Arguably the technology of the decade, blockchain continues to be met with hype and cynicism in equal measure. Indeed, New York University recently offered its students the opportunity to major in blockchain technology, however many industry experts say we are yet to see blockchain’s widespread adoption for some time yet. But when it does, I believe it will truly disrupt and change the world forever.
So why should you care about it? Well, it depends on your audience. If I were explaining why blockchain matters to my grandmother, for instance, I would tell her that you will no longer need your bank to make a payment to your energy supplier - or that you will no longer have to worry about voter fraud or vote manipulation in an election. And that the annual charity donation you make to the Red Cross, will become fully traced from source. Of course, we are not entirely there yet, but all these scenarios will eventually be possible.
Alternatively, if I were explaining why blockchain matters to a large financial institution, I would tell them that they no longer need to fund a large back office function to support financial transactions during the settlement, clearing and custody process. I would tell them that the cost to transact will dramatically reduce. We are already seeing this with Ripple, the real-time gross settlement system, currency exchange and remittance network, which can potentially reduce transaction costs from 40 to 70 percent.
If you were a doctor, I would tell you that counterfeit drugs, which are estimated to kill one million people a year, will soon be a thing of the past. I would also tell you that you will eventually be able to access a patient’s entire medical history at the flick of a switch anywhere in the world. This is because blockchain will bring transparency to the distribution of pharmaceuticals and patient information.
So, how does it work? Blockchain is an ecosystem that replaces an intermediary in a transaction. At its heart lies a software code which relies heavily on recent advances in encryption. The ‘middle man’ in a transaction now is a miner who gets rewarded with cryptocurrency coins or tokens. The miner, along with the software code keep the system honest, trustworthy and 100 percent reliable.
While we might have to wait for blockchain to become commonplace, when this happens, it has the potential to disrupt many industries and provide them with long-term benefits. Businesses today need to be open to this new technology by first understanding its potential, and then becoming adaptable and flexible by tailoring solutions. If blockchain does truly change the world like the internet, then it makes strategic sense to align now rather than later.
For further insights on blockchain and other pioneering technologies, check out our Capco on Crypto content series.