BLOCKCHAIN: A Leading Factor Of Growth In The Asian Market
In the past, Blockchain- which is known as a distributed ledger technology for both financial and non-financial institutions- seemed like a mysterious concept that only technologists could understand. However, the various advancements in Blockchain applications in 2016 helped more people and more businesses see it’s potential. For others in the business environment, Blockchain is something they’re still just exploring. But as we get further into 2017, there are a few trends that will be interesting to trace as the year progresses.
Blockchain has the potential to transform industry operating models. However, while noise around the distributed ledger technology grew steadily throughout the year, the majority of companies are still stuck in the exploration phase, beguiled by its beauty but unable to translate this fascination into practical applications.
Its primary applications still reside in banking. In an IBM study released, 15% of banks said they have plans to put blockchain into commercial production by 2017, and 91% of banks are investing in blockchain for deposit-taking. The World Economic Forum, meanwhile, estimates that some 80% of banks are actively working on blockchain projects.
DEVELOPMENT IN APPLICATION
With ongoing research and greater understanding of how Blockchain works, one of the biggest trends predicted in 2017 is the use of this technology in new application areas across industries. This is happening especially in business segments that have always had a middleman as part of the transaction. This means that many service-oriented businesses decentralize. For example, ride sharing transactions could be handled directly by drivers and passengers using the blockchain, which could then give once-disruptive companies like Uber and Lyft a run for its’ money.
Other applications include streaming services. We could let artists decide how their music is sold and shared, and everyone — from the writer to the producer to the singer — could receive a payment immediately through the blockchain when a song is downloaded, rather than getting their share later on. Rather than waiting for royalty checks to arrive that are processed by a publishing company, the artist can take greater control over their process from publication to payment through blockchain applications.
To date, the enterprise blockchain market has had two main participating groups – incumbent banks and financial firms, and startups. It was perhaps the former group that gained the most ground in 2016. Rather than simply testing proofs-of-concept, incumbent firms began to take more dedicated steps toward making their vision of blockchain’s impact apparent over the course of the year.
For instance, PwC’s Vulcan blockchain is more of a technology that seeks to create interoperable digital assets that trade alongside established cryptocurrencies like bitcoin. Built in conjunction with Bloq, Netki and Libra, the Vulcan platform is PwC’s effort to deploy enterprise grade blockchain-based applications. Likewise, Microsoft’s business development director Marley Gray describes Project Bletchley as the company’s effort to deliver an open and flexible blockchain-as-a-service (BaaS) offering. At the end of Q3 2016, Microsoft released a white paper outlining Bletchley as way to construct permissioned consortium blockchains.
JP Morgan ended 2016 with two blockchain offerings, Juno and Quorum. Current versions of JP Morgan’s Juno blockchain can handle up to 500 transactions per second. Accenture separated itself from other blockchain incumbents through its ‘editable blockchain‘.
Enterprise Blockchain Incumbents
PWC – Vulcan allows clients to launch digital assets that trade alongside virtual currencies
Microsoft – Project Bletchley is an open, modular Blockchain-as-a-Service (BaaS) fabric powered by Azure
Deloitte – Rubix aims to to bring start-up speed and enterprise reliability to the blockchain market
JP Morgan – JP Morgan unveils permissioned etheruem blockchain Quorum and “distributed cryptoledger” Juno
Accenture – Editable blockchain fro enterprise and permissioned systems
IBM – IBM Blockchain is the company’s enterprise offering, independent of their Hyperledger project contribution
IBM has a standalone blockchain separate from its work with Hyperledger, however, its core product offering runs on the same code. VP of blockchain tech Jerry Cuomo sees IBM’s blockchain as a way to leverage smart contracts, automating business processes for supply chain management, trade finance and IoT among other industries.
Eric Piscini, a Principal at Deloitte, sees Deloitte’s Rubix software platform as a way to accelerate the auditing process of transactions that occur on the blockchain. Rubix piloted test use cases across the pharmaceutical supply chain including drug safety, drug channels and any end-consumer issues with pharmaceutical drugs.
BLOCKCHAIN LEADING TO GROWTH IN ASIA
Blockchain technology has received the most investors’ attention in North America, where large financial institutions have invested in Blockchain related projects, but funding is falling. In China, however, it is on the up, with this year record-breaking for fintech investment, posting increases for each of the past four quarters. There is still significant room for growth in Asia in 2017, though. KPMG China’s fintech and innovation partner, Raymond Chang, said investors remain interested, just not in massive rounds, noting ‘VC investors are putting a lot of money into small Blockchain technology companies in Asia. Some very new companies are already into their second or third round of funding.’ This steady trickle of smaller projects is already starting to lead to larger investments, with Chinese investors recently taking part in a funding round worth $1.7 million for Taiwanese startup Bitmark, a trend that should continue into the next year.
Based on a report by ETHNews, the Monetary Authority of Singapore has already announced its intentions to develop a Central Bank issued digital currency that will be based on Ethereum blockchain protocols. Trials of a digital dollar have already started in the country. In Taiwan, an Ethereum based blockchain is already being used to track food coming from organic sources to the final consumer. There are even more Asian countries that intend to change their policies and this will help sustain the cryptocurrency market growth.
Even though, there is a lot of interest in cryptocurrencies in India, no legal or regulatory authority is situated in India yet. However, India’s Aadhaar biometric ID card system is an example where blockchain could exist. It secures transaction by saving the people’s identities, thus facilitating trade. The system assigns a unique 12-digit number to all Indian residents, which is stored in a central database along with biometrics such as fingerprints and iris scans. If someone wants to perform a transaction, such as opening a bank account, they present the card and have their fingerprint or iris scanned. This helps to prove their identity, cutting down on fraud and creating market efficiencies. The system currently serves a billion people. This is by far the largest and most comprehensive adoption of biometrics technology by any government in the world; transactional security is a priority in India. Aadhaar can be used to sign up for new mobile phone service, a process that still requires paper ID in many countries and is frequently subject to fraud.
While there have been significant advances made in terms of financial inclusion in the world, in recent years, the developing countries, and vulnerable groups (i.e. women, poor) remain largely unbanked. As such, recent estimates suggest that digitalizing private-sector payments of wages could increase the number of adults with an account by up to 280 million, while digitalizing public-sector wages could ensure up to 160 million people get a bank account. Nevertheless, the infrastructure support for inclusive financial services lags behind.
More specifically, financial services delivered through Blockchain technology has an untapped potential in those markets where there is simultaneously a high mobile penetration (i.e. people have more than one mobile subscription), as well as a low financial inclusion (i.e. less than 30% of the population has access to a bank account). Such key markets include various Eastern Europe and Central Asian countries like Armenia, Moldova or Azerbaijan, MENA countries (i.e. Egypt, Jordan, Tunisia) and others regions (e.g. Cambodia, Peru, Nicaragua, Congo, Mali).
Blockchain technology offers a secure, fast, and cheaper medium of carrying out online transaction and online transfer of information without the need of third party verification. The adoption of Blockchain technology in financial services sector has gained traction. Banking sector is willing to explore opportunities which would make the banking transactions more transparent and easy to process. Increased penetration of digital technology in the banking sector has resulted in the development of easy to use online platforms and applications. This drives the need to carry out the online transactions in a secure manner. Blockchain technology eliminates the frauds due to errors and identity theft to a large extent. Hence the financial services sector has been keen in exploring the technology before undertaking a wide scale deployment of this technology. This technology can benefit industries such as music and healthcare by offering easy access and exchange of digital data of these industries over the Internet.
By Humneet KAUR