Today's blockchain use cases and industry applications
Though far from a mature technology, blockchain is gaining prominence as a sound and highly secure method of conducting myriad transactions in multiple applications and industries.
Blockchain technology is a shared database that keeps track of a given collection of transactions. Groups of transactions comprise a block, the contents of which can never be changed. Each block is timestamped and joined to the filled block before it with another block joined behind it when it becomes filled with data, forming what is known as a blockchain. Its most common use is as a distributed ledger wherein all participants agree on each transaction's "truth" and verify the legitimacy of the transaction before it becomes a permanent record in a block.
There are some private blockchains with few or no other participants in the accounting of transactions. Even so, a block and the blockchain retain the same characteristics.
According to a 2019 Forrester Consulting blockchain survey commissioned by EY, formerly known as Ernst & Young, "preservation of data integrity was the number one driver and most common use case for blockchain adoption," said Chen Zur, EY U.S. blockchain practice leader. "About half of all the respondents said they prioritize use cases that would improve efficiencies and enable new revenue models like supply chain track and trace, payment support processes and digitization of document flows."
Blockchain came into prominence with the advent of cryptocurrencies like bitcoin, a peer-to-peer electronic money system. Blockchain use cases and industry applications have since expanded a great deal.
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"The best use cases, at least for now, are actually not general but instead are specific to a company, industry or function," said Jitin Agarwal, senior vice president of engineering at 84.51˚, the data science company of supermarket giant Kroger. "Organizations should dig deep into their operations to understand which of the five key blockchain-related benefits -- transparency, governance, security, public access or immutability/audit -- is most valuable."
Top blockchain use cases
Blockchain is "a general-purpose technology, which means it is applicable across sectors," said Christos Makridis, a research professor at Arizona State University, senior adviser at Gallup, digital fellow at Stanford University's Digital Economy Lab and CTO at arts and education technology startup Living Opera. "For example, financial services can use it to write smart contracts between consumers and their banking institution. Similarly, healthcare can use it to write smart contracts between insurers and hospitals, as well as between patients and hospitals. The possibilities are endless."
Blockchain use cases continue to expand. Here are some common commercial applications:
- Smart contracts. The primary function of computer programs called "smart contracts" is to automate the execution of contract terms when conditions warrant them. The computer code follows a relatively simple command of "when/if _then___" to ensure that all parties receive the benefits or penalties as the contract stipulates and actions require. Smart contracts are useful to, and used by, most industries today for a variety of uses traditionally governed by paper contracts. The blockchain also makes a permanent record of every action and reaction in the transaction.
- Cybersecurity. Blockchains are highly secure because of their permanency, transparency and distributed nature. With blockchain storage, there's no central entity to attack and no centralized database to breach. Because blockchains are decentralized, including those privately owned, and the data stored in each block is unchangeable, criminals can't access the information. "Essentially, the intruder needs keys to many different locations versus just one," Makridis noted. "The computing requirements for the intruder grow exponentially."
- IoT. Two primary IoT uses of blockchains are in the supply chain sector and for asset tracking and inventory management. A third use is in recording measurements made by machines whether those sensors are in the Artic, the Amazon jungle, a manufacturing plant or on a NASA drone surveying Mars. "Whether it be reports of chemical data regarding oil grades or tracking shipments of electronics across the world through various ports of entry, the blockchain can be utilized anywhere there is data interacting with the real world," explained Aaron Rafferty, CEO of cryptocurrency investment firm R.F. Capital.
- Cryptocurrencies. The blockchain concept was originally developed to manage digital currencies such as bitcoin. While the two technologies still compete against each other in alternative transactions, they've also been separated so blockchains could serve other purposes. Given the anonymity of crypto coins, blockchain is the only way to document transactions with accuracy and privacy for the parties involved.
- NFTs. Nonfungible tokens are units of data certified to be unique and not interchangeable. In short, they are digital assets. According to Rafferty, NFTs are revolutionizing the digital art and collectibles world. "We are using decentralization and the ethereum blockchain to create a music live stream network where artists and streamers can connect with fans directly, sell their NFTs, receive contributions from fans and trade in their rewards and contributions for crypto tokens," said Shantal Anderson, founder and CEO of music and pop culture streaming network Reel Mood.
Real-world industry blockchain applications
Most industries can use blockchain, 84.51˚'s Agarwal said, but the applications that "offer the most 'bang for your buck' are based on optimizing and reducing the friction associated with engaging in normal business practices."
