First used as the digital ledger for bitcoin transactions back in 2009, blockchain technology has evolved dramatically over the past decade and is now on the verge of becoming mainstream. Markets Insider notes that 21% of banks used blockchain in some form as of March 2021, with some of the more notable examples being JPMorgan and Citi.
While initially used strictly within the context of cryptocurrency, blockchain continues to grow and develop into an essential application, service, and solution for businesses and the economy in general. Due to increased customer and consumer demand, it’s been a catalyst behind the digital transformation of many businesses. Here are some of the latest developments in blockchain to provide perspective on where it’s heading in the 2020s and beyond.
Supply Chain Optimization
Historically, supply chain management has been heavily dependent on old-school documentation and manual paperwork. But as you might imagine, this sets the stage for inefficiencies and can create a lot of headaches when record-keeping. Blockchain technology, however, is providing a much-needed injection of innovation in this industry.
More specifically, it offers a highly digitized, fully transparent process that can track the shipment of products in a secure database without the use of paper documents. Companies can now support their supply chain management teams and infrastructure through managed service providers (MSPs) who can protect and maintain modern equipment to make the process far more efficient and build a higher degree of trust between manufacturers and retailers. By employing blockchain technology throughout the supply chain, companies can receive updates, monitor payment tracking, and automate manual maintenance tasks to reduce their costs.
It’s also integral for establishing the infrastructure in connected factory models, and integrating smart systems along the supply chain offers robust reporting and analytics that produce insights that help continually refine supply chain management over time.
Central Bank Digital Currencies
Although there’s been a reluctance to use cryptocurrencies for centralized banking in the past, interest has picked up as of late. Countries like China and The Bahamas have already implemented these digital currencies, and Wall Street banks now view it as “the next big financial disruptor,” explains Jeff Cox of CNBC. With cryptocurrency becoming increasingly regulated, more and more financial institutions are warming up to the idea. Therefore, there’s a trend where blockchain will be used for a growing number of central bank digital currencies moving forward.
Decentralized Financial Transactions
A big part of blockchain’s appeal is that it’s decentralized, meaning no centralized entity or middleman is managing the system. Instead, transactions are verified and recorded via a ledger, which reduces the trust users need to have in one another. And many financial institutions consider this type of technology to be ideal for adding a layer of security and transparency that they feel has been lacking up until now with traditional, private systems in centralized finance. While the inherent level of volatility and uncertainty with cryptocurrency does create concerns, we’ll likely see a gradual push toward decentralized financial transactions in upcoming years.
Blockchain as a Service and Certificate Verification
Another reason why blockchain is so secure is that it supports company compliance with strict security rules and standards when sharing information or providing proof of origin. Blockchain certificate verification, for instance, can be viewed by all participants within the network easily and transparently, which can be a true game-changer for companies looking to tighten the flow of information internally.
To provide the level of support modern companies need at scale, we’re now seeing the development of blockchain-as-a-service (BaaS) where a third party builds and manages blockchain applications for companies. A simple example would be MSPs using MSP software to implement and manage system audits and solutions to streamline security for organizations and provide a high level of on-demand support and full-time remote monitoring and management of connected systems and devices. We’re already accustomed to software-as-a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS); blockchain backed by robust RMM systems will likely be the next form of technology to be outsourced in this manner.
Despite the wide array of benefits that blockchain offers, such as increased transparency and lower operational costs, it still has yet to see mass adoption. But that’s subject to change as there have been major strides made to improve its interoperability as of late. As Nadejda Alkhaldi of software development company Itransition points out, there have been serious initiatives made over the past few years focusing solely on blockchain interoperability. Many experts agree we’re now at a tipping point, which means less siloing of blockchain ecosystems.
Another big innovation involves the way companies handle contracts. With blockchain, buyers and sellers can now use smart contracts for agreements, which are self-executing, completely trackable, and can’t be altered once signed. This creates a framework where multiple parties can strike up key partnerships without the need for a centralized authority, while offering each user better peace of mind. Although there are still some kinks to be worked out because of the vulnerability to hackers exploiting bugs, smart contracts show a lot of promise.
A non-fungible token, or NFT, is a digital asset such as a photo, video, or file that can be stored on a digital ledger and is certified as unique. As of mid-2021, the primary application of NFTs has been giving digital artists and content creators a means of securely monetizing their work. But there will be a growing number of use cases, including licenses and certifications, which have the potential to be useful for a wide range of companies.
“Security tokens are essentially digital, liquid contracts for fractions of any asset that already has value, like real estate, a car, or corporate stock,” explains Joe Liebkind of Investopedia. Recording ownership in a decentralized blockchain ledger provides investors with proof of their stake in an asset in a way that simply wasn’t possible before blockchain. Although security tokens have certain restrictions and are more expensive than utility tokens, they increase market efficiency and are being used by more and more investors.
The final development that’s gaining ground is enterprise blockchain. While most people are familiar with public blockchain networks like Bitcoin and Ethereum, which are available to the public, enterprise blockchain is specifically tailored for corporations. With it, the visibility of data is limited to a certain number of people, and it can be used for streamlining business processes on a large scale, including managing global payments and keeping track of goods within a supply chain. So far, enterprise blockchain has received interest from massive corporations like Walmart, IBM, and Facebook, but it’ll likely catch on with even more in the near future.