Introduction
Businesses run on data. Clean, secure, and efficient data can empower businesses and the industry and help to chart the right course for the future. Companies invest millions of dollars in technologies to get their data right and in time, so they can make business decisions. Challenges are plenty for banks and financial institutions as they generate a massive amount of data every millisecond across the globe.
Banks and financial institutions and even industry domains are looking for one trusted technology to address challenges related to security, transparency, real-time data assimilation, costs, and a single view of truth on data. The answer is Blockchain, an indisputably ingenious invention.
PWC listed Blockchain as one of the eight essential technologies impacting business across industries. According to research, the global market for Blockchain technology is expected to be US $30.7 billion by 2027 with a CAGR of 43% over between 2020-2027.
Additionally, Blockchain has been a hot buzzword due to the rise of cryptocurrencies in recent years. This blog sheds light on Blockchain and how it is helping companies with real use cases.
What is Blockchain?
Blockchain is a chain of blocks that record information. Simply put, it is a shared database or digital ledger. Pieces of data are encrypted in data structures known as blocks, which are chained together, forming a single source of truth (data) across a network of computer systems.
Blockchain is sometimes referred to as distributed ledger technology (DLT), meaning many parties hold copies of the ledger. DLT can be centralized or decentralized, depending on the rights of participants.
A centralized or private Blockchain network is governed/managed by a single group or organization. In a centralized and private Blockchain network, only known, identified and authorized parties can transact on the ledger. Whereas, in a decentralized network, all participants in the platform can transact. Blockchain is fundamentally distributed (all parties hold ledger data) and is not to be confused with decentralized (no single admin authority).
Features of Blockchain
- Distributed – All participants have a copy of the ledger.
- Decentralized – No middleman and authority.
- Traceability – All transactions are time-stamped with an irreversible audit trail.
- Security – All data is encrypted, making it impossible to hack or tamper.
- Immutable – Validated data is irreversible (It can’t be edited, changed, or deleted).
- Consensus – A mechanism (algorithm) to help the network make decisions on validating transactions.
Blockchain platforms:
These platforms allow users and developers to create Blockchain-based applications. They exist to support or facilitate users’ interactions with Blockchain and its network. These are the top nine Blockchain platforms to consider in 2022 by the Everest Group: Ethereum, IBM Blockchain, Hyperledger Fabric, Hyperledger Sawtooth, R3 Corda, Tezos, EOSIO, Stellar, and ConsenSys Quorum.
Challenges in Blockchain:
Every technology comes with its own pros and cons. Blockchain also comes with its own bag of challenges that one needs to consider before embracing technology.
- Standardization – Lacks a single worldwide rule book and procedures for networks.
- Scalability – The addition of more users slows down the validation process and increases costs.
- Storage – Personal computers have limited storage capacity for data.
- Interoperability – Most Blockchains do not communicate with other peer networks and work in isolation.
- Private keys – Once a user loses the private key, they will lose access to the network. It is almost impossible to recover these keys.
- Power consumption – Proof of Work (POW) and consensus algorithms are energy-intensive activities that demand more electricity.
The evolution of Blockchain and its application to the BFS domain:
While Blockchain as a technology has evolved in the last two decades, the below depicts the major milestones.
Use cases:
The invention of the internet brought a paradigm shift in everything, from living to doing business, and revolutionized the mode of sharing information across the globe. Blockchain technology is phase two of this revolution, and is bringing in the much-needed security, transparency, and efficiency in information sharing.
Below are companies with a revenue over $1 billion or with a market valuation of more than $1 billion that are embracing Blockchain to unlock value.
| # | Company | Industry | Use case |
| 1 | Depository Trust & Clearing Corporation (DTCC) | BFS | Wall street clearing giant, DTCC, piloted a project called ‘Ion’ to clear and settle equities traded on the secondary market that is aimed at resilient, secure, and scalable alternative settlement service to clients. The project is live in a parallel production environment, processing over 100,000 bilateral equity transactions per day on DLT.
