Blockchain - A Transformative Technology Or A Disruptive Force?
At its heart, a Blockchain is a record of transactions, like a traditional ledger. These transactions can be any movement of money, goods or secure data—a purchase at a supermarket, for example, or the assignment of a government ID number.
Today, transactions are verified by a central authority— like a government or a credit card clearinghouse. Blockchain applications could replace these centralized systems with decentralized ones, where verification comes from the consensus of multiple users.
A Blockchain needs to do two things: gather and order data into blocks, and then chain them together securely using cryptography.
Is Blockchain a transformative technology instead of a disruptive force?
Blockchain can not only lower the risk of fraud, it can help increase the Operational efficiency and improve the customer experience.
It essentially offers a decentralized ledger of all transactions across a network: When a transaction occurs, everyone on the network knows about it. It’s tamper-proof and virtually instantaneous.
To put it straight, Blockchain is a system facilitator, not a replacement for an existing system. It interacts with legacy systems through smart contracts that transmit transaction records accessible to permitted users that integrate them into their systems. These legacy systems continue to perform functions outside of what they specifically need Blockchain to enhance or improve on a transactional basis.
In the coming year, many firms hope to move from PoC to production to demonstrate immediate value. But to do this, they’ll have to move beyond seemingly endless debates about how to untangle complex, legacy infrastructure. Again, this depends on more than just the technology itself. You should address the nontechnical components of a Blockchain solution such as designing the future state operating model (including organizational design), business process management, and governance.
In recent years technology innovation has become fundamental to transforming the Banking and Financial Services industry. Growth is increasingly defined by the ability to leverage multiple converging technologies to create competitive advantage and drive value. The application of Blockchain technology and Smart contracts has the potential to re-engineer several business processes and bring about Operational simplification, Efficiency improvement, Risk and Time reduction in the several areas such as:
• Payments and Remittances
• Issuance, Ownership, Transfer and Servicing of Financial Instruments
• Trade Finance and Syndicated Loans
• Clearing, Settlement and Reconciliation
• Know-your-client and Anti-money Laundering
• Compliance and Regulatory Reporting
• Insurance Claims Processing and Underwriting
You pick any industry, and this technology holds huge potential to disrupt it, creating a more prosperous world where people get to participate in the value that they create.
Picked this example from one of my reads: The music industry, for example, is a disaster, at least from the point of view of the musicians. They used to have most of the value taken by the big labels. Then, along came the technology companies, which took a whole bunch of value, and the songwriters and musician’s are left with crumbs at the end. What if the new music industry was a distributed app on the Blockchain, where I, as a songwriter, could post my song onto the Blockchain with a smart contract specifying how it is to be used?
Maybe as a recording artist posting my music on a Blockchain music platform, I’ll say, “You listen to the music, it’s free. You want to put it in your movie? It’s going to cost you this much, and here’s how that works. You put it in the movie, the smart contract pays me.” Or how about using it for a ringtone?
There’s the smart contract for that.
For every industry the implications are quite profound:
• Blockchain technology will enable consumers to own and monetize their data
• Peer-to-peer dealings can become the norm
• Privacy will be protected and, due to the distributed nature of the Blockchain, the technology is very secure and un-hackable.