Is the world getting ready to spend big on blockchain?
Blockchain is a digital ledger that stores records of transactional data. Each time a new transaction is added, a new ‘block’ is created with the specific information and is added to the chain— that explains the name.
Resistant to the modification of data, the technology has presented new business paradigms in traceability and transparency. It also goes by another name—Distributed Ledger Technology (DLT)— which consolidates its purpose in business, where it can facilitate anything from financial transactions, supply-chain tracking to digital copyright management and real-estate.
Potential use cases for blockchain are truly vast, and a survey by Deloitte found that 53 percent of organizations around the world put DLT within their top-five tech investment priorities for the next 24 months.
That interest will substantiate some hefty investment; the IDC predicts global spend could surge to US$16 billion in 2023. IT and business sectors are expected to account for 70 percent of that, while the banking industry takes the remainder. The United States alone is predicted to triple blockchain spend by 2022, from US$1.1 billion this year, to US$4.2 billion in 2022.
Let’s take a look at what blockchain can offer businesses and why the world’s largest economies are ready to spend big.
The potential of blockchain
One of the main features of blockchain is its ability to register different kinds of transactions while storing data in a single, secure space.
The technology is said to reduce time and cost by optimizing record-keeping, inevitably streamlining supply chains. Besides that, businesses can access transactional data through technology with ease.
In this sense, business dealings with contracts become easier when transactional transparency is at its peak. Businesses can collaborate and network with partners through a secured platform with payment networks and data at bay.
Having a safe and secure storage space for important data such as contracts and client data is prioritized in all organizations. With some turning to cloud migration for its centralized server and variety of options, blockchain offers a series of reasons for organizations to consider as well. Blockchain allows businesses to store data mutually on each other’s computers with rented hard drive space. The stored data is protected with encryption and only authorized users can access the data with a crypto-key. Here, blockchain providers help maintain and manage shared storage.
Without a doubt, large enterprises and SMEs alike looking to streamline their business operations can significantly benefit from this technology in terms of secured business dealings, storage space, and collaboration.
A chain reaction in the US and China
Recognizing the relevance of blockchain technology in leveraging businesses, the majority of large enterprises around the world agree that blockchain technology will become a critical priority for investment.
Recently, China’s President Xi Jin Ping’s announcement that the country would embrace blockchain technology caused a rise in the cryptocurrency market. The country’s current investment of US$304 million in the technology is expected to increase by 133 percent in 2022.
Despite confidence in the opportunities blockchain presents, however, organizations must be cautious in not overestimating short-term benefits or capabilities.
Gartner’s Senior Research Director, Adrian Lee, said: “Many CIOs overestimate the capabilities and short-term benefits of blockchain as a technology to help them achieve their business goals, thus creating unrealistic expectations when assessing offerings from blockchain platform vendors and service providers.”
The blockchain platform market is composed of fragmented offerings that often overlap, says Gartner, or are being used in a complementary fashion, making technology choices confusing for IT decision-makers. Earlier this year, it was found that 40 percent of ‘AI’ startups in Europe weren’t actually offering any AI as part of their core products.
“Compounding this challenge is the fact that blockchain platform vendors typically use messaging that does not link to a target buyer’s use cases and business benefits,” said Lee.
“For example, ‘transactions’ was the term mentioned the most in relation to blockchain, followed by ‘secure’ and ‘security.’
“While these may be functions of blockchain-enabling technology, buyers are still confused as to how these functions are achieved or what benefits blockchain adds compared to their existing processes.”