Running a business more efficiently is just one part of the benefits that can be gained from blockchain applications. "Specifically, the need to preserve data integrity and the ability to build new revenue or business models are the top drivers for more than half of all respondents," said Rajat Kapur, EY senior manager, blockchain practice.
Here are some notable applications of blockchain in the public and private sectors, including government, healthcare, financial and banking services, supply chains and media.
The possibilities for blockchain use in healthcare seem endless. "There are a number of potential use cases: managing electronic medical record data, protecting healthcare data, safeguarding genomics information and tracking disease and outbreaks, to name some," said David Brown, science and program director at Qatar Precision Medicine Institute.
Precision medicine is medicine matched to a patient's genomics to improve results and lessen or eliminate side effects. It also encompasses genomic-based medicines that are so badly needed as infectious agents become increasingly resistant to antibiotics.
"Blockchain," Brown explained, "allows healthcare providers and researchers to develop groundbreaking drugs and therapies based on genomic profiles."
There are many blockchain use cases in various government agencies, including voting applications and personal identification security.
Blockchains can't be forged nor the data within them manipulated. They can "hold digital IDs, certificates of any kind, even passports on its immutable ledger," Rafferty said. "This data can be accessed and viewed at any time in a completely transparent manner, which will bolster international travel industries."
Similarly, voting on-chain in a truly decentralized and transparent manner eliminates the middleman and any question of voting manipulation or fraud.
Blockchain is used in many types of financial applications. Trade finance, for example, "is riddled with multiple steps and concurrent processes that can dramatically elongate transaction timelines," Agarwal explained. With blockchain, he added, the entire process is "simplified with a bidirectional data flow. This streamlines the trade finance transaction for each participant and "dramatically reduces the time to close from 10 to 12 weeks to approximately one week."
EY's Zur said he expects business-to-business enterprise clients that "have contractually driven, multiparty cash flow distributions" to use blockchain to "help them automate contract-related calculations and processing."
Still considered to be far from a mature technology, blockchain is already used in many real-world banking applications, "including contract management, real-time transparency, calculations and reporting, inventory management, procurement, funds traceability, lending and borrowing, digitizing assets, cryptocurrencies, reconciliation and settlements [for securities and commodity trades], and secure land registries," EY's Kapur said.
Supply chain management
Before the COVID-19 pandemic disrupted supply chains worldwide, supply chains were the hottest blockchain application -- and now even more so.
Blockchain is a good fit because "complex global supply chains have no central authority" and "lack visibility," reasoned Nir Kshetri, a professor at the University of North Carolina-Greensboro and research fellow at Kobe University.
Companies involved in a supply chain, Kshetri added, can "benefit from transparency, commercial confidentiality of data and an immutable record of transactions. For these reasons, the Netherlands-based market intelligence platform Blockdata's analysis found that traceability and provenance supply chains were the most popular blockchain use case among the world's biggest brands in 2020."
Media and entertainment
Media and entertainment is a rich arena for blockchain use, and the applications are as imaginative as the industry.
"Even in the business side," Rafferty said, "a company can mint tickets to a football game or concert to a major artist tour on-chain and set parameters so that, every time the ticket is resold on the second-hand market, the team or artist collects royalties on those transactions set at a percentage that they determine during the minting process."
Another example of a successful use case is EY and Microsoft's blockchain-based product for gaming rights and royalties management, "which provides a financial system of record, from contract creation to payment reconciliation," Zur said. Microsoft plans to use the expanded blockchain functions to "enable its Xbox gaming partners and its network of artists, musicians, writers and other content creators to gain increased visibility into tracking, management and payment processing for royalty contracts."
Meanwhile, Anderson reported that her company Reel Mood uses a "proprietary decentralized video server," which is "also powered on the ethereum blockchain to give us high-quality resolution for users, competitive rates and little disruption or lag."
Living Opera is conducting R&D into blockchain applications to "match opera songs with visual art to enhance the overall experience for the end user," Makridis noted. "Moreover, because smart contracts are simply lines of code, we are also exploring ways of embedding an interactive component into the art."
Time is ripe for blockchain
Today, companies are zeroing in on how to use blockchains to generate new revenue streams and create rather than suffer disruption.
Currently, the best blockchain use cases are "those where companies can create or leverage the inherent Metcalfe effect of the blockchain" but do so "without the need or requirement to move substantial chunks of their market with them," Agarwal said. "This creates a more manageable shift that the company can control -- an opportunity to be an early adopter driving disruption, rather than being disrupted."
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