The digital economy as we know it is changing. Although still realising its potential, blockchain has been setting the pace for the next iteration of the internet, offering tremendous promise for the evolution of digital interaction, financial services, and digital rights.
While blockchain’s fuelling of cryptocurrencies remains a central growth point, blockchain technology holds a far greater potential beyond the investment sphere. Indeed, blockchain is poised not only to enact a transformative influence on our industries but to revolutionise our entire economy.
Despite earlier hurdles that deterred blockchain adoption, including complicated user interfaces, scalability constraints, and regulatory concerns, blockchain has increasingly proven its worth. It has matured to the point where we no longer need to discuss its future capabilities, but can analyse its current impact in driving unprecedented efficiencies in enterprise supply chains and operational systems.
Mainstream organisations and groups across all sectors, from finance providers to government institutions, have taken notice and begun accelerating the integration of blockchain into their processes, in a game of anticipatory market penetration.
In fact, a recent report commissioned by Casper Labs revealed that “nearly 90% of businesses in the US, UK, and China are starting to use blockchain in some capacity”, with a further 87% stating their likelihood to invest in a blockchain solution in the next 12 months.
Experts at PwC expect that “between 10% and 15% of worldwide infrastructure will be using blockchain within a decade”, which is compelling evidence that we are only just witnessing the beginning of the transformative potential of this technology.
Blockchain’s inherent advantages
The virtues of blockchain lie in the transparency, security, and decentralisation that it offers. Unlike traditional database systems, blockchain infrastructure is immutable, meaning it cannot be changed or censored. This enables organisations and governments to prevent fraud in a wide range of contexts.
Take, for instance, the electronic voting system. Blockchain’s verifiable infrastructure and automated smart contracts can ensure that political actors don’t tamper with election records, while governments can guarantee voter registration integrity since public individuals cannot lie about their profile. Ultimately, this leads to a more transparent and fair election process.
On an individual level, blockchain ledgers enable consumers to regain control over their personal data. The current user data ecosystem, managed by an oligopoly of social media giants, has been plagued by data breaches and data protection scandals since its inception. The adoption of blockchain-backed digital identity and zero-knowledge proof technology offers timely relief for users, empowering people to decide who can process their data and for what purpose, and putting data security back into the hands of users.
Blockchain’s transparency also opens the door for businesses to streamline and authenticate their supply chain networks. This, in turn, enables faster and more cost-efficient product deliveries, creating traceable product journeys, improving co-ordination between intermediaries, so each and every process that takes place on the chain can be verified by all involved parties. For example, last year, mining behemoth BHP adopted blockchain to advance digital traceability within its business processes, using the technology to accurately analyse its carbon offsets and help it to reduce emissions, and thus work towards carbon neutrality.
Simplifying global finance
Blockchain stands as a powerful tool for righting the catalogue of inefficiencies that exist within the traditional finance (TradFi) sector, by streamlining processes and facilitating more inclusivity and higher grades of global accessibility. According to a European Savings and Retail Banking Group (ESBG) analysis of the Global Findex Database, released by the World Bank, today’s traditional finance system has failed to include 13 million adult EU citizens. Decentralised finance (DeFi) provides a means of mitigating this exclusion. By removing the need for intermediary management of assets, blockchain enables the maximally efficient allocation of resources, thus ensuring that every member of society can enjoy unbiased access to credit services.
It’s important to remember, however, that the success of this new financial era lies in finding a balance between TradFi processes and DeFi systems. Working in unison, TradFi can deliver the necessary security and regulatory framework that DeFi lacks. DeFi can deliver crucial technological improvements and reduce operational costs through real-time credit tracking, automated compliance, and straight-through settlements given that there is no longer a need for manual reconciliation. The convergence of both systems will also lead to the generation of new financial products and services that are not possible in either system alone.
Benefits to treasury
Blockchain technology has the potential to significantly impact corporate treasury management in several ways. Blockchain developers are shifting their focus from proof-of-concept projects to the creation of more practical, treasury-focused blockchain solutions.
Primarily blockchain can disrupt many aspects of the cash management process, including investments and payments. Blockchain-based systems can enable peer-to-peer (P2P) lending, helping corporate treasurers achieve high returns with less risk.
In addition, blockchain technology can optimise reconciliation processes, reduce complications in cross-border payments and billing, and eliminate costly third-party transactions. By streamlining present cumbersome processes and eliminating manual data entry and reconciliation for international payments, blockchain technology can save significant time and costs in treasury management.
Adapt to survive
The progress of blockchain has reached the point of no return, now representing an impossible-to-ignore means for enterprises to optimise their internal operations and maximise their external market presence. As the infrastructure continues to evolve, we can expect to see more innovative use cases and applications that will transform various industries and promote a more equitable economy.
While the blockchain industry has some way to go before it entirely supersedes traditional infrastructures, there is no doubt its impact is already being felt in the world economy. Change is on the horizon, and as tech visionary, author and entrepreneur Stewart Brand once said: “Once a new technology rolls over you, if you’re not part of the steamroller, you’re part of the road.”
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