The technology underpinning cryptocurrencies such as Bitcoin may well revolutionise the way we do business, with new applications extending across all sectors of the economy.
The future is only ever just around the corner. Technologies that are already available today have the potential to radically transform the world we live in. One such technology is blockchain, a distributed ledger technology best known as the infrastructure behind digital currency Bitcoin.
For some time, CommBank’s Innovation Lab in Sydney has been at the forefront of blockchain research. What’s increasingly clear to us is that blockchain’s potential reaches well beyond the financial services sector. In fact, it’s no exaggeration to say that blockchain could revolutionise our whole economy.
Shared intelligence, total transparency
At the heart of blockchain’s potential is a decentralised structure that does away with the need for third-party authorisations or centralised ledgers. Instead, blockchain creates an open, shared digital record, using a peer-to-peer network of participants to verify and approve every transaction, making transactions completely transparent and secure.
In addition to making transactions completely transparent, it can contain a limitless amount of information, making reconciliation and execution virtually frictionless.
Here are five ways it could transform the way we do business:
- International payments
The Commonwealth Bank is a founding participant in the global R3 consortium, set up to define the standards and protocols for a broader application of distributed ledger technology. Among other things, we’ve been exploring blockchain’s potential as a safe way to transfer money (or any virtual ‘value’) around the world.
Blockchain could help cut transaction times for international transactions from days to minutes, slashing costs and significantly reducing risk — with customers able to track each step of the transaction in real time.
- Smart contracts
Imagine a world where the negotiation or performance of a contract can be automatically verified and executed via computer protocols, underpinned by blockchain technology. This is the world of smart contracts, where programming code could replace legal documents and clauses, integrating them into electronic commerce and payments protocols to enforce the contract’s terms.
In fact, smart contracts are already being applied in copyright protection, with blockchain app Ethereum using them to identify and manage intellectual property – even processing royalty payments directly to the work’s owner.
- Global trade
Extending the concept of smart contracts into the physical realm could also transform the way we trade and transport goods across borders. With a transparent, permanent record, goods could be easily recognised, verified and audited at every stage of their journey, cutting administration, eliminating fraud, and reducing the time between sending the goods and receiving payment.
For example, commodities such as pharmaceuticals that are sensitive to heat could be monitored during transport through a connected sensor that would advise if the cargo was compromised.
Should this happen, the smart contract’s encoded supply chain logic could cancel various payments, as well as any transportation and warehousing arrangements. It could then invoke insurance contracts and re-order the compromised goods.
- Ownership registries
Blockchain could also simplify the transfer of ownership of any item of value, such as equities, property, cars, and businesses. Because all participants would have access to the same title information, they could instantly check that everything is above board, without wasting time going through a third party or centralised authority.
- Supply chains
Blockchain is also likely to prove an invaluable tool for businesses whose brand depends on confirming the source of their ingredients, materials or goods.
One company, Provenance, is already taking advantage of blockchain technology to create an immutable record of a product’s entire lifecycle. This not only helps companies build trust with their customers, it can make the certification of goods (such as organic, free-trade or GM-free) an easier and more reliable process.
To stay on the right side of history, companies will need to keep a close eye on the impacts of blockchain in their own industry and beyond, experimenting with the technology and running trials with trusted partners, clients and other key stakeholders, to understand the specific opportunities and challenges it could bring.
We’re still only beginning to grasp how blockchain will change our world. But for businesses that choose to embrace the potential of this transformative technology, great opportunities await.
To learn more about the how you can turn today’s imagination into tomorrow’s ground breaking innovation, visit our Innovation Lab page.