Juniper Research has released a brief report on where Blockchain might be leveraged.
The emergence of Bitcoin and an array of alternative cryptocurrencies (‘altcoins’) has been a true phenomenon of the past 7 years or so. In that time, billions of dollars’ worth of these currencies has been traded on the dedicated exchanges that have sprung up to support them, while a number of merchants now support Bitcoin as a payment option.
However, with only a small, dedicated base of users, attention is turning away from their usage as an alternative to fiat currencies and to the wider potential of the blockchain technology that underpins them.
Numerous banks are now trialling the technology as a means of reducing settlement costs, while a host of other use cases, eg smart contracts and ID verification, are also seeing their first deployments.
Selected Blockchain Opportunities
- Settlement & Remittance
It is increasingly envisaged that blockchain technology will have a significant role to play in the future evolution of transaction settlement solutions. Many clearing houses processes tens, or even hundreds, of millions of financial and commodities derivatives and securities transactions per annum. At present, the clearing firms involved in the transaction have independent processing systems; the introduction of a blockchain-based system would substantially reduce the risk of error and indeed the time taken for error checking.Cross-border remittance in particular is viewed as an area where blockchain technology could have a profound impact. The total value of official cross-border remittance in 2015 (latest World Bank data) was $582 billion, of which $436 billion was sent to emerging or developing economies.
However, a substantial amount is additionally sent through unofficial channels, chiefly in the form of cash in envelopes. One reason for this is the high cost of remitting through the most popular official channels. The average cost of sending $200 via MTOs (Money Transfer Operators) was 6.6% in October 2015; via banks, this rose to 11%. Furthermore, several leading remittance corridors charge rates significantly higher than these average figures, in some cases up to 25%.
With blockchain technology able to significantly reduce the costs to the remitting organisations, the hope is that the savings enabled by this will be passed on to consumers and enable average prices at or below the 3% average price which the World Bank is targeting. The hope is that not only will it then result in more ‘grey’ remittance transferring to official channels, but also in a net increase in remittance flows, helping to boost economies which are in part dependent upon remittances from migrant workers.
- Smart Legal Contracts: Current & Future Use Cases
While there are a number of definitions for ‘smart contacts’ per se, smart legal contracts may be defined as:
Contracts in the form of computer protocols with the ability to verify their own conditions, emulating the logic of contractual clauses.
Smart contracts can self-execute by, for example, triggering the release of payment when certain conditions are fulfilled. These contracts run on networks beyond the control of the contract’s participants, thereby providing a record of the terms of the contract and ensuring its fulfillment. Furthermore, smart contracts can offer an array of additional benefits to participants, including:
- Reduced cost – less human intervention in the procedure implies a lower resource cost;
- Real-time updates – as the contract exists on the blockchain, tasks, including transaction fulfillment, are automated and can occur instantaneously.
Smart contracts could be particularly useful for governments in that they automate manual processes which are time-consuming and expensive.
i. Real Estate
In June 2016, Lantmäteriat (the Swedish National Land Survey) confirmed that it was working with the blockchain start-up ChromaWay, the consultancy firm Kairos Future and fixed/mobile network operator Telia to consider how blockchain technology ‘could reduce the risk of manual errors while creating more secure processes for transferring documents.Several other agencies are understood to be working on PoCs (Proofs of Concept) in this field, including the Republic of Georgia’s National Agency of Public Registry (with BitFury as its blockchain partner).
ii. Internet of Things
The ‘Internet of Things’ represents the combination of devices and software systems, connected via the Internet, that produce, receive and analyse data with the aim of transcending traditional siloed ecosystems of electronic information to improve quality of life, efficiency, create value and reduce cost.It may be possible to integrate blockchain technology in an M2M (Machine-To-Machine) environment, to provide real-time data and authorise access. Given that one of the blockchain’s capabilities is to allow Event Y to occur Given that Condition X is fulfilled, it could also lead to equipment which needs data to fulfil a task being able to locate and self-order that data.
