Blockchain Technology Impact on the Distribution Industry (Part I)
In my article on “Changes in US economy are affecting your business. Take action” I mentioned how the emerging technologies are reshaping the way to do business in general, and specifically the distribution industry. In this article and the next, I will define what these technologies are and I will elaborate on one of them: Blockchain Technology. In this first part, I will focus on explaining, as simply as possible, what is a blockchain, its origins, and evolution.
What are the emerging technologies?
Industrial development has undergone three revolutions and has a fourth ongoing one as illustrated below. Each revolution has been triggered by a technological breakthrough and its dominance decreases from one to the other.
The heart of this new revolution is the digital and information technology that has permeated at all levels of human activity. It started in 1950 with the first pager devices and evolved over time as illustrated below. Within this current revolution, four technologies have surfaced with the potential to drive the most impact on business in the shorter run: Cloud, Internet of Things (IoT), Artificial intelligence (AI), and Blockchain (BC). In another article, I will address each one of these emerging technologies. This time I will expand on Blockchain and how it is and might be disrupting the supply chain industry.
What is Blockchain? – Definition, and origins
In laymen’s terms, a blockchain is basically a chain of blocks that contain digital information; think of them as packets of data all tied up, like a train. Each block or wagon contains a mathematical algorithm that maps data of arbitrary size to an array of fixed size (cryptographic hash) of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree).
The idea of a communication network that relies on information fast, securely, and transparently is not new. In 1979 Ennio Bustos stated the need for a “Neurological communication network” as a necessary step for the evolution of the data processing realm in his dissertation “Array of microprocessors in a wide broadcasting network to solve complex problems”. In 1982 David Chaum proposed a blockchain-like protocol in his dissertation “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups.” In 1992 Stuart Haber and W. Scott Stometta incorporated Merkle trees into the Blockchain as an efficiency improvement system that was able of collecting several documents into one block. But it wasn’t until 2008 that a group known as Satoshi Nakamoto first conceptualized a distribution of Blockchain. This led to the implementation of the first digital currency Bitcoin which later evolved to a second version.
Uses and potentials of Blockchain Technology
Blockchain technology can be integrated into multiple areas. The primary use of blockchains has been as a distributed ledger for cryptocurrencies such as bitcoin; there have also been a few other operational products that had matured from proof of concept by late 2016. As of 2016, some businesses have been testing the technology and conducting low-level implementation to gauge Blockchain’s effects on organizational efficiency in their back office.
In 2019, it was estimated that around $2.9 billion were invested in blockchain technology, which represents an 89% increase from the previous year. A report from International Data Corp has estimated that corporate investment into blockchain technology will reach $12.4 billion by 2022. Furthermore, according to PricewaterhouseCoopers blockchain technology has the potential to generate an annual business value of more than $3 trillion by 2030.
An industry with such potential and level of investment has attracted the attention of visionaries about uses of the technology, developers to create the visions and offer solutions under a BaaS model (Blockchain-as-a-Service), entrepreneurs interested in riding the wave, and consultants on how to implement the solutions.
Who is using BaaS?
BaaS has gained significant traction because it can solve complex issues around transparency, efficiency, security, and costs, simply and straightforwardly. The quickest adopters have been in the software, financial technology (FINTECH), and logistics industries. BaaS has become so popular that some of the largest tech companies in the world, like IBM, Microsoft, Amazon, and Oracle, have created divisions dedicated to the integration of BaaS. The table below is a partial list of solutions available in non-crypto areas.
I hope this article has been helpful. In the second part, I will focus on how Blockchain can impact the distribution industry and how you can benefit from it. Don’t miss it! I will continue to publish information related to Warehouse Management, distribution practices, and the general economy. If you are interested in this article or want to learn more about Laceup Solutions, register to keep you updated on future articles.