As trust in institutions falls to all-time lows, a concept as old as global trade routes is becoming radically new and promising to rekindle trust in innovative and unexpected ways.
Beneath the banner headline “Global Implosion of Trust, ”the 2017 Edelman Trust Barometer, an online survey of 33,000 respondents in 28 countries, reports a general decline in trust in all four major institutions: business, government, NGOs and media. It is the first such broad decline since Edelman began tracking trust in 2012.
Meanwhile, the accelerating adoption of blockchain, a new type of transaction capability, promises to codify trust in new ways. On a blockchain, data is shared in real time across a scalable group of individuals and institutions. Every event, every transaction is time-stamped and becomes part of a growing chain, a permanent record, that cannot be altered or tampered with.
On permissioned blockchains, privacy is maintained by agreement about which parties view which transactions, and where desired, by masking the identity of the party. In this way, everyone involved in a transaction has control, but no one person is in control. This is why blockchain will do for digital transactions what the Internet did for information.
According to a new study by the IBM Institute for Business Value of 3,000 global C-suite executives, fully 33 percent of organizations across all industries and regions are either considering or actively engaged in blockchains. And for blockchain “Explorers,” which are about 8 percent of those organizations experimenting with, piloting or implementing blockchains, there are already surprising results. These early results can be characterized in three ways:
1) Blockchain is turning the uncertainty of digital disruption into competitive advantage. Six in 10 blockchain Explorers report that blockchain creates more trust and transparency in both data and transactions. Data recorded in a blockchain can verify that wine has been shipped and kept in transit at the proper temperature.
Likewise, as goods in transit clear customs and ports, organizations aware of their location in real time can dynamically optimize their supply chains. Proving provenance in blockchains is helping prevent counterfeit semiconductors from flooding the market or outbreaks of illness from contaminated foods.
2) Blockchains create platforms for new business models. Forward-looking companies willing to reinvent themselves are finding whole new ways of working in blockchains. Blockchains are particularly well suited to customers, partners, and even competitors, sharing data in ways that give rise to new, personalized services.
Likewise, a leading bank in South Africa is exploring the use of Blockchain technology for trade settlement network to record and manage reconciliation of independently settled CIB trades. Recently, the World Bank has endorsed blockchain for government bonds and also announced its partnership with the Kenyan Government to explore ways on how to use blockchain technology to boost financial inclusion in Kenya and East Africa.
3) Blockchain is fostering collaboration even among competitors. As a “rising tide lifts all boats,” blockchain has the potential to lift entire industries. On platform business models, strategy shifts from controlling internal resources and building competitive barriers to orchestrating external resources and engaging communities.
The current deficit of trust in global institutions need not be terminal, but time is pressing. New platform business models based on blockchain can help rebuild trust rapidly so long as all parties share some level of economic advantage. Organizations should start by identifying new opportunities to monetize data and alternative payment models. They can begin with “garage consortia” or smaller, trusted groups of industry partners, learn how to develop pilots and work together to mutual advantage.
Already, early blockchain Explorers are gaining advantage through experiences that can’t be easily copied. And the platforms being built today may shape the evolution of blockchain for decades to come.
(The author is PhD holder and is the current Manager & Research Scientist, IBM East Africa)
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