DTCC is also working on a project to bring its $10 trillion credit derivatives business to a Blockchain. This aims at eliminating redundant efforts and paperwork for 50,000 accounts held by the largest financial institutions. |
| 2 | Nasdaq | BFS | Nasdaq has pivoted many POCs and projects on DLT and is one of the early adopters. One such project is a proxy and E-voting tool for Strate (Pty) Ltd, the South African central securities depository (CSD). |
| 3 | Vanguard | BFS | Vanguard, one of the world’s largest investment management companies, piloted along with Citi, State Street and BNY Mellon, to digitize the issuance of asset-backed securities (ABS). The project aims at storing loan information on a shared, unalterable ledger. |
| 4 | Broadridge | BFS | Broadridge is working on the software it bought from Northern Trust to manage the entire life cycle of private equity investments. The tool has helped in eliminating manual paperwork, digitizing via smart contracts, and transfer of ownership stakes. |
| 5 | Credit Suisse | BFS | Credit Suisse, the Swiss banking giant, is one of the early adopters of Blockchain since 2015. Blockchain-enabled settlement is live on listed U.S. equities between broker-dealers Credit Suisse and Instinet, LLC.
Credit Suisse, UBS, and Commerzbank executed Collateral Swap on Deutsche Börse Distributed Ledger Technology, reducing the settlement time for government and corporate bonds to the same day. |
| 6 | HSBC | BFS | HSBC has put DLT in action for multiple use cases including transforming global trade, simplifying foreign exchange transactions, streamlining payments settlement, and standardizing private placement information. HSBC’s Blockchain-based custody platform enables global custody clients to access details of their private assets – including equity, debt, and real estate – directly and in real-time. HSBC is one of eight banking founding members of the Contour platform. |
| 7 | ICBC | BFS | Industrial and Commercial Bank of China (ICBC) now has more than 30 Blockchain applications that let customers trace everything from their healthcare coverage to how their philanthropic donations are spent. It helps manage compensation for government demolitions and relocations, social welfare employment and charitable initiatives. It is also learnt that the Bank has applied for 41 patents related to its enterprise Blockchain platform. |
| 8 | JPMorgan Chase | BFS | JPMorgan’s “Liink” Blockchain network is simplifying the process of transferring payment-related information across financial institutions. The network covers 25+ leading banks from over 38 countries with 400+ institutions that have signed letters of intent. |
| 9 | Visa | BFS | Acting on the rise of digital currencies and the introduction of CBDC by central banks, Visa is doing extensive R&D to make sure money flows safely. Visa is working to secure transactions using biometrics, and is also issuing both physical and virtual debit cards against crypto wallets, which can be used online or at stores. store or online. |
| 10 | Amazon | FMCG | Amazon-managed Blockchain extension of Amazon Web Services, provides supply chain solutions to track-and-trace goods and services across pharmaceuticals, manufacturing, FMCG, and mining. |
| 11 | Walmart | FMCG | Walmart, an American retail behemoth, is using Blockchain for food traceability to its customers to reduce wastage. |
| 12 | Carrefour | FMCG | Carrefour, a French supermarket chain, integrated Blockchain technology into food transition, thus helping its large customer base to scan QR codes to find more information about the food on their table. Per Carrefour, this feature has boosted sales and they have a plan to expand it to 100 more products. |
| 13 | Novartis | Pharma | Novartis has been experimenting with Blockchain since early 2016 and is a leading member of PharmaLedger, a 29-member EU Blockchain consortium working on using DLT to combat counterfeit and black-market medicines. |
| 14 | Cargill | Agriculture | Cargill, America’s Agri giant, uses a platform called Splinter to enable members to manage the vast supply chain to communicate and transact. Cargill is also working with ConsenSys on the Covantis initiative focused on modernizing global trade operations with Blockchain. |
| 15 | Boeing | Airline | Boeing, the world’s largest aerospace company, has implemented SkyGrid to monitor the airspace, execute optimal flight paths, and manage a drone fleet. |
Conclusion:
Blockchain is undoubtedly an emerging technology that is shaping the future of business. While cryptocurrencies around the world are extensively leveraging Blockchain, it has far-reaching use cases not limited to the banking or capital market industry, but across industry sectors such as real estate, healthcare, government, retail and more. However, while organizations embracing Blockchain are in the right direction, one needs to be cautious of the hidden risks, challenges, and impacts on the business.
LTIMindtree has been a preferred partner of choice by our clients across the industry groups we operate in, driving transformation through innovative Blockchain solutions for real-world problems. The LTIMindtree Blockchain Centre of Excellence (CoE) works with the BFS CoE and its domain consultants. Our Blockchain Maturity Model (BMM) assesses requirements, ensures readiness, and then comes up with a roadmap for solution implementation. If you are planning to implement Blockchain-based solutions and need a guiding partner, please get in touch with us today.
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