The end of 2017 saw the price of cryptocurrency hit unprecedented levels, with Bitcoin approaching the $20,000 mark and Ethereum moving past $1,000. This was the cherry on the cake of what was a tremendous year for blockchain advocates, pushing the technology - which underpins Bitcoin and the majority of other cryptocurrencies - firmly into the mainstream consciousness.
In 2018, the hype around blockchain will continue to grow, not only with cryptocurrencies carrying on their volatile march, but as research into its other applications rises. According to Gartner's estimates, blockchain delivered $4 billion in business value-add or technology innovation in 2017, growing to $21 billion by 2020, $176 billion in 2025, and $3.1 trillion by 2030. Deutsche Bank, meanwhile, forecasts that by 2027, blockchain systems will record transactions for about 10% of worldwide GDP.
Financial services and banking sectors are the obvious starting points for blockchain adoption. Since early 2014, PwC say that more than 40 financial services firms (or their strategic investment arms) have invested in a blockchain or related startups, while more than 60% of banks now back blockchain. However, this is not where blockchain's applications begin and end. According to The Blockchain Research Institute, there are now blockchain projects in at least 10 industry sectors, and moving into 2018 it’s expected that companies in even more will begin researching how they can harness its potential.
This is not going to be an overnight process. Blockchain has been dubbed the Internet 2.0, and to continue the comparison, it is roughly as mature today as the World Wide Web was around 20 years ago. In one recent PwC study, 56% of firms said they recognized the importance of blockchain, but 57% conceded they did not yet know how to respond. Ultimately, no one believes there will be full-scale, production blockchain implementations in 2018, with common consensus that it will take 5 to 10, but many organizations will start to put in the groundwork. We've looked at some of the industries outside finance where it has the most potential to have a transformative effect.
Outside of finance, insurance is arguably the industry most ripe for blockchain revolution. Investment has already been significant. In February 2016, for example, AXA Strategic Ventures (along with other partners) invested around $55 million into blockchain startup, Blockstream. François Robinet, Managing Partner, AXA Strategic Ventures, said of the deal at the time that 'We are excited about the close partnership that we will have with them in driving deeper engagement, thought leadership and technological transformation in the world of insurance and asset management as we believe that in this industry, blockchain technology will be a conduit for systematic changes.' Lloyd’s London Market has also included blockchain as part of their target operating model modernization plan, while a number of the largest insurers have come together to form the B3i consortium with the aim of sharing ideas around blockchain, testing use cases, and pursuing concepts related to the wider insurance sector. B3i counts among its members Achmea, Aegon, Ageas, Allianz, Generali, Hannover Re, Liberty Mutual, Munich Re, RGA, SCOR, Sompo Japan Nipponkoa Insurance, Swiss Re, Tokio Marine Holdings, XL Catlin, and Zurich Insurance Group.
There are a number of applications for blockchain in insurance. Blockchain provides a ledger to create, organize, and maintain company records in a single, verifiable, and easily accessible repository. This creates a single source of information that is available in real-time to all parties involved, enabling customer details to be validated automatically, crime numbers to be uploaded immediately and verified, and so forth. This should greatly improve operational efficiency and slashing costs. Stephen D. Palley, of Anderson Kill in Washington, for one, notes that 'The killer application for blockchain in my view is in insurance coverage, in automating the resolution of insurance claims, and particularly automating resolution of insurance claims payments.'
Another particularly appealing facet of the technology is its potential to detect and prevent fraudulent activity. McKinsey & Company estimates that between five and 10% of all insurance claims are fraudulent, while the FBI puts the resulting cost to US non-health insurers at in excess of $40 billion per year. Everledger is one organization working to solve this issue, providing traders, insurance companies, financiers, consumers, claimants, and law enforcers with a complete history of an item’s authenticity, existence, and ownership so that they can be sure of the provenance of what is being insured.
The energy industry has long led the way when it comes to the adoption of new technologies and it will likely prove to be the same story again with Blockchain. Companies such as Spectral Energy in The Netherlands, Power Ledger in Australia, and Grid+ in the US are already leading the way, with the latter two raising a combined $65 million to test real-world use cases of blockchain in energy. In total, energy blockchain start-ups have raised over $1 billion.
The benefits will be especially profound for renewable energy, enabling a peer-to-peer energy trading model. Solar panels now adorn many people's houses. These can be connected to the grid, allowing consumers to sell excess power back to the grid. Start-up Conjoule, for one, offers a blockchain platform designed to support peer-to-peer trading of energy among rooftop PV owners and interested public-sector or corporate buyers. The company has already raised $5.3 million in funding from Tokyo Electric Power Company and others, and has been running a pilot in Germany for the past year.
MIT Technology Review notes that it also has wider implications for renewables, enabling it to be differentiated from fossil fuels so it can be more easily measured:
'On an electricity grid, electrons generated from the sun, wind, or other renewable sources are indistinguishable from those generated by fossil fuels. To keep track of how much clean energy is produced, governments around the world have created systems based on tradable certificates.
Problem is, the way we manage these certificates 'sucks' and it’s holding up investment in renewable power, says Jesse Morris, an energy expert at the Rocky Mountain Institute. A new system based on blockchain, the technology at the heart of Bitcoin and other digital currencies, could fix this, he says.'
