Blockchain technology provides an ocean of riches

The digital economy is overflowing with information. Blockchain will fix that.

Blockchain technology promises greater transparency for industries as diverse as seafood and shopping centres

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When it rose to prominence in the mid 2010s, blockchain technology held the promise of filling in one of the key missing pieces of online infrastructure — trust.

With numerous projects now entering their production phase and many of the barriers to its adoption now well understood, blockchain seems ready to fulfil that promise.

And if Australian industry can rise to the opportunity that blockchain presents, the rewards could be great.

According to the National Blockchain Roadmap developed by the Department of Industry, Science, Energy and Resources, combining blockchain technology with other innovations could add economic value to a range of business sectors, and see Australia contributing to an estimated global annual business value of more than $US175bn ($242.5bn) by 2025.

According to Rupert Colchester, a leading blockchain expert at IBM, that value comes through blockchain resolving issues relating to creating and maintaining trust in multi-party transactions.

“It’s a shared ledger technology enabling organisations, or even people within an organisation, to share ledgers across silos or different businesses,” Colchester explains.

“It means that different organisations can have a distributed and somewhat decentralised view of the same data, whereby the data put into that database from different parties is labelled with who entered it and when it was entered.”

This functionality means all parties can see the same version of the database and have a record of all changes made, somewhat like when tracking changes are made to an online document.

Colchester says this is especially appealing to organisations that operate extensive multiparty supply chains.

Blockchain is also useful in other scenarios where trust needs to be maintained among multiple parties.

One Australian blockchain project that is achieving significant results has emerged in the property sector, where the technology has been deployed to resolve problems in the issuing of bank guarantees for rental properties.

According to the head of customer lending journey and new technology at Westpac Institutional Bank, Rodolf Salem, these guarantees have traditionally been paper based.

“When we think about management of that piece of paper, including the push and pull from various parties, it does introduce significant cost and delays,” Salem says.

“And because it is printed and someone signs it in ink, it is open to operational risk.”

“What blockchain enables is the ability to store that same information in various nodes, and any changes to that bank guarantee can be validated by all parties. In a paper document that is not always the case.”

— Rodolf Salem, head of customer lending journey and new technology at Westpac Institutional Bank

The problem was first highlighted by a group of property management companies, who, together with a consortium of Australia’s major banks and IBM, set about creating a digital solution. The problem was tailor-made for a blockchain-based solution.

“What we have done is take that piece of paper, put it into software code, put a legal framework around it and standardised some of the metadata elements, and now we can actually transact the bank guarantee digitally,” Salem says.

“What blockchain enables is the ability to store that same information in various nodes, and any changes to that bank guarantee can be validated by all parties. In a paper document that is not always the case.”

Salem says this has eliminated the chance of any one party introducing an error, as those changes can be seen by all other parties. The process of pushing and pulling the document between parties has also been reduced to just seconds, which has significantly accelerated the process of issuing and implementing the guarantee.

“So we have taken a process that would take five or 10 days down to minutes or hours, and eliminated cost from a customer perspective,” Salem says.

The solution has now been commercialised as a new company, Lygon 1B, whose stakeholders include Westpac, ANZ, and Commonwealth banks, along with Scentre Group and IBM.

According to Salem, the success of Lygon 1B is also raising interest in the use of blockchain for resolving problems in other verticals — not just bank guarantees.

The technology is also likely to become more prominent across different industries, with the National Blockchain Roadmap initially highlighting three applications for the technology — for agricultural supply chains in the wine industry; trusted credentials in the university sector; and transferable customer checks for financial services. Since the road map was issued in February, additional use cases have been highlighted in regulatory technology and cyber security.

Colchester says IBM is also working on numerous blockchain implementations. These include the IBM Food Trust, in which the technology is deployed to trace food provenance such as seafood catch, and TradeLens, an IBM collaboration with global logistics company Maersk, to interconnect supply chain partners to improve visibility and efficiency in freight.

“Where companies have problems, especially ones where they are trying to solve for customers, suppliers, partners and consumers, blockchain starts to become an interesting candidate technology to move the needle in terms of trust, shared visibility, provenance, and quality of data,” Colchester says.

“Blockchain has created a structure and a framework for companies to start to share data in a much more real-time way and have trust that the data being shared is accurate and up to date and hasn’t been tampered with.”

Global potential

With the Department of Industry, Science, Energy and Resources having already identified the global potential for blockchain, what remains now is for ­Australian industry to embrace that opportunity.

According to Steve Vallas, chief executive of the peak body Blockchain Australia, Australia is ­recognised globally as having a strong regulatory framework that makes it an ideal place to run blockchain-based pilots and implementations.

“The announcement of the ­National Blockchain Roadmap is also a signal that this is something that government is looking at, and so it is something that industry should be looking at,” Vallas says.

“That confidence-building exercise is now rippling through most of the conversations that I am involved in.”

While Australia could still ­benefit from having more people with practical experience in blockchain implementations, Vallas says the general awareness of what the technology can do has risen ­markedly in the business community in recent times and the technology is also being embraced by the university sector.

Vallas says this heightened awareness is critical to the success of blockchain, as unlike other emerging technologies, which are often championed by large ­individual organisations or start-ups, blockchain implementations tend to be most effective when they involve multiple parties.

That need for different parties to work together to explore ­solutions, rather than go it alone, has been one of the key factors ­behind the gap between where blockchain was hyped to be in the mid 2010s, and the maturation behind its take-up today.

“The technology isn’t the issue,” Vallas says.

“The issue is businesses that don’t normally interact in that ­particular way, that they are looking to share data. You need buy-in from stakeholders across verticals, and that is the thing that has been absent.”

For Rupert Colchester, a world where the benefits of collaboration are obvious is a world where ­blockchain technology becomes ubiquitous.

“People won’t be excited to use blockchain in 10 years time or even five years time probably,” he says.

“They’ll just be using it as a total de facto choice of underpinning technology in any new system or platform.

“They may not put every piece of data into the immutable bucket that is blockchain, but they will certainly often say ‘of these 1000 pieces of data that I’m going to be storing in this application that we’ve got, 100 of those pieces may well be shared with our partners, customers, suppliers quite ­regularly, and so we’ll store some of that on the blockchain.”

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