The Fourth Industrial Revolution (4IR) is upon us, and blockchain technology is fast becoming a game-changing ingredient in its passage not only for the financial sector, but for several other industries as well.
However, before delving into the specifics of how this innovative technology is revolutionizing today's industries, it is essential to understand what blockchain technology is and why it has gained popularity over the past decade.
Understanding the basics of blockchain technology
A blockchain is essentially a distributed ledger that consists of a series of records, called blocks, securely linked together by cryptographic hashes. These blocks are linked together in a sequential manner, forming a chain-like structure. Each block contains vital data, including a cryptographic hash of the previous block, a timestamp, and transaction information, typically represented as a Merkle tree, with data nodes as leaves.
What makes blockchain a unique technology is its core set of features, which includes immutability (preventing changes to already recorded transactions), decentralization (no central governing body), and transparency (allowing anyone to view or track transactions). All these features together introduce a new technology that fundamentally eliminates the need for central intermediaries and allows distributed verification by multiple participants (validators).
As for its origins, the first blockchain-like protocol was proposed by David Chaum in his 1982 dissertation called "Computer Systems Created, Maintained, and Trusted by Mutually Suspicious Groups." However, it wasn't until many years later, when Satoshi Nakamoto developed and released bitcoin, that the idea behind the blockchain came into practice.
Today, blockchain is one of the 4IR technologies that is significantly revolutionizing industries, along with Artificial Intelligence (AI), Virtual Reality (VR) and the Internet of Things (IoT).
The impact of blockchain in today's industries
According to the latter report According to Fortune Business Insights, the total blockchain technology market size reached $11.14 billion in 2022, with forecasts indicating that it could exceed $469.49 billion by 2030, growing at a CAGR of 59.9%. North America accounts for almost 50% of this capital, with a market size of $5.25 billion in 2022.
Image Source: Fortune Business Insights
Of course, several industries are benefiting from this capital injection, but in this article we will highlight five major sectors that look particularly promising or have made significant progress in adopting blockchain: financial services, supply chain, healthcare, energy and real estate.
Financial services
Bitcoin was launched at a time when the global financial system was on the brink of collapse as a result of the US housing bubble. While most traditional banks are still resisting the idea of decentralized crypto assets, many of the leading banks, including Standard Chartered, JP Morgan and Goldman Sachs, have invested in research or development of the underlying technology - blockchain.
How is blockchain transforming financial services?
Let's start with the most basic function of the financial ecosystem: payments. Unlike the traditional payment system, where settlements can take up to a week to clear, digital assets like bitcoin and stablecoins like USDT and USDC take only minutes or hours. Furthermore, these transactions are much cheaper as there are no central intermediaries involved to charge exorbitant fees.
Even more intriguing is the emergence of decentralized finance (DeFi), an emerging crypto niche whose architecture resembles traditional finance. DeFi offers all the financial services you can get from a bank, investment manager or broker, with the only difference that there are no third parties involved. Instead, settlements are automated through pre-coded smart contracts when settlement conditions are met.
And although DeFi has yet to become mainstream, it currently has over 43 billion dollars, locked into various DeFi protocols that offer services ranging from exchanges, lending, derivatives and wagering. It is also interesting to note that traditional banks are gradually joining the DeFi bandwagon, with JP Morgan committing first his deal with DeFi last year.
Meanwhile, with the adoption of blockchain infrastructure, Ripple's corporate blockchain solution is gaining momentum and is currently being used by Standard Chartered and Axis Bank to improve the efficiency of corporate on-demand payments between the two banks.
Supply chain management
The global supply chain management market was valued at USD 27.2 billion in 2022. Estimates of Allied Market Research show that it is poised to reach $75.6 billion over the next decade, growing at a CAGR of 10.9%. Behind this growth are technological advancements, most notably AI, IoT and blockchain technology, which play an integral role in streamlining supply chain systems.
