Why blockchains will rewrite business models and revolutionize industries
Almost every sector — from banking and utilities to entertainment and agriculture — can expect to experience major business model disruption as blockchain technologies take hold, predicts digital guru Don Tapscott.
Because blockchain technology originated as the underlying mechanism of the bitcoin digital currency, there is a widespread belief that its potential is greatest in – or even limited to — the financial sector. But, says Don Tapscott, business author and authority on the impact of digital technology on business and society, that is to misunderstand a reality that is already unfolding.
“It’s hard to say how big this blockchain revolution is but it may well be bigger than the first era of the internet,” he says. “Blockchain gets to the core of commercial activity, of wealth creation, to the heart of innovation, to the real machinery about what makes an economy work. It raises the prospect of changing the fundamental structure of the corporation, of how we orchestrate capability in society, innovate to create goods and services, and engage with the rest of the world. There are very far-reaching business models already [emerging] that are just shaking the windows and rattling the walls of many industries.”
In his new book, Blockchain Revolution, Tapscott identifies scores of areas of business and society that will be changed by blockchains. Musicians will be able to reclaim much to the value they cede to record companies by offering their music directly to fans, movie-makers and broadcasters; individual investors will be able to deal directly with companies they hold shares in rather than go through stock markets; and the exclusive use of cars will start to dwindle as such assets are shared over peer-to-peer networks. Those are just a few examples, but as these and others evolve, two areas of financial services in particular provide the greatest evidence for the forthcoming impact of blockchains.
“In five to 10 years the financial services industry will be unrecognisable,” says Tapscott. What do the banks actually do? he asks. “They move value, they store value, they lend value, they exchange value, they account for value, they attest to value: every one of those could be disrupted very profoundly by this technology.”
It is something that has got the whole financial services industry sitting up and paying attention. “But it’s not just the threat, there’s a bigger opportunity for them,” he highlights.
That sense of opportunity is evident in the large number of blockchain pilot projects underway at major banks. In June, for example, Santander UK announced its was trialing a blockchain-based application for international mobile payments that would challenge traditional money transfer services. In the same month, Banco Bradesco in Brazil said it was piloting a new digital wallet that uses blockchain for direct mobile payments and transfers. And looking to leverage blockchain’s inherently secure architecture Japan’s Mizuho Bank together with technology company Fujitsu have conducted an operational trial focused on cross-border securities transaction settlements, which would ensure it is practically impossible for anyone to tamper with transaction histories, as well as shortening the processing time for cross-border securities transactions from the current three days to same-day settlement.
Such moves will have a liberating effect on consumers and small businesses, says Tapscott. A customer tapping their card in a small retail store would find a blockchain-based settlement would be instant rather than taking several days to occur, as the process simply invokes a change in the blockchain distributed ledger.
Another area set for disruption is the accounting industry, Tapscott predicts. “A third of the revenue of accounting companies is [derived] from audits. But with blockchains you not only have double entry accounting — credit and debit — but automatically you make a third entry in the blockchain, a time-stamped record of every single transaction that’s occurred. So rather than an annual audit costing tens of millions of dollars it could be instant and real-time.” That would free up the resources of forward-thinking accounting companies to invest in more high-end, value-added activities, he believes.
The examples are now everywhere, he says. “In every industry, in every major economy you can see big disruptions starting to occur.”
Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World by Don Tapscott and Alex Tapscott is out now.
• Photography: Emmanuel Fradin