Gopi K, Infosys SVP, explores the future of the blockchain in 2019 …
Do we continue to know the blockchain, how is it adopted globally and in every market?
From the emergence of Bitcoin from the dark days after the financial crisis of 2008, technology has gained a lot of importance and notoriety due to the increase and fall of numerous cryptocurrencies and Ico. In the business world, the speculative blockchain turned into the Holy Grail and promised to solve all problems and open new business opportunities. It is my opinion that in 2018 the blockchain is emerging from the global hype cycle in all sectors. Several initiatives launched in advance have been suspended or interrupted. The networks are slow to get more participants. Plethora of startup fuels the confusion that confuses the lines between basic technology and cryptocurrencies / ICO.
B3i, an insurance industry consortium has the support of several industry players and has completed more POCs. However, there are many challenges in adoption: trust, erosion of competitive advantage, regulation, risk etc. Batavia, a commercial financing initiative by IBM has adoption problems and has merged with we.trade. The IBM-Maersk shipping solution met with significant apprehension from rival industry actors. Having said that, 2018 has also seen several success stories: the Farm to fork initiative with Walmart retail, the JP Morgan interbank payment platform, Traceability and provenance for precious gems / diamonds with Brilliant earth, Payments via Lyra between banks and companies in Spain, etc.
While technology is promising, its application to the business must be approached with a holistic mindset. Projects that are rooted in the true corporate value provided by Blockchain are bearing fruit, while others moving from the FOMO effect (fear of losing) are taken by adoption, value and scalability challenges.
How will adoption increase / decrease in 2019?
With increasing awareness of technology and its maturity, we are forced to see a steady increase in the adoption of blockchain to optimize inter-company business processes and to give new business models. A telltale sign for incoming adoption is the increase in supply demands in this field. In recent quarters, we have witnessed a peak in RFPs led by numerous companies, in some cases as a group, working to identify specific use cases for blockchains. These initiatives focus on the value of the business and have a very rigorous gating process to filter out forced use cases. Through these initiatives, industry leaders are starting to see the value of a shared ledger and a future where collaboration outperforms the competition.
We believe that in 2019, while efforts between industries and geographic areas merge around specific use cases, the adoption of blockchain will increase. When companies establish that a centralized utility among businesses is the answer for a cheaper, faster and more efficient system, they will feel more comfortable collaborating with their industry rivals. Furthermore, all players are better informed of past successes and failures. The theory of disintermediation through the blockchain has yet to be demonstrated on a large scale, but the winds are blowing in this direction and the threat to the incumbents is becoming more real.
Consider heavily the blockchain used in banking and logistics, which sectors will begin to adopt the blockchain in 2019?
There are many cases of use for blockchain in any industry. This is evident from the plethora of use cases, startups and solutions of various players. However, we believe that blockchain will have a significant impact in three key areas: payments and settlements, origin and trade. It is obvious that the financial services industry has been a leader in the last few years in the adoption of the blockchain. This trend should continue, but other sectors are starting to reap the benefits and will peak in adoption in the future. Distribution and services, logistics and supply chains, production and resources are the industries that have started investing and will continue to do so in 2019. Public sector / government initiatives are also gaining ground in specific geographic areas such as the Middle East, Asia and Australia regions .
For what purposes will the blockchain be used in 2019 compared to 2018?
In the short term, the strategic value of blockchain leads companies to reduce costs and simplify processes. We have witnessed the adoption of blockchains in payments, remittances, origin and traceability in the early days, in line with expected returns. While there are blockchain applications that promise to provide a topline advantage to companies, in 2018 and 2019 leaders should continue to adopt cases with obvious underlying benefits.
We expect the blockchain to expand in the following cases / areas of use
- Trade, supply chain finance and p2p payments in FS
- Reinsurance, detection of fraud and management of insurance policies
- Register of ownership / land, tax compliance, infrastructure in the public / public sector
- Food security and provenance in agriculture
Are government policies favorable to the adoption of blockchains?
As in the case of the adoption of many technological innovations of the past, the invisible hand of the government is the key to legitimizing the blockchain and bringing it to a wider audience. Various applications of technology, particularly in highly regulated sectors such as banks, insurance companies, pharmaceuticals, etc., are obliged to operate within the limits of current regulatory standards. Informed by industry, regulatory bodies are starting to change policies. There are numerous legislative initiatives in various jurisdictions at the federal and state / provincial levels to incorporate the benefits of blockchain into the provision of services for next-generation citizens. For example, blockchain is a basic driver for Smart Dubai initiative aimed at transforming various intergovernmental and citizen transactions. Similar initiatives are underway in other geographical areas – Southeast Asia, Europe, the United States and Australia. The entire regulatory environment is expected to positively influence the adoption of the sector in 2019.
How do the blockchain alliances support adoption for 2019?
The true value of the blockchain can only be achieved when multiple market participants work together. While the competitive disadvantages of a shared ledger must be carefully evaluated according to the use case, according to Metcalfe's law, the value of a network increases in proportion to the square of the number of participants. The plethora of alliances / consortia formed in different sectors is a testament to the industry that recognizes the advantages of larger networks.
For example, RiskBlock and B3i are trained to drive the innovation of solutions, products and services in the insurance industry through the power of the ecosystem based on blockchain technologies. Likewise, BiTA is an alliance in the transport sector with the vision to drive the adoption of emerging technologies in freight, logistics, and related industries. There are examples of similar alliances in other sectors with some local networks (Europe, North America, etc.) and others attempting to form real global networks. It is important to note that many alliances still need to implement large-scale blockchain implementations. With the increase in the number of participants, the complexity of management and agreement on standards, value distribution and legal jurisdiction grows exponentially.
It is a difficult task to achieve alignment between market players traditionally accustomed to competing with one another. However, alliances (and consortia) are starting to make progress by starting with non-critical use cases and gaining trust among the players.