At its core, blockchain technology reinforces the key features of supply chain management, which include tracking, visibility, inventory management and ethical practices. By tracking raw materials and finished products using an immutable ledger, blockchain has enabled all participants in a particular supply chain to verify the origin of raw materials, ensure their originality throughout the chain, and seamlessly facilitate transaction finality.
Given this value proposition, it is not surprising that the supply chain is one area where we are seeing notable progress in blockchain integration. A good example is De Beers' own blockchain-powered platform, Tracr, which launched via 2022 to improve the company's diamond supply and distribution chain. It is worth noting that De Beers is one of the largest diamond producers in the world.
The UAE's state oil company, Abu Dhabi National Oil Company (ADNOC), is another organisation that has integrated blockchain into its supply chain through a partnership with tech giant IBM. The initiative allows stakeholders to efficiently track oil starting from the wells to the consumption stage, while also recording in the chain verifiable transactions at every stage of the process.
Health
Healthcare is also benefiting from the advent of blockchain technology, particularly in protecting patient data. According to a recent report The HIPAA Journal reported 692 healthcare data breaches between July 2021 and June 2022, compromising the personal information of over 42 million individuals. This is an alarming trend given the sensitivity of medical data.
But with blockchain in the picture, it's now possible for the healthcare industry to reduce instances of data corruption through decentralized and tamper-proof data logs. Several startups have already emerged that offer blockchain as a service to the medical industry, including the likes of Akiri, Medicalchain, Guardtime and Patientory. All of these companies offer data security solutions powered by blockchain technology.
"An interoperable blockchain can strengthen data integrity while better protecting patients' digital identities. The inherent blockchain properties of cryptographic public/private key access, proof of work and distributed data create a new level of information integrity for healthcare." states report of Deloitte.
Energy and sustainability
The issue of climate change is a hot and controversial topic that cannot be ignored, no matter which side of the fence you sit on. For context, climate change activists envision a zero-carbon world, meaning that any CO2 emissions must be offset by an equivalent amount of carbon credits. As it stands, one carbon credit is equivalent to one metric ton of carbon.
So how do companies access additional carbon credits? The simplest way is through an emissions trading scheme (ETS). However, as demand for carbon credits is expected to reach 1.5 to 2.0 gigatonnes by 2030, this market needs to become more accessible. This is where blockchain technology comes into play, enabling the conversion of carbon credits into tokenized digital assets that can be sold in decentralized markets.
Although still a nascent area of innovation, in the recent past it has several carbon credit initiatives related to blockchain and crypto have emerged. One example is Universal Carbon, which claims to be the leading project introducing a tradable carbon token that resides on a public blockchain. Ideally, users can purchase this token and choose to hold it as an investment or burn it to offset a year's worth of carbon emissions.
In general, blockchain technology through tokenization opens the opportunity for a larger population to participate in carbon credit markets, ultimately increasing liquidity and advancing the path to carbon neutrality.
Real estate
Last but not least is the real estate market. Here blockchain offers several use cases ranging from recording titles in distributed ledgers, automation of property management and tokenization. Using smart contract technology for property transactions and verifying seller legitimacy not only reduces transaction costs and time, but also improves the due diligence process.
However, what I find more intriguing is the tokenization aspect, which essentially bridges the gap between the traditional real estate market and the economies in the chain. Imagine being able to buy a part of a house or a piece of land without necessarily owning the whole unit; that's what tokenized real estate introduces-fractionalized investing. It makes the real estate market more liquid and globally accessible.
For example, suppose you want to sell a 200,000 square foot property through a blockchain. In this case, one could simply use a platform like Tokens to list the property by first securitising it (choosing the jurisdiction of issue and distribution). Once ready, you can proceed to tokenize it and divide ownership into smaller shares represented by digital tokens, allowing future investors to purchase the shares and own a portion of the ownership.
Clearly, real estate tokenization is still a grey area in terms of both development and regulatory framework. However, given the underlying potential, we are likely to see more stakeholders in this market using blockchain technology.