First came Bitcoin, the controversial cryptocurrency invented by an anonymous coder in 2008. In the time since, Bitcoin has both surged in waves of enthusiasm and fought buffets of scandal. But even as Bitcoin itself has been slow to gain the traction it was predicted to have, the infrastructure created to support Bitcoin transactions has prospered: the blockchain. Through blockchain technology, every transaction is immortalized on a permanent digital block and then linked together to other related transactions. These transaction histories—or blockchains—are held in open-source distributed ledgers so that virtually anyone can trace a transaction backwards in time, and no one can alter the records without everyone knowing they have been changed, a guarantee against fraud.
Financial services was the first major industry to begin investing in blockchain because of its obvious usefulness for storing information concerning financial transactions. The World Economic Forum suggested in a 2016 report that blockchain would become “the beating heart" of the financial services industry for back-office functions such as databases and record keeping.
But the financial services industry was only the start. New startups have emerged using blockchain technology in innovative ways to solve problems in a wide variety of industries.
Combating Fraud in International Trade
One industry gaining interest in blockchain technology is international trade. The task of shipping commodities and goods around the world on freighters is beset by fraud and other issues that cost industry hundreds of millions of dollars a year.
The Eurobanking Association said in a May, 2016 report that blockchain technology is the solution to a number of international trade's pain points, such as matching shipments to invoices and insuring against fraud, which Bloomberg reported costs industry over $1 billion a year.
As a result, a number of startups are offering blockchain-based solutions to the trade problem. One company is California-based Skuchain, which participated in of RocketSpace's Logistics Tech Accelerator program. Skuchain uses a blockchain technology called Brackets to link trade loans with invoices and purchase orders, helping companies know when goods are delivered at faraway ports.
According to Skuchain, its technology allows trade loans to become collateralized assets whose repayment can be guaranteed by automated release of funds triggered by real-world events such as passage through customs. The firms that use Skuchain's services now have access to the same array of shipment financing that Goldman Sachs once offered exclusively to its affluent customers, such as lending against purchase orders and invoices.
Skuchain's blockchains are also being developed to help keep close track of the flow of goods in supply chains that provide parts to factories and finished goods from those factories to retailers through a commercial network.
Establishing Trust in Manufacturing and Real Estate
A U.S. company called Cognizant Business Consulting is working to develop what it calls the “Genesis of Things," which combines blockchain and 3D printing in the manufacturing process. This process would assign a unique identification number to every part manufactured. In addition to creating new marketplaces for designers to publish their work in the form of 3D files, the Genesis of Things would help reduce what the firms calls the “trust tax," by ensuring that parts manufactured are original designs and not cheap knockoffs.
Another innovative use of the blockchain technology is Velox.re, a Laguna Beach, Calif. startup that specializes in real estate technology. The company has partnered with Chicago's Cook County to set up a blockchain-based system for registering and transferring property titles and other public records. The pilot project is also being used to register liens against property.
Supporters say that the real estate industry is ripe for disintermediation because of the many middlemen that currently take part in an average transaction: brokers, notary publics, government land title offices, title search companies, appraisers and escrow firms. By using smart contracts powered by blockchain technology, most of these roles could be eliminated.
The idea is that the blockchain would assign each property a digital address. Then, every time a property is sold, the transaction would be recorded on a digital ledger, with such information as ownership and amount outstanding on a mortgage. This would make title searching a thing of the past.
Fighting Theft in the Diamond Industry
A London-based company called Everledger is using the blockchain to keep track of luxury items and other valuables, such as diamonds. By tracking a diamond from the day it is cut, Everledger will help law enforcement authorities and insurance companies trace stolen gems, which the company says is a $120 million-a-year criminal business.
Everledger assigns each jewel a unique identification number, which is stored using both a private blockchain and a public one. The company contends the public blockchain ensures high security while the private blockchain ensures the smooth execution of a smart contract, which is written operated via in computer protocol rather than a physical document and stored on a blockchain.
Everledger maintains that while its business is currently focused on diamonds, it could also be used to transfer digital products, such as songs.
A similar approach is being embraced by Loyyal, a New York-startup that uses the blockchain to manage loyalty and rewards programs, all on one platform. The Loyyal platform makes it easier to transfer points or miles from one program, such as a credit card company, to another, such as an airline.
Loyyal and Everledger are just two of the startups using an IBM blockchain ecosystem that is based on the Hyperledger Project, which is an open-source collaboration of 100 major firms, including Cisco, Fujitsu, Hitachi and VMWare, in addition to IBM.
New Power in the Energy Industry
The goal of a smart contract is to enable parties to transact with each other without the need of a third party to operate the transaction or establish trust. For commodities such as energy, this capability offers immense value. This use of the blockchain is being developed for the energy industry by TransActive Grid, an open-source electricity metering system that monitors local power generation and usage. The company is currently running a pilot project in three Brooklyn, N.Y., neighborhoods to reduce customer costs and promote clean, renewable energy as well as protect local energy supplies during emergencies, such as storms. In such cases, the blockchain allows for peer-to-peer transactions, be it currency, physical asset, or commodity to be operated securely and openly.
Yes, financial services was the beginning for the blockchain, but as these companies demonstrate, in a relatively short time blockchain methods have been deployed by startups around the globe to modernize shipping, manufacturing and even the provision of electricity to disrupt existing businesses. As these uses gain traction, the market for blockchain technology is expected to boom as more and new applications for the technology are unlocked -- discovered on this new frontier by startups.