In 2008, someone (or a group of someones) published a white paper under the pseudonym Satoshi Nakamoto. In the document, Satoshi—whose true identity remains a mystery to this day—introduced Bitcoin to the world and explained the technology that allows people to own and transact with cryptocurrency: blockchain.
At the time, this white paper didn’t exactly set the world ablaze. Not many people read it—and plenty of those who did remained skeptical about its claims.
Fast forward more than a decade, and Bitcoin’s value has skyrocketed, while dozens of competing blockchain-supported cryptocurrencies and digital currencies have entered the market.
What’s more, the world is beginning to understand that blockchain has the potential to be much more than a cryptocurrency ledger. That reality is driving business leaders across industries to ask: Should our organization have a strategy for this still-evolving technology?
Our point of view? We don’t believe in deploying any technology for technology’s sake. Technology’s true value comes from what it can enable—whether that’s new revenue streams, more innovative products, better experiences for customers and employees, and many other goals. Digital businesses know this. They work to first understand their challenges and opportunities, so they can implement the right digital solutions—alongside digital-centric strategies and new ways of working—to address them.
This means your business doesn't necessarily need a fully defined strategy or investment plan for blockchain—yet. But it’s important to understand what’s going on in the space and consider the potential implications for your own organization and industry.
Why? Well, let’s go back to the original use case: cryptocurrency. Blockchain enabled the creation of an entirely new form of money—leading to a disruption of traditional financial models akin to the shift from the barter system to standardized currencies, thousands of years ago.
So, with that in mind: What else could blockchain disrupt? What other traditional institutions, activities, and models could it change forever? What impact could it have on your industry and your business? What challenges could it address for you? What new possibilities could it create?
Read on for a few ways digital leaders in a wide swath of industries can use—or already are using—blockchain as an innovation-enabler and problem-solver.
As a refresher, a blockchain is a distributed ledger shared among the nodes of a computer network. It stores and structures digital information in groups, as a “block,” instead of in tables, as conventional databases do. As each block’s storage capacity is filled, the block closes and becomes linked to the block before it. This creates a chain of data that is a complete record of all transactions on the ledger.
Every node in the network has access to this record. The blocks are time-stamped, encrypted, and immutable—meaning they cannot be tampered with—which proves the fidelity of a record or transaction and generates trust without the need for a trusted third party.
Blockchain can safeguard and provide secure access to important data, which can facilitate cross-collaboration across industry and competitive lines—without the need for costly intermediaries.
Healthcare organizations need access to accurate provider data for activities such as claims processing, provider and member attribution, payment integrity processes, and more. But that data is collected by a host of entities: managed care organizations, health systems, physicians, payers, and other healthcare stakeholders. And it’s held captive within the disparate IT systems belonging to or maintained by each party. This leads to duplicated efforts and inefficiencies for some (or all) of the entities involved.
Using blockchain technology to underpin a provider data exchange keeps the data private and immutable—while also allowing access to the parties that need it, when they need it. Once parties are authorized as owners within a system, they can easily share and access this data, no matter what IT platforms they use.
Formed by Aetna, Humana, MultiPlan, Quest Diagnostics, and UnitedHealth Group, the Synaptic Health Alliance is exploring blockchain to more effectively share information, automate mutually beneficial processes, and audit interactions. The alliance aims to create a cooperatively owned, synchronized, distributed ledger to collect and share changes to provider data, starting with demographics. This “could streamline administrative burden, help reduce costs, improve access to care for patients, and relieve friction between providers and multiple payers,” according to the Synaptic Alliance.
A smart contract uses lines of code to define terms of an agreement between buyer and seller. It is stored on a blockchain, making the transaction publicly traceable and transparent while keeping the parties anonymous. And it self-executes automatically, according to how the code was written—reducing risk and augmenting trust in the deal for both parties.
During M&A deals, both sides accept a high level of counterparty risk—up front and post-close. For example, in the case of an earnout, a buyer might agree to pay the target a percentage of gross revenue. A traditional earnout contract requires each party to trust that the other will behave according to the rules of the contract.
