KPMG lays out six blockchain predictions for 2020
2019 was the year organizations moved blockchain and cryptoassets “beyond the hype phase,” adopt the technology across real use cases, according to a report by KPMG.
Indeed, last year saw the continued entrance of major firms into the realm of distributed ledger technology in sectors ranging from infrastructure and finance to transport and public policy.
In banking, one of the leading sectors for blockchain adoption, Swiss Bank UBS and Barclays began experimenting how the tech could be deployed to expedite back-office functions and settlement, amid estimates the industry could shave off US$20 billion in middleman costs.
JP Morgan also entered the fray with JPM Coin, a token intended to facilitate transactions between institutional accounts. With more than 100 blockchain patents filed, meanwhile, Mastercard’s activity in the field led the payments monolith to become the third-biggest blockchain innovator worldwide.
Examples across various sectors have included Walmart Canada deploying the world’s first blockchain-based freight and payment network; leading carmakers, including BMW and Daimler, exploring use cases in raw materials tracking and tokenization, and Starbucks teaming up with Microsoft, using the technology to trace its coffee “from bean to cup”.
Businesses like these are realizing the potentially powerful applications of blockchain and demonstrating how core tenets in decentralization and transparency can be applied— as one component of a wider technological confluence.
More than 50 percent of global organizations now believe the technology represents a top-five strategic priority within the next two years.
“Business executives are leveraging the capabilities of blockchain and tokenized assets to spur an unprecedented level of innovation, differentiate themselves, drive new revenue models and retain market share, as well as to advance their strategies, systems, and processes,” said Arun Ghosh, US Blockchain Leader at KPMG.
“In 2020, we anticipate adoption at scale given its ubiquitous and wide availability as organizations embed enterprise blockchain in their digital strategy and investments.”
According to Ghosh, the quickening pace of blockchain and cryptoasset adoption could be driven by six key trends.
# 1 | Cryptoassets adoption led by MPC
One of the biggest challenges to cryptoasset adoption is that of custody— how assets are owned, stored, secured, transferred and accessed in decentralized environments. This area has so far lacked in both solutions and regulatory guidance.
However, advances in multiparty computation technology (MPC), and more providers entering this sector will help overcome the custody challenge, enabling secure, highly-available wallet infrastructure for high-frequency traders and asset managers requiring instant access to their funds.
# 2 | Public sector leaders to facilitate growth
The development and rising adoption of cryptoassets will be driven by the public sector, says Ghosh: “the race to integrate crypto into existing global financial institutions is very real.”
Around the world, governments are anticipating the launch of central bank digital currencies (CBDC), to realize strategic and competitive advantages within the global trade systems.
Central banks in Asia and Europe, for example, are in the final stages of launching digital currencies for future payment systems and cross-border transactions, and KPMG expects resulting frameworks to anchor initiatives in the private sector.
# 3 | Interoperability to drive scale
There will be a shift from private-permissioned to interoperable blockchain implementations.
As private blockchain implementations emerge, the next stage is integrating private and public blockchains in order to develop ecosystems and trade networks.
Interoperability will make way for greater efficiencies across supply chains, enabling the integration of middle- and back-office processes and payment layers, for example.
“Given that blockchain is a cloud-first technology, this configuration of new, commercially-available distributed ledgers can serve as a ‘trust layer’ for existing and new data; drive accountability, reliability and traceability across ecosystems by validating and protecting stored data,” Ghosh says.
# 4 | Blockchain can enable trusted AI
With maturation of machine learning and AI investments, businesses can turn to blockchain to ensure data models are protected.
The convergence of AI and blockchain will lead to “more success” in scaling the technology. Blockchain can enable trusted AI by authenticating and authorizing data models and outputs, by offering an end-to-end view of automation and decision engines, while ensuring data input authenticity, that models were never tampered with.
# 5 | Blockchain for sustainability
KPMG and Ghosh believe blockchain could become a “central component” in the convergence of technology used to manage climate change.
Decentralized, transparent data models enabled by the technology can house data transferred via IoT, and make it visible to a vast number of countries and regulators that are jointly monitoring and reporting on carbon emissions and rising sea levels, among other applications.
# 6 | Zero-knowledge cryptography
Zero-knowledge systems will enable new forms of self-sovereignty.
Rapid advances in cryptography are enabling the emergence of zero-knowledge trust systems, unlocking the potential for advanced data privacy use cases and for the creation of digital identities.
Zero-knowledge systems and zero-knowledge proof cryptography are allowing participants of a network to control and verify or “prove” their data, identity or other characteristics without exposing underlying information.
28 September 2021