a joint blockchain project to share medical records (that are again recorded and time stamped through blockchain) and speed up approval or denial decisions.

Blockchain for Identification

More than a billion people around the world have no way to prove their identity, according to data from the World Bank. That’s one in eight people. A daunting statistic, considering companies and financial organizations are now required to follow rigorous Know Your Customer (KYC) policies more than ever before.

To complicate things further, rules and regulations vary drastically from one jurisdiction to another, making it difficult for individuals to meet identification standards wherever they work. Blockchain has the potential to provide a standardized network of identification information that can be stored securely, accessed by select institutions or entities, and validated quickly.

While blockchain-powered digital identity management has game-changing uses in finance, healthcare, education, real estate and other industries, the most significant application is in government services. National, state and local-level governments can store and maintain records of citizens’ birth, death, marriage, national identity, licenses and property in a unified and secure database. And yet, citizens would only need to carry or produce the bare minimum certification to prove their identity when asked.

The Estonian government is successfully using a blockchain-based national ID system to make 99% of their public services available online. The platform allows people to file taxes, cast votes, access health records, obtain residency permits, register businesses, and so on. After suffering an attack in 2007, the government secured the platform with blockchain technology itself, making it so secure that not even the government can rewrite certain records.

Blockchain and the Internet of Things (IoT)

The worldwide market for IoT was valued at $384 billion in 2021 and projected to be worth an unprecedented $2.4 trillion by 2029. There are an estimated 12 billion active IoT devices across the world at the moment.

And yet, IoT is by no means a mass-adopted technology. There are a lot of concerns regarding privacy and security from the individual, corporate and regulatory points of view. Blockchain technology can add a viable, higher level of security to IoT networks by encrypting all data and making it incorruptible.

This has great implications in business – especially in the supply chain, inventory/asset management and business analytics functions. Tracking the location and state of goods serves a variety of purposes in tech, retail, IT and other sectors.

Blockchain in Healthcare

Blockchain technology has demonstrated encouraging potential in reducing healthcare costs and improving access of medical records to patients, healthcare providers, insurers and other stakeholders.

Blockchain enables the implementation of strict data storage, access and sharing policies in accordance with HIPAA rules. This is more significant during the distribution of patient data between laboratories, hospitals, doctors, nurses and pharmacies. It also helps facilitate faster and better provisioning of healthcare services between hospitals, governments and research labs.

Blockchain also helps in tracking and tracing the movement of drugs through the medical supply chain. The Drug Supply Chain Security Act (DSCSA)’s Interoperability Pilot program in the US has tested he effectiveness of blockchain technology in preventing and controlling the distribution of counterfeit drugs as well as recalling ineffective or harmful drugs quickly and safely.

“Blockchain provides an alternative to meet the 2023 interoperability requirements for the DSCSA. Specifically, the FDA pilot has the potential to extend the pharmaceutical blockchain business network to meet the requirements and enhance security of prescription drugs and patient safety,” said Talvis Love, SVP, CIO Pharmaceutical Segment at Cardinal Health, one of the stakeholders in the project.

“We are strategizing to develop solutions that build in greater efficiencies and safety into the supply chain – that will ultimately benefit the patient. This is just the beginning of the type of industry-altering impact new technologies like blockchain will have,” added Scott Mooney, VP of Distribution Operations at McKesson, a founding member of the initiative.

Will the Future Be Powered by Blockchain?

Blockchain technology has been around for over a decade now. But the promised blockchain-land isn’t here yet – despite enthusiastic and widespread usage and trading of cryptocurrency and NFTs by early adopters and tech evangelists, universal on-the-ground adoption of blockchain technology hasn’t happened as fast as predicted. Perhaps it is testimony to the resilience of the tried-and-true systems that the world has in place – they’re too “good enough” to improve.

However, the promise that blockchain holds is undeniable. Its ability to improve the speed, security and efficiency of existing processes in industry, consumer and government applications is evident. This gives it the disruptive power to create new business models – from neighbors trading renewable energy with each other (LO3) to a university that has no administrative department (Woolf). 

Can blockchain technology really help unlock practical solutions to complex socio-economic issues? Time will only tell.

This is an updated version of the article originally published on September 25, 2020.

Michael Brenner is a keynote speaker, author and CEO of Marketing Insider Group. Michael has written hundreds of articles on sites such as Forbes, Entrepreneur Magazine, and The Guardian and he speaks at dozens of leadership conferences each year covering topics such as marketing, leadership, technology and business strategy. Follow him @BrennerMichael.

Dipti Parmar updated this article. She is a marketing consultant and contributing writer to Nutanix. She’s a columnist for major tech and business publications such as IDG’s CIO.com, Adobe’s CMO.com, Entrepreneur Mag, and Inc. Follow Dipti on Twitter @dipTparmar or connect with her on LinkedIn for little specks of gold-dust-insights.