By Agnelo Marques, VP Technology & Head Blockchain COE, Mphasis
Blockchain has been on a roll since the beginning of2018 with news about innovative ways of its use. Besides that, there is a lot of educative content published, that has helped demystify blockchain concepts. There was also enough to read that helped in resolving the confusion between Bitcoin and Blockchain. Bitcoin as you know, is a specific application of blockchain technology which in turn is a type of a distributed ledger. There have been several PoCs that have had a successful run and even more ideas on how it can be applied to many more use cases in a variety of industries. The development on the technology seems to be taking place in two distinct plains, one is the startup space which has been active vibrantly since long and caters to application and infrastructure alike, the other is the enterprise applications space, where lot of the development is in the PoC stage and is expected to be so for some more time, before production ready applications can become a reality.
Blockchain – enterprise use cases
For the purpose of this article, let’s focus on the enterprise landscape. In an enterprise, a blockchain solution can be classified into two broad categories, one which could help reduce cost and the second which could improve revenue either by increasing existing revenue or by introducing a new revenue stream.
Cost reduction is possible when certain attributes of blockchain are leveraged to improve efficiency, transparency, and traceability in the current process. Positively impacting revenue however, would require a more disruptive approach, solutions resulting out of such disruptions would introduce new models of business and revenue. So, it is mainly about cost reduction v/s revenue generation. What should the enterprise choose? There is no simple answer to this question, but going by the current trends in the industry, it appears that the former will come earlier and more frequently compared to the latter, which may take longer. Looking at the current examples of PoCs being executed it can be observed that the enterprises are focusing on cost reduction, examples being insurance claims processing, international trade finance, funds transfer and supply chain among others. All of these are existing business processes to which blockchain is being applied with efficiency improvement as the primary goal, leading to cost optimization.
The supply chain scenario
Outside of the financial service space, supply chain is a very popular use case and has seen a maximum number of trials recently. One of the flavors of the supply chain scenario is the very popular Food Safety pilot in China commissioned by the food safety department at Walmart.
Cost reduction is possible when certain attributes of blockchain are leveraged to improve efficiency, transparency, and traceability in the current process
Let’s look at another use case, counterfeiting. It is yet another issue that can be effectively addressed with supply chain implemented on a blockchain platform. At a high level, the solution typically requires a mechanism to write to the blockchain a unique hash signature – which is immutable – for each unit. Then with the aid of a mobile app it would provide each party in the supply chain including the end consumer, a mechanism to validate that the signature of the unit in hand is indeed registered on the blockchain, guaranteeing that the unit is authentic.
To cite and example, counterfeiting costs EU alone about Euro 60 billion and this is a global problem. There are three primary actors that are affected when a counterfeit unit of the product is sold unknown to the unsuspecting customer. First, the manufacturer/brand loses potential revenue coming in from a genuine buyer, second, the retailer (online or offline) may lose credibility and potentially be exposed to the risk of legal action, finally, the customer who is left holding the counterfeit product and goes through a bad experience of dealing with return. When referring to the customer, it is the genuine buyer who is indeed looking for an authentic product, there however are buyers who do buy counterfeit products with the full knowledge of the same. There is however a fourth entity which is the common link between the above three, and that entity is the logistics partner who transports the goods from manufacturer to the distributor to the retailer and in case of online sales even to the end customer. How would it be if the logistics partner offered anti-counterfeiting as a new value-added service? Here are a few potential ways in which revenues can be positively impacted. For example, a new revenue stream could get created, if they chose to charge for the service. Large manufacturers could make it mandatory for distributors to use the same logistic partner if they are using a different one, this will lead to additional revenue. The value-added service could potentially help gain larger market share. This is just an example/idea to help explain the concept revenue generation use cases when compared to cost reduction ones.
Enterprise blockchain Opportunity
Blockchain offers opportunities to enterprises, that can help them achieve transformative growth. The technology is nascent but evolving at a fast pace, and as months pass by is accelerating mostly to accommodate enterprise requirements of scalability, security and information privacy. Most organizations that are assessing the technology are conducting PoCs which is the right approach, but a more formal approach is required for evaluating the technology within the enterprise. Without a formal evaluation framework, it is difficult to calculate ROI of a final blockchain solution. One of the primary challenges related to blockchain solutions is coming up with an exhaustive business case that can list down costs, benefits and risks, and consequently makes the decisioning process difficult. While challenges in the technology are being tackled, it may be appropriate to keep an eye on how this technology moves ahead but be judicious before jumping into PoCs/Pilots.