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Blockchain’s unavoidable link to the highly tumultuous cryptocurrency market (i.e. Bitcoin) has recently made it vulnerable to criticism and dismissal. Despite this climate, blockchain technology, now in its fourth generation, continues to push forward, evolving beyond its cryptocurrency origins and becoming increasingly simple to use.

The evolutionary generations of blockchain

Before we discuss the future business impact of the fourth generation of blockchain, let’s first look at the stages of blockchain’s evolution since it was first conceived in 2008.

First Generation

Developed by the mysterious Satoshi Nakamoto, the first generation of blockchain saw the emergence of distributed ledgers and enforced digital scarcity, as exemplified by Bitcoin. Blockchain appealed to cryptocurrency creators because of its Proof of Work¹ algorithm, which validated transactions and prevented people from “double spending”, or using the same money for more than one transaction.

 

Second Generation

The second generation of blockchain, led by the automation and the development of trusted code platforms like Ethereum and Hyperledger, introduced the concept of smart contracts and made possible the digital tokenization of physical assets.

It was also around this time that the technology suffered initial scrutiny and concerns with regard to scalability, transaction speed and network efficiency.

 

Third Generation

Third-generation blockchain platforms like Aion, Cardano, and EOS, introduced technology such as sharding to tackle scaling issues in order to cut down on cost and speed of transactions.

These platforms also matured the distributed application capabilities of blockchain. (eg. La’Zooz, a decentralized, community-owned transportation platform that turns a vehicle’s unused space into a variety of smart transportation solutions.)

 

Fourth Generation Blockchain

The first three generations have been pivotal in increasing the scope of blockchain’s applicability, but there remained challenges (e.g. complexity, cost) that hindered widespread adoption.

Fourth generation blockchains resolve prior challenges and enable trust in easy-to-consume ways, accelerating the formation, operation, and reconfiguration of business networks. In addition to greater ease of onboarding, these lower cost, and highly scalable platforms make pragmatic trade-offs such as recognizing that not all transactions are created equal. For example, a variable consensus mechanism will allow you to incur different transaction time and cost when buying a cup of coffee when compared to buying a house.

Fourth generation Blockchain platforms like Insolar² and Aergo, are enabling business networks to be easier to use through business-oriented interfaces that hide the complexity of the underlying blockchain technology. It is this moment in the evolution of blockchain technology–where we stop talking about blockchain and just start using it– that we believe will spark the true disruptive potential of blockchain.

 

What does it all mean?

Business networks—companies combining their resources in the pursuit of common objectives—are the key drivers of value creation and innovation in our modern economy. Their productivity and potential have traditionally been constrained by transactional frictions, principally informational and trust. The internet has significantly reduced informational friction and blockchain is the mechanism that can radically reduce trust friction.  A world with low informational and trust friction will innovate and create value at a dramatically accelerated pace.

By: Douglas Heintzman, Innovation Practice Lead at The Burnie Group

NOTES:

1. Proof-of-Work: Proof-of-Work was the first blockchain consensus mechanism and is still arguably the most popular choice in achieving distributed consensus (the ability to trust a stranger without having to go through a third-party). https://medium.com/nakamo-to/what-is-proof-of-stake-pos-479a04581f3a
2. Disclosure: Insolar is a client of The Burnie Group

 

Blockchain is a technology that holds the potential to disrupt several industries with many innovative applications. Despite its roots in cryptocurrency, some of the most creative and disruptive applications of blockchain go beyond pure financial transactions.

Automation through smart contracting, security through encryption, and transparency through shared information are just of a few of the novel ways that blockchain is enabling business disruption. As a peer-to-peer, distributed network, blockchain technology is helping the businesses that use it become more transparent, democratic, decentralized, efficient, and secure.

Blockchain has shifted the way we view security and transparency and will continue to transform several industries as it becomes more popular and widely adopted. Below, we look at six industries currently adopting blockchain to gain competitive advantage.

 

1. Financial Services

Financial services have traditionally received the most attention within the blockchain ecosystem. Blockchain’s secure approach to exchanging data, increased transparency, and lower operating costs make it attractive to the highly regulated and security-focused financial services industry.

