By Justin Biel, trends editor at Grow Wire
⏰ 6-minute read
- The world’s largest companies are exploring and deploying blockchain applications to solve crucial business problems.
- Although the majority of blockchain projects are still in the testing phase, the deployment of private, public, and consortium blockchain application are increasingly common.
- By understanding the level of blockchain adoption across industries and current use cases, business people will understand the benefits of blockchain and the coming impact on respective industries.
This is the second story in a series on blockchain for business.
Read part I, “Blockchain for Business, Explained.”
Companies and entire industries are exploring blockchain applications to enhance the ways they do business. These projects are increasingly common, although the majority of them are still in the testing phase.
Shell, for example, is working with technology and finance partners on a platform for the trade and settlement of crude oil. Walmart used blockchain to create a food traceability system, insurance giant AXA now offers flight insurance via blockchain technology, and Facebook is using blockchain to build a cryptocurrency, Libra, which will allow users to buy and sell products from participating merchants and send payments across its platform.
Facebook is using blockchain to build a cryptocurrency, Libra. (credit: Facebook)
Fifty of the world’s largest public companies are currently exploring blockchain projects, blockchain expert Michael Del Castillo wrote on Forbes. CB Insights cited a whopping 55 major industries blockchain could transform in the coming years.
Today, enterprise companies are fully invested in the blockchain race, experimenting with different types of blockchains to find the best fit for their needs. Most non-enterprise and growing businesses, meanwhile, are holding off on developing blockchain projects, preferring to wait for industry-wide, standardized systems to evolve.
Instead of pretending this shift is not occurring, businesses of all sizes need to:
- Understand the different kinds of blockchains: public, private and consortium.
- Gain insights from early adopters.
- Determine which type of blockchain, if any, might enhance their business operations.
What is the difference between private and public blockchains?
The underlying distributed ledger technology of private and public blockchains is essentially the same. The difference in these systems lies in who controls them, who can execute consensus protocols (which are used to verify information on the ledger) and who is granted access to information on the ledger.
“A public blockchain network is completely open, and anyone can join and participate in the network,” writes Praveen Jayachandran, a blockchain researcher at IBM.
A public blockchain is completely decentralized -- no single party controls the network -- and all transactions are visible in the public ledger. Today, Bitcoin is one of the largest public blockchains. Anyone can anonymously join Bitcoin’s peer-to-peer digital currency network, which is powered by the network of Bitcoin users rather than any central authority or governing body.
Bitcoin is one of the largest and most well-known public blockchains.
On the flip side, “a private blockchain network requires an invitation and must be validated by either the network starter or by a set of rules put in place by the network starter,” Jayachandran continued. “This places restrictions on who is allowed to participate in the network, and only in certain transactions.”
“A private blockchain network requires an invitation and must be validated by the network starter.”
J.P.’s Morgan’s Interbank Information Network is an example of private blockchain, as it facilitates global, cross-border payments within a network of over 300 banks. J.P. Morgan developed the blockchain network and only grants participation rights to verified banking institutions or approved partners.
What is a blockchain consortium?
A consortium is a middle ground between public and private blockchains. A consortium blockchain offers the benefits of a private blockchain, such as efficiency and private transactions, while maintaining a semi-decentralized structure. Instead of having no controlling parties (public blockchain) or a single controlling party (private blockchain), a group of people or organizations manage the blockchain.
Consortium blockchains comprise many of the enterprise-grade blockchain applications currently in development. The managers of a consortium blockchain are often industry-specific and include influential companies and key stakeholders.
For example, MOBI (the Mobility Open Blockchain Initiative) is an automotive industry blockchain with members like BMW, Ford, General Motors, Honda and Renault. The OOC (Oil & Gas Blockchain Consortium) includes companies like ConocoPhillips, ExxonMobil, Chevron and Shell. The BiTA (Blockchain in Transport Alliance) is the largest commercial blockchain alliance in the world with members like UPS, FedEx and The Home Depot.
The Mobility Open Blockchain Initiative wants to shape the future of transportation with blockchain technology.
Consortium members also include technology companies like Google, blockchain software companies like Ethereum, consulting companies like Accenture, city governments and NGOs. Instituting new blockchain systems across an industry requires many stakeholders to collaborate.
For instance, MOBI aims to make mobility and transportation more efficient, safer and greener via blockchain projects. Building these systems requires coordination far beyond the capacity of a single automaker. Technology companies and blockchain software developers must work together to build MOBI’s applications, and then carmakers must integrate these systems into their vehicles and mobility offerings. City governments then must approve those offerings.
There are also consortiums like R3 and Hyperledger, which work with members across a variety of industries to develop a wide range of enterprise-grade blockchain solutions. These consortiums offer both public and private blockchain platforms.
The CEO of R3, David E. Rutter, has raised over $100 million to build operating systems on blockchain technology.
What industries are leading the charge on blockchain projects?
In Deloitte’s 2019 Global Blockchain Survey, 53 percent of respondents --1,300 senior executives across a dozen countries -- said blockchain had become a critical priority and 83 percent saw compelling use cases for the technology. Leading the charge is fintech, but other industries are following suit, namely, technology, media, telecommunications, life sciences, health care and government.
Still, the majority of blockchain projects remain in the exploration phase. In Deloitte’s survey, only 23 percent of respondents had initiated a blockchain deployment, down from 34 percent in 2018.
This drop in deployment is related to a "seasoning of the collective opinion toward blockchain based on increased exposure to the technology and a better understanding of its abilities and drawbacks,” stated Deloitte.
What are some examples of live blockchain projects?
Although many companies and consortiums are in the testing phase with blockchain technology, several trailblazers have blockchains up and running today. The four companies below are using blockchain now, providing a preview of what’s to come.
- In 2019, the British Columbia government used Hyperledger Indy, the Hyperledger consortium’s publicly available source code, to build the beta website for OrgBook BC, a public directory that allows any interested party to verify a business's legal status and “doing business as” name. In the future, OrgBook BC will also show the type of organization and any legal licenses, permits or accreditations the company holds. The database expedites the process for individuals, companies and government officials seeking to verify a business's legal standing.
- Finanstra, the third largest fintech company in the world, developed a blockchain solution with R3 to process syndicated loan arrangements. The program was successfully piloted, with BBVA bank processing a 150 million euro loan with Japan’s MUFG financial group and France’s BNP Paribas bank earlier this year. According to the Financial Times, the blockchain-enabled syndicated loan system replaced “outdated and inefficient processes including faxes to share information between different parties,” increasing the speed of processing from “two weeks to a day or two.”
- Since 2014, Overstock.com has accepted payments via Bitcoin through the digital currency exchange Coinbase. The home goods retailer gives customers the option to receive refunds in Bitcoin.
- Last year, the State of West Virginia partnered with Voatz, a mobile election voting platform, to debut a mobile voting app powered by blockchain that can be used by state residents living overseas. Over 150 West Virginians, most of whom are deployed military members or Peace Corps volunteers, used the app during the 2018 midterm election.
🌱 The bottom line
A decade after the technology’s creation, prominent companies and industries are actively building and deploying blockchain applications. Although the majority of blockchain projects are still in the testing phase, the deployment of private and public blockchain projects are increasingly common in today’s business landscape.
Enterprise companies and consortiums across major industries are paving the way for adoption of new blockchain processes. However, smaller companies will likely sit on the sidelines until new systems gain industry-wide acceptance.