MAINFRAME > Business Strategy > Business Applications

Blockchain Is Set to Streamline Markets and Transform Industries

business of blockchain
Illustration by Greg Mably

As a demonstration, the team built a blockchain to mirror the global financing transactions and applied it to dispute resolution. “[The blockchain] went live Sept. 6, and in three months we had reduced average dispute time from 40 days to 10 days, and reduced the amount of capital tied up by 40 percent,” says Brigid McDermott, vice president of business development for blockchain, IBM. “Blockchain is a fundamentally different technology that I truly believe is going to let people think about businesses and industries totally differently.”

The Shipping News

International trade requires an extensive network of intermediaries to build trust. According to a 2014 study by Maersk, for example, a shipment of refrigerated goods routed from East Africa to Europe required almost 30 intermediaries and over 200 communications before it reached its destination (ibm.co/2nHMapC). Despite all of those interactions, it’s frequently difficult to know exactly where the goods in a given shipment are at any one time, or even if they are the right goods. According to the Grocery Manufacturers Association (tinyurl.com/hdsdlh2), global supply-chain fraud in the food industry alone costs between $10 billion and $15 billion annually.

The solution is to swap out all of those intermediaries for a shipping and supply-chain blockchain, an effort now underway. The immutable ledger would involve the entire supply chain so that the origin, status, processing, shipping and location of any particular item is always known by every member. Suddenly, not just the shipping process but the supply chain itself becomes transparent. This blockchain could largely eliminate fraud by introducing complete transparency from start to finish.

“You could use the technology to identify the provenance of something, from its point of origin in a mine or a factory through different points of entry, different ports, different customs officials, etc.,” Tapscott notes. “You can know that you’re receiving what you initially ordered, that it came from where you thought it was coming from and that what you’re receiving has arrived in a legal way.”

The value of the blockchain approach lies in the fact that it’s not just transparent across an ecosystem but can create better vertical integration. Current approaches to supply-chain management only deal with a subset of the data. “You have the information generally from your business but you don’t necessarily have the information from all the players in the supply chain because they’re each dealing with multiple vendors and suppliers,” McDermott says. “If everybody had a complete view, they could do a better job of optimizing how supply chains work, and that would eliminate a lot of inefficiencies.”

Removing Real Estate Risk

For another example, look to the real estate market. The title industry exists to ensure that a property title is clear before an asset is sold. If a real estate blockchain is established, it could contain full chain-of-ownership information for any property included, and make that data immediately accessible to any device on the blockchain. Over time, it could conceivably eliminate the need for title insurance.

The model can be extended into the mortgage business. From a banking standpoint, writing mortgages is an exercise in risk management. Much of that risk consists of an applicant’s ability to repay, but some of it is also based on the accuracy of the information itself. If a blockchain for banking connects with one for business and government, the process of writing and qualifying for a mortgage becomes easier and cheaper. Full information from salary to bank balance to home address is all available, not just as a one-time snapshot pulled from disparate sources but as an unbroken history harvested from a single location in near-real-time.

“If you have a blockchain that tracks back source data, then you suddenly have the ability to be much more specific about how much of the risk is actually due to the probability that this person will repay and how much of it is just noise,” McDermott notes. “A big part of what blockchain does is take away the need for these intermediaries that create trust and allow that trust to happen in a much cheaper, faster and cleaner way.”

Kristin Lewotsky is a freelance technology writer based in Amherst, N.H.


comments powered by Disqus

Advertisement

Advertisement

2017 Solutions Edition

A Comprehensive Online Buyer's Guide to Solutions, Services and Education.

MAINFRAME > BUSINESS STRATEGY > BUSINESS APPLICATIONS

IBM Delivers Additional Protection for Blockchain

Build A Solid Foundation

The zEnterprise delivers value as the cornerstone for business applications

MAINFRAME > BUSINESS STRATEGY > BUSINESS APPLICATIONS

Blockchain’s Potential Extends Beyond the Financial Industry

IBM Systems Magazine Subscribe Box Read Now Link Subscribe Now Link iPad App Google Play Store
Mainframe News Sign Up Today! Past News Letters