After the promise of cryptocurrencies taking over the current banking system was quashed, its underpinning technology known as blockchain can be the cause of a renaissance in the financial sector. This is not speculative in nature, as many offerings have been in the past, but based on an actual product, use case and customers.
Big companies such as Facebook and IBM have begun investing in blockchain technology, which has already begun to show a lot of promise in revolutionising the financial sector. Many banks in India have also begun to adopt the technology for smoother cross-border transactions and transparency in their operations.
The original blockchain was that on Bitcoin, which was used to facilitate the creation of a permissionless and trustless value network. While the concept of blockchain grew to be accommodated under the umbrella of distributed ledger technology, the main promise has always been to bring financial services to the unbanked and enable true financial inclusivity. Let us take a look into what these offerings are doing for the state of the financial and logistical markets.
IBM’s Giant Footsteps Into Blockchain
IBM began moving to a service-based company in the late ’00s and early ’10s, with its position cemented as one of the world’s biggest companies providing solutions today. Capitalising on their reach across the world and a long list of clients, IBM has begun its blockchain efforts. It is already a part of the Linux Foundation’s Hyperledger product for shepherding blockchain developments, and itself has made many forays into the real-world applications of the blockchain.
To this tune, IBM has 3 prominent blockchain products. The first among them is known as IBM Food Trust, which uses blockchain to enable end to end tracking of produce. The use of the blockchain will allow for a shared history for all the participants, thus enhancing visibility and accountability. This ensures a higher amount of trust in the food supply chain, along with ensuring that the consumer knows exactly where their produce is coming from.
Their second product is one known as TradeLens, and is set to create a blockchain-enabled environment to set ground truth standards for supply chains. The project aims to do what standardisation of shipping containers did for the shipping industry as a whole. To achieve this, IBM has made it an open and neutral platform that has every step of the chain validated in real time by the participant doing the work.
However, the biggest bet for IBM’s blockchain dreams comes in the form of IBM Blockchain World Wire. This is a system aimed at replacing the currently outdated system for cross-border transactions known as SWIFT. SWIFT has existed for more than 60 years and creates pain points for customers wishing to transfer money across borders as it is unreliable and slow. IBM has leveraged blockchain to create a system that clears and settles cross-border payments in almost real-time, as opposed to SWIFT which can take anywhere from 3-5 business days.
Cupertino’s Blue Giant Looks To Provide Value Adds For Consumers
Facebook is not only looking into blockchain technology but also aiming to use it to create a cryptocurrency. This is to allow users to engage in cross-border transactions with their friends across the world at lowered transaction fees compared to traditional cross-border transactions. When looking at their reach over 3 of their products, Facebook has almost 3 billion individuals logging in to use them across the world, among which 300 million are in India.
Even though introducing a cryptocurrency would mean that they will be required to navigate through multiple regulatory loopholes. However, Facebook, with its multiple run-ins with regulators, has a better chance of getting the product onto the open market. The giant is also looking to integrate WhatsApp, Messenger and Instagram messaging platforms into one experience. This will unify all of the user bases of the messaging platforms into one, creating a monopoly over social networks.
In this environment, using a cryptocurrency means that Facebook can settle transactions across the world for all of its users. The cryptocurrency is set to be a stablecoin pegged to the value of the US dollar to ensure that volatility risk doesn’t take place when the users are utilising the currency to send the value.
In Conclusion
Blockchain technology as a whole can be expected to be seen in many more applications similar to this. The distributed ledger can be a prominent place to expand into the financial sector due to its ease of implementation for a company with resources such as IBM and Facebook. It also provides a unique value-add for the service and will leverage the existing network effect of the social media platforms.
Blockchains can also be used for multiple other purposes as well, as seen by IBM’s implementation of a decentralised identity platform and supply chain tracking.
