Blockchain-based technologies experienced phenomenal growth in 2015. They went from being ignored by big companies and researched only by startups to attracting attention from the innovation world and featuring on the cover of respected mainstream publications such as the Financial Times and The Economist.
Could blockchain transform your business?
The key to blockchain's rise is distributed ledgers – open ledgers which allow transactions to be registered between different parties without a third party, such as a bank.
So why might your business use blockchain, why is it now top of the agenda for Microsoft, IBM, BBVA, Banco Santander and VISA, and why have the 44 biggest global banks created 'R3 CEV', a consortium designed to explore its potential for financial services?
Blockchain allows transactions to be registered without the need to place a 'trust deposit' with a third party or deploy expensive infrastructure to maintain the ledger. This cuts traditional back-office processes and creates new business models. It offers direct benefits to financial services organisations and creates opportunities for those in other industries.
How does it work? Blockchain and distributed-ledger technologies record information which is shared and replicated between multiple servers, also known as nodes. One of the main features of this technology is that it does not need the intervention of a central validator.
But blockchain has brought true disruption to the concept of trust. In the majority of commercial dealings, there is a need for a certain level of trust between parties. However, blockchain allows every complete transaction or record to be available for all to see and completed without the need of a third party. It records an ever-growing list of completed transactions, or blocks, in chronological order, that cannot be changed and are completely traceable.
To unlock the true potential of this technology, it is vital to understand its foundations.
Blockchain is the technology that underpins Bitcoin, the well-known cryptocurrency, a model first outlined in a white paper by Satoshi Nakamoto in 2008. The Bitcoin protocol has evolved since then, with each implementation called a 'distributed ledger', and each one creating hundreds of different uses outside of digital currencies.
Blockchain enables transactions (financial or otherwise) between two or more parties in a secure and irreversible way and, as explained, without the need to place a deposit with a third party. By cutting out the middle man costs are reduced and the transparency and efficiency of these transactions are increased. Blockchain also guarantees the identities of the parties because user identity is verified using cryptography.
The potential impact of distributed-ledger technologies on financial services, such as capital markets, settlement, securitisation or even audit, is obvious but this technology could revolutionise many other sectors.
For these technologies to achieve wider success, we believe you need not only technological expertise, but also business knowledge.
Grant Thornton has brought together a team of experts in law, economics and technology, based in Spain, to develop several concepts and prototypes for many different sectors. The main purpose of these projects is to investigate how blockchain technology can replace inefficient back-office systems or create new business models.
The Grant Thornton team draws on insight gained from working with many startups in the blockchain ecosystem to see how the technologies can be taken further.
The team is also working with Block Chain Space, the first accelerator programme in Spain for startups focused on blockchain technology.
If you would like more information and find out how blockchain technology could transform your business, please get in touch.