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The blockchain or DLS technology (distributed ledger technology) has been a hot topic in the financial services industry in recent years. The pungent lightning strike of the excitement Bitcoin and the Ethereum fueled the revelation of smart contracts and decentralization, which led many to label internet blockchain 3.0. Is it really?
Good question.
If you were around for the first few days on the internet, you experienced something like the hype, the failure and the next boom in new technology. The days of DotCom proliferated with some of the first companies to take advantage of the world wide web. Many have become DotCom bombs, but from the ashes of collapse emerged a digital ecosystem that has upset and continues to destroy a legion of industries. Blockbuster Entertainment anyone?
So the blockchain innovation will follow a similar path?
The initial party of promotional currency (ICO) helped bring the blockchain to popular notoriety, but also gave the novel a slightly black look. The first killer app for blockchain has become online capital as ICOs have easily raised billions of dollars. Most of these issuers have since vanished and there have been too many frauds.
However, the interest in decentralized technology that optimizes and disintermediate processes and services remains high.
The major analog industries that are at home in ossified operational practices are the main objectives of generalized accounting technology. Toll-filled networks, which slow down transactions and increase costs, create an opportunity for distributed technology to remove friction.
So, what's next?
Recently, CI had a chance to sit down with the American blockchain KPMG at the head of Arun Gosh to talk about what he is seeing in KPMG. Gosh was participating in the Blockland event in Cleveland, Ohio, a conference with a strong corporate stake.
Gosh, quite new in his role, is driving the KPMG approach that is trying to integrate financial management and digital transformation with a complete blockchain guide from strategy to implementation. In front of me, I asked Gosh if the blockchain was more hype than reality. Smoke and digital mirrors.
Gosh said that having been a consultant for 22 years he has had a lot of work experience with both back and middle office operations. He said that 18 months ago they had their first major victory with an important pharmaceutical company (which he was not able to name) that came to them with a challenge to the security law and compliance requirement. . Blockchain was the answer:
"This gave us the moment" ahah ", said Gosh. "This also gave us a certain level of recognition [blockchain] it's not just hype ".
As a company, they decided to do more to invest in the right areas of new technology in relation to their areas of expertise. Gosh and KPMG believe that blockchain is a fundamental technology for business operations.
Are we at Peak Hype?
Gosh admitted that the bubble burst a little but added that the market often confuses Bitcoin with Blockchain:
"Forget the clamor of the crypt," Gosh said. Business leaders are saying that they need to look at blockchain. Four or five corporate software vendors have announced blockchain as a service in the cloud, which helps.
"This gave a sense of sanity to this madness." People are now stepping back and saying I can actually create a blockchain node in less than three minutes to protect it and deploy it in a contextual framework".
What they are discovering is that the leaders come to them and ask them about Blockchain.
Crypto hype aside, Gosh sees the value in the authorized blockchain. Distributed ledger technology can be used to reduce friction in many different services:
"The proofs of concepts are over." It works.The question is now a test of value. "
Private. Manage permissions. Within the company.
At the moment, at least 3 or 4 commitments are moving towards the KPMG value stage test. People are seeing efficiency gains.
Returning to Pharma, sees significant productivity gains that remove costs from operations. Today the Pharma distribution network is very complex. From production to distribution there are many layers and many different intermediaries. Using the blockchain, you can have verifiable test points along the way. From the "serialization" of drugs to the collection of patients in pharmacies. He said that managing this life cycle with the existing ERP options is rather cumbersome.
"Go straight to the ledger … that defines those test points, they're saying that if you do it for the supply chain of production you can do it for the clinical supply chain … We're seeing a larger increase in interest because it works ".
And let's not forget the financial services.
Apparently, KPMG is also gaining ground including audit and tax advice. It is agreed that finance is the killer app, but while the uptick is slow the interest and appetite for the blockchain remains and "zeal is reinvigorating" ".
Regarding the debate regarding the authorized blockchain and without authorization, Gosh believes that the concept of public blockchain is too broad. When you break everything, using a public blockchain is a monumental task.
"Why should they want to go out and create a consensus mechanism in the public domain without adequate controls and governance that meet their corporate standards for information security and storage management?"
Gosh said that there are groups that are creating standards on public blockchain, but there is not yet.
A private or authorized approach is only faster and easier.
"The next phase is interoperability," said Gosh. "Then I think we will see a much wider appetite …"
Asked if KMPG has any preference for options in the allowed space and Gosh said they are currently agnostic.
"We will remain and we will have to remain targets for the protocol or the platform."
For 2019, Gosh expects a wider range of industries to implement blockchain solutions. Besides Healthcare, these include Telco / Media, consumer products / retail, industry / production and government. Identity and decentralized management and the way in which it will shape trade are also an important part of the vision. Regtech and compliance challenges are a natural choice.
There will be considerable traction in customs and trade. The KPMG teams are apparently completely overwhelmed by the question.
"We see a great movement in these areas … In 2019, we will see about a dozen projects that will enter a mature cycle".
He is seeing tremendous support from platform vendors to help these projects move to production.
According to Gosh, the distributed ledger is "reshaping a lot of problems". The use of blockchain will become the "new normal" for the industry. "Here's where we see evolution," said Gosh.
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