By Veena Pureswaran, IBM
My family is currently purchasing a new home. One of the painful parts of acquiring a new home, however, is the trail of paper and documents that need to be exchanged, signed and validated. Between mortgage lenders, insurance companies, and government inspections and tests, the process can be lengthy to legally and safely buy a new home.
Each day people like me, as well as businesses and governments, buy and trade assets through complex business transactions: from simple deals like purchasing a new car to more complex cross-border trades.
The inefficiency of various brokers exists across even simple business networks and take time, incur costs, and increase risk. Imagine fundamentally changing how business deals are executed by reducing time, cost and risk with blockchains.
The IBM Institute for Business Value (IBV) recently announced a new study,“Fast Forward: Rethinking Enterprises, Ecosystems and Economic with Blockchains,” which outlines how this vision will soon become a reality. The study is the first in a series examining how blockchains can bring new speed, efficiency and transparency to all levels of business networks from organizations to ecosystems and economies.
In our study, we recommend that businesses answer three questions. They are:
- How fast should I move?
- Can we achieve network-wide accepted standards?
- How can I scale with new revenue models?
In contrast to most business automation today, distributed ledger technologies such as blockchains are built on shared ledgers where participants write transactions in near real-time to an unbreakable chain that becomes a permanent record of an asset or transaction. This is viewable by all parties in the transaction.
In the study, we observe that despite many technology and business innovations, three types of friction still predominate: lack of access to information, interactions, such as transaction costs, and innovation including restrictive regulations, which are holding back business growth.
We identified five key attributes of the emerging blockchain technology, including how it’s distributed across the network, yet secure, transparent, consensus-based and flexible — and how these attributes have the potential to eliminate existing friction and profoundly affect current business models.
Consider how assets from cars to warranties, art to corporate bonds — even identity-based assets, such as health or tax records — can be shared, exchanged or transferred on a blockchain platform with far greater efficiency and yet pose less risk to privacy.
As transaction costs plummet and organizational governance transforms the processes, blockchains will create a new distributed form of digital contracts that include by-laws agreed on by consensus and managed transparently.
Blockchains will also eliminate the need for costly third-party institutions or intermediaries to broker trust because smart contracts, certifications and digital compliance will optimize transactional relationships.
As blockchains accelerate the flow of capital and the creation of wealth, our economies and interactions will be less subject to fits and starts, and instead move fast forward — almost like a state of perpetual motion.
New services delivered on blockchain networks may accelerate access and liberate those that were once locked out of efficient value creation to fully participate in an “all-in” economy.
These monumental changes may reset the clock on the science of organizational management, the tightening of trust and the economics of wealth creation. As a result, blockchains will enable profound economic progress enjoyed and driven by a greater number of individuals and organizations.
While blockchains can powerfully improve businesses’ efficiency, trust and value, C-Suite executives must carefully evaluate where blockchains can give them the greatest gains for their business and where they do not.
First appeared at Forbes