This is just the start. Blockchain also allows energy networks to be controlled through smart contracts that tell the system when transactions should be initiated, as established by predefined rules designed specially to balance supply and demand, saving on wastage. As Benoit Laclau, Global Power & Utilities Leader at EY, notes, 'An energy blockchain can be a catalyst for business model and process change right across the enterprise. It could be instrumental to manage the sector’s growing complexity, data security, and ownership. It is essential therefore that utility CIOs and business leaders understand the role that blockchain can play. Doing proof of concepts, and implementing small-scale tactical deployments which solve actual business needs are as much about the lessons learned as the value delivered.'
In a recent survey from MyersBizNet, brand marketers cited click fraud as their primary concern (78%), while media buyers reported the same in similar number (63%). Are You a Human, a company dedicated to identifying fraud, has found that 58% of internet traffic is driven by bots, while research from FraudLogix claims that around 50% of impressions served to Internet Explorer come from ‘non-human’ traffic, and 20.5% of impressions served to Google’s Chrome browser.
Blockchain has the potential to guarantee the validity of clicks between advertisers and web owners by telling marketers in real time where their ad has been placed and whether targeting is being delivered as has been paid for. It ensures that all parties are operating with the same information, providing transparency and a clear audit of interactions and metrics so that both client and ad tech providers are on the same page and focused on outcome-based ROI, rather than ROI-surrogate outputs.
An early player in this space is BitTeaser, a Danish ad network that blends advanced blockchain technology with a fresh market approach. Launched in January 2015, it displays all click-throughs on the Blockchain in real time, far quicker than Google AdWords reports, which can be delayed by in excess of 18 hours. According to a profile in Forbes, ‘BitTeaser is powered by a digital token that trades on OpenLedger's platform under the ticker symbol ‘BTSR’. The power and flexibility of the network’s infrastructure allows users to earn tokens by blogging, selling ads, pointing traffic to a designated website via social media or SEO. And, if they want to be an active community member they can opt for that too.’
IDC Health Insights predicts that this year will see as many as 20% of organizations actively developing blockchain projects. BIS Research projects similar numbers of 10-15% of healthcare entities integrating the technology in their operations by 2020.
Blockchain has the potential to revolutionize how individuals’ medical records are stored. Anybody who has ever worked in medical records will know that they are often a confusing mess of part digitized, part handwritten scraps of paper. Furthermore, the average American visits 16 different doctors over the course of their lives, which means that their records are often spread across different facilities and providers in incompatible databases, with data bouncing from one silo to the next. In the process of this happening, data gets lost, which leads to errors being made and treatment being delivered slower than it otherwise would be. The Premier Healthcare Alliance has estimated that this lack of interoperability leads to 150,000 lives being lost and costs $18.6 billion per year.
By storing medical records on a blockchain, you can create a longitudinal health record covering every incident and update from childhood to old age. This is ideal for medical research, facilitating the kind of longitudinal studies that can really help best understand illnesses. It also means that control is transferred back to where it should be - the patient. Whenever a medical record is created on the blockchain, so too is a digital signature alongside it that verifies the authenticity of any changes made. The patient is notified that health data was added to their blockchain and they can add their own health data from mobile applications and wearable sensors like Fitbit and 23andMe to their records that is secured and verified in the same way.
Blockchain could benefit the music industry in a number of ways. Firstly, it would allow artists to protect the fruits of their labors from being downloaded for free. MP3s and other formats are currently woefully inadequate when it comes to doing this, and they are easily shared illegally. With blockchain, music is published on a ledger with a unique code and time stamp that cannot be changed. Each record holds metadata containing ownership and rights information. As a result, it cannot be downloaded, copied, modified, or shared for free.
One startup already making ground in this area is the Dot Blockchain Music Project, which was founded by musician Benji Rogers. He notes on his LinkedIn that, ‘The Dot Blockchain Music Project is the first attempt to use blockchain technology to create a global decentralized database of music rights, wherein a song cannot be separated from its usage rights and still be played. The focus is to develop this new protocol and its supporting online infrastructure with the ultimate goal of facilitating the media industry’s adoption of the format.’ Users can upload music and the associated metadata onto the ledger, and search and play the music of their choice. Smart contracts ensure that the owner of the content gets paid automatically each time its played. The database stores .bc or ‘dotblockchain’ records, which cannot be separated from its rights and is what makes it immutable.
Rogers explains that: ‘I looked at the metadata of some of these albums we were being sent and suddenly I realized that artists don’t have a way to digitally express their rights into anything tangible. And the reason that’s important is: what’s more fundamental to the work itself than who owns it, and how to pay them? … The persistence of information on ownership is going to become really important. The bass player who played on a track that’s sampled 600 times and then played on a platform that makes money – how does that money get back to the bass player?’
OPUS is another startup looking to shake up the industry. Their platform does not take a cut from artists’ earnings, with their website claiming that 97% of the revenue is received by the artists. In addition, even playlist-makers can earn from their activities for driving traffic to artists’ works. Their website notes that they have developed 'a beta-ready, 4 layer decentralized system that uses cutting-edge low latency IPFS as a storage layer to store songs permanently and transparently. An Ethereum-based logic layer to handle all the transactions on the Opus network. A Universal Music Registry Number (UMRN) relay to keep track of a global ledger of music tracks, and last but not least an Opus-API that enables any player, including the core player to access the Opus Infrastructure and play music tracks all around the world. With such an immutable system in place, we then introduce additional mechanisms such as the OpusDAO, and the artist bounty system.'