Why 2018 Will be Year of Blockchain?

With Bitcoin prices skyrocketing in the last quarter of 2017, Bitcoin emerged as a big hit among investors across the globe. Having emerged from the shadows of Bitcoin, Blockchain has arguably become one of the most disruptive technological innovations in recent times. The technology is built on the concept of a distributed consensus electronic ledger responsible for creating and keeping track of innumerable transactions in a trusted and secure environment.

However, considering the potential that Blockchain offers to transform the existing transactional ecosystems, the technology has not yet been leveraged in the way it could have been. Even though it has been available for several years, Blockchain has still been a mystery to many. But this is changing fast, and is going to change faster than ever in 2018.

While 2017 was the year everyone talked about cryptocurrencies, 2018 is expected to mark the year of action for Blockchain implementation beyond cryptocurrencies and across industries such as finance, commodities, health, governance, supply chain, trading, healthcare, real estate & security among many more. Solution providers like IBM, Microsoft, Oracle etc. have also joined the fray of enablers who can bring Blockchain solutions to the industries.          

Blockchain spurring evolution of FinTech
Some of the world’s leading banks have realized the potential of Blockchain, with regulatory authorities also looking at the technology for auditing and compliance purposes. The next 4-6 years are expected to see a period of consolidation and growth where banks will explore the benefits of Blockchain, combined with regulatory guidance and certainty that network effect will hold.  

While 2017 saw speculators enter the digital asset market in droves, 2018 is expected to see major institutional players like asset managers, pension funds and other financial institutions, such as payment providers, enter the space.    

Our country’s central bank, the Reserve Bank of India, has also tested an end-to-end Blockchain technology proof-of-concept (PoC) for trade finance application, involving regulators, banks, financial institutions and clearing houses. Banks such as ICICI Bank, YES Bank, Kotak Mahindra Bank, and Axis Bank are also using blockchain for certain processes and have found value.

India's largest lender State Bank of India is rolling out BankChain, a consortium of 27 banks, which are exploring to build solutions for banking. Besides, SEBI has appointed an advisory committee CFRT, for conducting research on the Blockchain platforms in the sphere of fundraising, asset management and post-trade settlement. However, adoption of Blockchain in financial institutions can face challenges due to uncertain regulatory environment, which could also stifle further evolution of the digital asset market.  

Blockchain across industries
Enterprises left no stone unturned in experimenting with Blockchain in 2017, where a number of PoCs were executed across various domains, of which many have qualified the benchmarks to form propositions being planned for deployment.    

International Data Corp.’s Health Insights report has predicted that a fifth of healthcare providers will have operationalized Blockchain by 2020. In the Supply Chain domain, Blockchain is being seen as a valued proposition for Shipping industry, with companies like Maersk, Mercuria, Walmart Stores Inc. and Foxconn Technology Co. Ltd building Blockchain solutions to track transactions and goods.

In Media and Advertising, we saw Blockchain solutions like XCHNG, Vuulr and Steemit, which aim to disrupt the broadcast content economy using Blockchain technology. Mahindra Finance’s Blockchain PoC on bill discounting for provenance (food, diamonds, luxury goods) is also going to move to production.        

Blockchain adoption by governments  
Blockchain has the potential to solve some of the massive problems that governments usually face, such as maintaining land records, asset registries, auto records, voting frauds, national identity database, and financial transaction records and traceability, among others. However, while some governments are cautious of blockchain-based applications like crypto-currencies, they will have to catch up soon considering the rapid pace of adoption by others such as Dubai, Estonia and the UK, who are taking the lead in building most transforming use cases in Blockchain.  

We have seen some ambitious initiatives from Dubai Government which plans to become the first Blockchain Government By 2020. Russia’s Federal Agency for Technical Regulation and Metrology announced the formation of a technical committee to standardize Blockchain and distributed ledger technologies, while Brazilian Ministry of Planning has partnered with Microsoft in Blockchain Identity App Trial.

Back home, Niti Aayog, the government's premier think tank, is exploring the use of blockchain technology in legally approved areas such as education, health and agriculture, and is working on a PoC to leverage the use of this technology in key sectors. The think tank is also working to build a full-fledged Blockchain infrastructure IndiaChain, which could help in reducing frauds, subsidy distribution, contracts’ enforcement, land records and regulations, KYC, SME financing and energy distribution among many more.

However, cryptocurrencies are facing restrictions in some countries, with governments in China, Russia and South Korea instating bans on Bitcoin usage. Thus, it is likely that some of the innovations will emerge in countries that don’t have stable currencies and economies, as this allows them to leapfrog into the world of cryptocurrencies.

Way ahead
There won’t be one single dominant Blockchain network in the future, and that is how Blockchain networks would allow the movement of value across all ledgers in exactly the same way — irrespective of the Blockchain network in use. 2017 saw the appearance of interoperability solutions with Blocknet, Raiden, COMIT and Interledger Protocol (ILP), and this is expected to continue in 2018 as well.

The Blockchain market size is estimated to grow from USD 210.2 million in 2016 to USD 2,312.5 million by 2021, at a CAGR of 61.5 percent during the forecast period. This only depicts a strong trend where organizations are seeing value in the early investments they are making in this new technology.

Arising convergence of Blockchain with other emerging technologies, i.e., Big Data, AI, IoT and cloud is what is seemingly breaking the silos, enabling real disruption and transformation. Today, we can find plenty of use cases of AI-Cloud-Data-Blockchain in autonomous vehicles, digital rights, e-governance, precision medicine and other areas. Industries across sectors are trying to build various use cases of Blockchain, with many PoCs planned for roll-out in 2018.

Blockchain is firmly footed to play a strong role in determining the business of future.

-- Som Shekhar Singh, Director, Technology at Sapient Consulting.