In 2019, some of the biggest opportunities for blockchain in financial services will be in:

•  •  AML/ KYC
•  •  Clearing and settlement
•  •  Trade finance
•  •  International payments
•  •  Identity as a service
•  •  Onboarding
•  •  Remittances

 

2. Healthcare

Blockchain’s features offer countless benefits in the healthcare and long-term care industries. It can improve the accessibility and accuracy of patient data, facilitate better and faster treatment and enhance patient safety. It can also create a common, secure health information database that medical staff can access seamlessly. With less time spent on administrative tasks and better access to patient data, the quality of patient care can be greatly improved.

Blockchain helps reduce instances of fraud, reduces operational cost through optimized processes, and improves transparency and interoperability, reducing duplication of work in the healthcare space. These areas, in particular, are ripe for blockchain:

•  •  Electronic health records
•  •  Clinical trials
•  •  Claims adjudication and billing management
•  •  Prescriptions – provenance, double-Rx

 

3. Supply Chain Management

Today’s supply chains are increasingly complex, involving multiple parties across multiple regions and modes of transport. Blockchain provides these intricate supply chain networks with increased transparency, improved traceability and optimization through automation.

In supply chain, we expect to see blockchain used most prominently in:

•  •  Provenance tracking, ex. Agricultural and pharma products (any place where spoilage or counterfeit can be introduced)
•  •  Monitoring location, conditions (e.g. temperature, exposure to elements, any agitation/tremors) and security of products during transport
•  •  Contract and Sub-contract management
•  •  Bidding systems
•  •  Invoicing and bills of lading
•  •  Customs clearance

 

4. Government and Public Service

Governments have generally been slow to prioritize blockchain’s potential. At present, Canada is one of more than a dozen countries that are examining blockchain’s potential and running exploratory pilots. The public sector is expected to leverage blockchain for the benefits of increased security, efficiency and enhanced customer experience.

Record management in public services and government is an area where blockchain can automate paper-based processes, minimize fraud, and increase accountability between governmental agencies and those they serve.

Areas with a high degree of promise for blockchain include:

•  •  Civil registries and identity management
  •  •  Immigration management
  •  •  Refugee management
•  •  Land and personal property registries
•  •  Voting systems
•  •  Toll-roads
•  •  Micro-loan capitalization (enforce scarcity)

 

5. Insurance

Insurance is an industry that is ready for the adoption of blockchain. Blockchain’s ability to increase transparency, manage identity, and generate smart contracts will allow the insurance industry to improve efficiency (e.g. Oracles¹ will provide inputs to smart contracts, reducing manual processing and instances of fraud.) and enhance the ability to accurately underwrite risk.

Some of the areas where we expect Blockchain to gain traction include:

•  •  Parametric insurance
•  •  Claims processing
•  •  Risk modelling
•  •  Peer-to-peer
  1. Individuals can take out insurance policy with eachother rather than through an insurance provider

 

6. Energy

A historically centralized industry that relies on intermediaries and inefficient energy transport across long distances, blockchain provides the infrastructure to support innovation in the form of peer-to-peer energy networks, microgrids, electric vehicle (EV) charging, automated billing, and invoice settlement.

The energy sector, in particular, will be impacted by IoT devices creating an opportunity for blockchain. For example, having a ledger of things to complement the Internet of Things will ensure that all the many minute IoT data transfers and transactions are accurately represented and logged.

In the energy sector, we expect to see blockchain used in:

•  •  Microgrid/ decentralized management
  1. moving electrons in barter
  2. establishing contracts for peer-to-peer storage/extraction
  3. use of smart appliances
•  •  EV charging
  1. Transactions & identity management
•  •  IoT
•  •  Metering and payments

 

The Final Word

Businesses in these and countless other industries need to consider incorporating blockchain into their strategies so as not to fall behind. As we look forward in 2019, Blockchain’s potential to transform the way companies operate to reduce costs and create new revenue streams will be transformative.

As businesses explore the disruptive potential of blockchain, we will begin to see more progress made beyond proofs of concept and limited scale pilots.

If you have questions about how blockchain could impact your industry, contact us. The Burnie Group will help you to set the right strategy and build the right foundation to help you become a pioneer in this emerging technology.