The Internet is entering a new era of digital transactions thanks to the innovations around blockchain technology. Blockchain nowadays is mostly associated with Bitcoin, the cryptocurrency, which is used as the virtual currency in a variety of transactions across a public network. The advantage of this technology, as many suggest, is that it brings transparency in the system and simplifies transactions across different endpoints. The scope of blockchain is much bigger, as it has the potential to revolutionize any ‘transaction’ that has a value, not just those involving money.
Growth in banking and financial sector
Gartner identifies blockchain as one of the strategic technologies in cards for IT decision makers for 2018. While banking sector is faster in adoption of cryptocurrency-based transactions, other forms of digital transactions are likely to follow. Gartner estimates, by the year 2020, the banking industry will derive $1B of business value from the use of blockchain-based cryptocurrencies. The promising figure, according to Gartner, should be viewed as the ‘tacit endorsement of cryptocurrency as a legitimate option by the banking industry.’
World Bank estimates that in 2015, transactions worth over US$430 billion was carried out in the U.S using blockchain platforms. The growth has been astounding as Bitcoin transactions averaged over US$200,000 per day in 2016. Fundamentally, bitcoin uses encryption methods to secure transactions, as opposed to the conventional username/password tactics. Encrypted transactions are not prone to security breaches, so the potential of bitcoin is huge in financial sector. Goldman Sachs believes that blockchain technology also has the potential to bring savings of up to $2bn in the U.S. and $6bn per year globally – in the capital markets sector alone. Savings could be much higher within this sector itself, considering the multiple savings in technology adoption, manpower reduction, and more.
Windfall for big blockchain vendors
With its potential to create value and authenticate different forms of digital transactions, bitcoin is viewed as the Web 3.0 of today’s digital economy. The distributed network architecture allows public to build a variety of applications around it, making it a custom application suitable for their transactions.
A survey conducted by Juniper Research reveals that 67 percent among the 400 decision makers already invested more than $100,000 in blockchain by the end of 2016 while 91 percent would be spending at least this amount in 2017. The research, however, urges companies to deploy private blockchains for commercial deployments rather than public chains such as Bitcoin. Private blockchains will restrict the access to unsolicited users and will offer great level of control over the development of blocks.
In views of these requirements, blockchain platform developers like IBM are now offering custom solutions for enterprises to further enhance the privacy, confidentiality, performance and scalability of the blockchain network of their clients. Recently IBM has won a number of customers in the financial sector. Further, IBM has been developing blockchain platforms for asset tracking and music industry. Developed as part of the IBM Global Financing program, IBM’s large-enterprise blockchain is estimated to decrease the amount in dispute from $100 million a year to $30 million and reduce average dispute resolution time from 44 to 10 days.
In another major development, Microsoft, in partnership with Intel, has come up with its custom blockchain framework called Coco Framework addressing critical needs of enterprises by enabling high-transaction speed, distributed governance and confidentiality. The Coco Framework with initial implementations like R3 Corda, Intel Hyperledger Sawtooth, J.P. Morgan Quorum, and Ethereum will be launched at GitHub in 2018 as an open source project. The platform can enable transaction speeds of more than 1,600 transactions per second, Microsoft says.
As the world revolves around digital, blockchain will flourish to accommodate almost all types of transactions, involving not only money but goods and assets as well. By leveraging these technologies digital enterprises can derive more value and improve efficiency across different transactions.