This article is the first in a series of proprietary blockchain industry analyses by Element Group — into sectors that are being disrupted by innovative tech. Subscribe here for all subsequent posts in the series, along with further research, reports, and op-eds as they become available:
A Quietly Disruptive Revolution?
A few years ago it was thought that blockchain would transform the world and its industries, with the potential to be a ‘job-killer’ sooner rather than later. Since then, some significant breakthroughs have been made. The old question still remains: has blockchain gone mainstream yet? Not quite — but it is making inroads.
While the foundation blocks are being laid by innovators and early adopters, the developing technology is still in its early phase: being tried and tested. While many see the potential for growth and are piloting various schemes, there is no one industry that has been completely revolutionized by blockchain as of yet.
Element has looked closer at where blockchain is really happening in various sectors and how the technology is being utilized in each field. We have also noted the spaces where some thought the technology would make significant changes (but has not), and have assessed the roadblocks that are in the way.
Changes to Distribution of Data
Some expected the automotive industry to be radically transformed by blockchain mechanics — in fact, it was one of the first examples of how observers thought the technology would work. There is some truth to this: changes are happening in private, public, and commercial transport systems, though slower and more conservative than initially expected.
Alliances such as MOBI and BiTA have formed to explore the possibilities of utilizing blockchain components within their industries. Automotive manufacturers can see the potential for data sharing to further autonomy in vehicles, while goods transporters see a way to drastically improve distribution.
Shipping industries, along with other logistics firms, are similarly trialing the technology on a much more utilitarian level. While their needs are prosaic, they match the technology’s current capabilities perfectly: they need a transparent, efficient, and immutable way to store, transfer and utilize data fittingly.
Energy trading and cloud storage have also taken the technology on board. Energy trade, in particular, has become blockchain ‘a la mode’ — perhaps because, unlike other industries, energy trade does not need the same level of privacy and confidentiality in data distribution.
Falling Short on Privacy
Consider this requirement for secured privacy when looking at banks and medical care systems in particular. Some presumed blockchain technology would considerably change healthcare and banking mechanics by now, but it has not really done that. The public does not yet trust this ‘trustless’ system with their data.
Better the ‘centralized devil’ they know. In these sectors there is a lot more to lose if data is breached or keys are stolen, so fool-proof guarantees are a must in these cases. At the current level of their development, integrating blockchain solutions could pose more risks than would be mitigated.
Apart from total security, there is something else that finance needs which blockchain simply cannot provide: speed. Blockchain transaction time is not even close to the speed required by a generation who expect things done instantly — akin to a credit card transaction.
Several banks have explored pilot schemes, as we noted in our recent post on trends in banking. In Ripple’s opinion, however, they are not yet ready to fully transact through distributed ledgers due to privacy and scalability factors – and they will not be on board until these issues are ‘fixed’.
We must also consider that banks — particularly Swiss banks — make most of their profits from fees and commissions on cross-border payments. Giving control of these transactions to the customer would do them out of a service. While banks like to display a public image of embracing new tech and implementing forward-thinking measures, they are also savvy and want to keep profit margins high.
Knowing Your Customers
Our lives are lived increasingly online thereby increasing our digital footprint. Of course — there are those who would like to stay very much removed from the digital grid, but there are those who spend substantial time online and can see the merits in being able to manage their digital identity.
Globally, people are realizing that self-sovereignty when it comes to online data is not only paramount, but a basic right — and a commodity. A number of companies are currently capitalizing on that market. Adding to that, and beyond proprietary rights, there is the case for the issuer and the identifier who increasingly need to validate identities in online borderless transactions.
Popular trends like ridesharing and peer-to-peer lodging require reliable Know Your Customer (KYC) procedures. The 2017 phenomenon of digital asset crowdfunds also continues to develop. Voting systems are exploring blockchain too — though more so as pilot schemes. These processes will all need increasingly more efficient and immediate verification.
But again, why haven’t other more traditional areas like passport issuance, payroll, medicare, or banks taken to this progression towards decentralized identity verification in a more meaningful way? Is it lack of trust in the tech or the customer? Or is it still a matter of the bottom line?
AI and The Internet of Things (IoT)
There is global excitement about the possibilities of home automation and driverless vehicles through Artificial Intelligence (AI). There is also potential for amazing innovations from data obtained using blockchain tech combined with AI advancements. Many have big expectations, but it is still a waiting game.
The motor industry is exploring data sensors for cars to enhance self-navigation, and even washing machines may soon be semi-autonomous. So why are we not seeing more substantial mainstream coverage of these exciting use-cases? Because it is early days — a lot of this innovation is still in trial and error mode — it is a very nascent field.
We are living in an age of immediacy, where our ‘inner-timers’ not only want, but insist on having things ready in the next five minutes — or not at all. We do not want products that are in beta-mode, we expect them to be glitch-free.
The world wants a finished result that is accessible, scalable, and aesthetically pleasing — it is what we have come to expect. Anything less and we send it back, and may write a scathing review about it online. Big innovations are being explored within the area of blockchain technology, AI and IoT combined, but they are definitely not ready to be exposed to the unforgiving eye of the mainstream public or their ‘make-or-break’ reviews just yet.
Still Nascent Stages
This could be said of several areas of blockchain development and utilization — we are still in the awkward years, and a lot of growth still needs to happen before mainstream audiences will fully get on board. The technology is still not accessible enough for the later adopter to get to grips with it easily. There are many kinks to iron out. And iron they will.
Areas where growth is needed are not necessarily confined to accessibility, security, or scalability. There is also regulation to consider. Not token regulation — but the prevailing regulations of the actual industries themselves. Consider the energy sector being hindered in their quest for distributed energy trade by the regulatory environment that they come under the umbrella of. It is the same for many others. There is a sea of proprietary legislation to navigate in these industries before blockchain can make significant steps forward.
A myriad of challenges will need to be circumvented for blockchain technology to fully break through industries. But break through them they will — as we said, they are already making inroads.
This is the first in a series of analyses from Element — where we explore the sectors that are being disrupted by innovators and makers of change in the blockchain world. Be sure to receive the next instalment as soon as it becomes available by subscribing to the company newsletter: