When it comes to blockchain, it’s cryptocurrency that usually grabs all the headlines, but what really is blockchain technology and why is it so important? Blockchain technology is the underlying framework which offers a solution to one of the internet’s greatest issues: Trust.
“Anything that can conceive of as a supply chain, blockchain can vastly improve its efficiency - it doesn’t matter if its people, numbers, data, money.”
Ginni Rometty, CEO IBM
Blockchain: What is it?
A blockchain is often described as a “distributed ledger” meaning it exists on a secure protocol where a network of computers verifies transactions before they are executed.
The actual technology that underpins the blockchain builds trust by enabling collaboration and secure verification without having to go through a centralised authority.
In essence, blockchain is a shared, unchangeable, programmable ledger which no single user controls; the transparent nature facilitates the process of recording transactions and tracing assets in a corporate network.
Practically anything can be tracked and traded on a blockchain network, reducing costs and mitigating risk for everyone who participates.
“ [Blockchain] is the biggest opportunity set we can think of over the next decade or so.”
Bob Greifeld, Former-CEO Nasdaq
To mitigate against risk much of our modern-day Internet currently follows a decentralised model, where companies maintain multiple servers.
In case a server gets compromised, only some information becomes vulnerable.
But a distributed model is even better. In a distributed model, all records are maintained continuously all over the network. To change a record anywhere – the majority of the other record-holders have to agree it’s a legitimate change.
Blockchain ushers in a new era in distributed trust. Industry runs on information. The quicker it’s received and the more accurate it is, the better.
In our last thematic thinking report, we looked at real world applications of blockchain technology from solving supply chain constraints to disrupting the aviation industry.
We’re seeing more and more companies adopt blockchain technology across health care, supply chains, government, retail, energy, telecommunications, manufacturing, insurance, finance, and transport.
In fact, During 2022, spending on blockchain solutions by businesses is forecast to hit $11.7 billion.[1]
For example, Home Depot, relies heavily on its vendors to secure the distribution of products to its many aisles in its 2,295 stores within US, Canada and Mexico.
Each store on average carries 35,000 products so ensuring the correct merchandise is received is paramount.
The company partnered with IBM Blockchain to provide a real time trusted network which is shared with its vendors improving visibility so issues can be resolved before they escalate into disputes, providing solutions to allow the company to refocus on customer analytics.
Allowing Home Depot to bring that innovation directly to its customers.
Blockchain technology could even be pivotal in tackling the Covid-19 pandemic: the technology could provide important breakthroughs in the tracking and distribution of vaccines.
With fake vaccines being produced by fraudsters, it’s increasingly pivotal to ensure integrity at every point of the supply chain.
Blockchain technology guarantees the authenticity of vaccine shipments, and distribution can also be tracked to ensure they are arriving at the correct locations, at the correct temperature.
IBM has created a system using blockchain technology to coordinate the different agencies and healthcare authorities involved with vaccine distribution alongside recording vaccination rates and effectiveness across the different platforms they all rely on today.
The innovations in this area driven by the pandemic will likely encourage the use of blockchain technology in the manufacture and distribution of vaccines going forward.
The key is blockchain creates trust. And with this trust the potential for industry innovation and disruption is potentially limitless.
We continue to believe in the advantages of a theme-based approach; offering investors pure play exposure to companies at the forefront of the blockchain revolution.
Sources:
[1] 91+ Blockchain Statistics, Facts, and Trends For 2021 (techjury.net)
This article was prepared by FTGP and reflects the current opinions of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security or strategy. Investors should review the fund documentation, including the risk associated with an investment, before making any investment decision.
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