Building the conditions of an earnout into a smart contract would make contractual outcomes systematic, rather than trust-based. How? A smart contract could be programmed to regularly pull data on gross revenue from a predetermined source. If the defined metric is achieved, the contract would trigger automatic payments to the target on a fixed schedule.
Northern Trust has deployed legal clauses as smart contracts directly from a digital legal agreement onto its private equity blockchain. When venture capital firm Emerald Technology Ventures launched a new fund in 2019, Northern Trust used smart contracts to automate the fund’s legal and contractual requirements—as well as provide transparency and speed up the contract negotiation process.
Blockchain makes a ledger of transactions and purchases visible to any party with access permissions. And because each transaction is unchangeable, using blockchain creates a trusted, verifiable record of data.
Blockchain can be used to boost supply chain transparency, providing end-to-end trackability of materials and products. This makes logistics, warehousing, and procurement processes more efficient. But it also helps manufacturers and retailers of consumer and industrial products adjust their operations—in near-real and real time—to meet sustainability goals such as reduction of carbon footprint.
Plus, it’s challenging for organizations to identify and mitigate any sourcing-related ESG risks without visibility into their entire supply chain. C&IP organizations can use blockchain’s immutable record of verified data to confirm their raw materials are being sustainably sourced from trusted suppliers—and that their suppliers are not using tier-3 or tier-4 suppliers with a record of human rights violations.
Cobalt is an important raw material for the production of lithium-ion batteries, which are found in power tools, portable devices, and electric vehicles (EVs). But in certain parts of the world, cobalt extraction can involve child labor. EV manufacturer Tesla is working with other stakeholders to develop a blockchain platform to trace cobalt and verify it is sustainably sourced—with the pilot being executed in “real operating conditions,” according to the company.
Blockchain technology allows assets to be exchanged, with real-time settlement, as certain conditions are met. This gives organizations an opportunity to transact with their customers in new ways—and even incentivize them to work toward shared goals.
In peer-to-peer energy trading solutions, both utilities and customers can produce and sell electricity, but there’s a catch: Energy transactions have to happen in near-real time.
Using blockchain-based solutions, residential and commercial solar panel-owners can autonomously transact with consumers and sell them excess energy—in real time. This incentivizes these “prosumers” to install renewable energy products. Meanwhile, individual consumers gain sustainable options for their energy supply, even if they aren’t in a position to install their own solar arrays. And utilities benefit through more efficient grid management as well as improved supply-and-demand-balancing: During times of high demand, utilities can buy energy from the solar-panel owners and feed power directly to the grid.
The Brooklyn Microgrid allows residents to buy and sell power from each other on a blockchain-based platform. Energy is generated, stored, and transacted locally—no centralized authority or special infrastructure needed—which improves efficiency, sustainability, and grid resilience. As a bonus, it boosts competition among suppliers. Plus, as we’ve written before, one of the upsides to a concept like the Brooklyn Microgrid is that it drives consumer buy-in: They gain an element of control (real or perceived) over how their energy is produced.
Blockchain has the potential to change how organizations execute fundamental business processes—such as record-keeping and transactions—from traditional and inefficient to digital and highly effective, or even innovative.
But here’s the part where we bring you back down to earth: Many blockchain applications and solutions are still in, or not far out of, the experimentation phase. And like any emerging/evolving technology, blockchain has its challenges.
Still, the use cases highlighted here hint at blockchain’s enormous business potential. Early adopters and digital leaders have proven blockchain can be used to reduce inefficiencies, deliver new and better products, engage with customers, and reimagine transactional ecosystems.
And remember: Organizations with a digital mindset see technology as merely the enabler. They start by building an understanding of their own business—and then they implement the digital solutions that are right for them. As you transform your operating model to be digital, your organization will gain the ability to capitalize on new solutions to new (and old) challenges —no matter what form those solutions take.