The first Bitcoin transaction occurred in 2010 when Laszlo Hanyecz purchased 2 large peperoni pizzas for 10,000 Bitcoins in Jacksonville, FL. If he had held on to those Bitcoins till today, they would be worth $40 million dollars, alternatively he could buy 3.3 million peperoni pizzas!
Bitcoin is probably one of the most well-known uses of blockchain technology today, but blockchain extends well beyond Bitcoin. Blockchain is like the underlying operating system, while Bitcoin is similar to one of the many applications that run on an operating system (IBM).
Bitcoin, better known as a cryptocurrency, is digital cash, which can be traded for goods and services over the internet. Bitcoins are stored online in a user’s Bitcoin “wallet” and are transferred over a highly secure peer-to-peer (P2P) network, better known as a blockchain. Although Bitcoin is certainly the most well-known cryptocurrency, it certainly not the only one, with others including Ethereum, Litecoin, Ripple, Zcash, Dash and many others. Bitcoins can be purchased on Bitcoin exchanges (i.e. Coinbase) using credit cards, bank transfers, debit cards, etc. (TheStreet).
Cryptocurrencies are not backed by a central bank or a government authority, instead the peer-to-peer network monitors and verifies Bitcoin transfers and records them in a distributed digital ledger on computers across the world. When transaction details are added to this digital ledger, Bitcoin use a method called “mining” to add blocks of transactions to the distributed digital ledger in a secure, tamperproof way (Logistics Bureau).
Today’s modern global distributed supply chain is incredibly complex, with blockchain having the potential to transform how business is done. With its distributed digital ledger, blockchain has many potential applications in the supply chains for any type of transaction, contract, tracking item, payment and more. Let’s discuss some of the major industry sectors on how blockchain is being used in the supply chain.
Automotive Industry
Porsche has been testing blockchain applications since 2018 and integrating it into their cars. Partnering with XAIN, they are working on application to lock and unlock cars, parking, and loaning out company cars to employees, with other applications soon to follow. Tomcar, an Australian vehicle manufacturer pays its global suppliers through Bitcoin, which allows for the transfer of funds anywhere in the world (Forbes). Industry giants; Ford, Renault, General Motors, BMW and IBM have co-founded MOBI blockchain consortium, which is exploring the use of blockchain technologies to make the industry safer, more affordable and more widely accessible.
Food Safety
Walmart uses blockchain technology to track pork supplied from China, including information on the source, where it was processed, where it was stored, and its sell-by-date (Forbes). IBM is currently working with French grocery chain Carrefour to improve food safety by tracking chicken, eggs, and tomatoes as they travel from farms to stores to help detect and prevent the outbreak of foodborne illnesses. With 12,000 locations around the world, Carrefour plans to use the system to track all fresh product lines.
IBM has now partnered with Dole, Golden State Foods, Kroger, Nestlé, Tyson Foods, Unilever, Walmart and other major corporations to determine how the global supply chain can benefit from blockchain. Their first initiative is to reduce the time it takes to identify and eradicate the source of foodborne illness (Very).
Pharmaceuticals
In 2013, the Drug Supply Chain Security Act required that the makers and suppliers of prescription drugs must use an electronic interoperable system to identify and trace certain prescription drugs, with the blockchain providing the answer. Drugs can be tracked, traced, and verified as they move through the supply chain from manufacturer, to distributor, to dispenser, and to the patient. (KPMG).
Healthcare
Healthcare providers Humana, Multiplan, UnitedHealth Group's Optum, UnitedHealthcare, and Quest Diagnostics have partnered in a pilot program to use blockchain technology for healthcare provider demographic data. Companies today keep separate copies of provider data. Reconciling the information costs as much as $.2.1 billion annually. Leveraging blockchain to share this data, could results in significant cost savings (Modern Healthcare).
Shipping/Logistics
Maersk and IBM have partnered to develop a global supply chain platform built on blockchain technology called “TradeLens”. So, far, the platform is being used by 94 companies, including cargo owners, global container carriers, logistic firms, freight forwarders, terminal operators, and international customs authorities. The shipping companies alone make up over 20% of the global supply chain. TradeLens has captured 154 million shipping events to date and is adding 1 million more per day. Based on initial trials, it was estimated that the blockchain solution could reduce transit time of a shipment of packaged materials to a production line by 40% (Cointelegraph).
Federal Express is using blockchain technology to track high-value cargo in the supply chain process, with plans to extend this functionality to all shipments. They are also helping to develop blockchain industry standards for supply chain logistics.
Online Retail
Over four years ago, Overstock.com became the first major retailer to accept Bitcoin as a form of payment. Today, they accept over 40 versions of cryptocurrencies. Medici Ventures, a subsidiary of Overstock, invests in emerging markets for blockchain technology (Computerworld). To date, they have invested in 12 firms. Microsoft has also been accepting Bitcoin payments on its website since 2014 and has over 40 patents related to Blockchain payment gateways.
Diamonds
Signet Jewelers, the world’s largest retailer of diamond jewelry, recently joined Tracr, a diamond blockchain program created by the De Beers Group to ensure a diamond’s authenticity and provenance. The program ensures gems are not illegal conflict diamonds coming from African war zones, tracing the gem from mine to retailer. Tracr also ensures that there is no theft or illicit substitution along the way.
Banking/Finance
The financial sector accounts for over 60 percent of the market value of blockchain. JP Morgan, ANZ and RBC have recently launched pilot programs for blockchain-based payments (KPMG). Ripple, a blockchain provider, is working on building out blockchain-based solutions for banks to use for clearance and settlement (CBInsights).
Conclusion
The market potential for blockchain is immense. In a recent survey by PwC of 600 executives, 84% of organizations are already involved in some way with blockchain technology. International Data Corporation (IDC) forecasts worldwide spending on blockchain will reach $11.7 billion by 2022, with the United State leading the way accounting for 36% of the investment, followed by Western Europe, China, and the Asia Pacific. Gartner predicts that blockchain’s business value-add will grow to more than $3.1 trillion by 2030 and that 10-20% of the global infrastructure will be running on blockchain technology by 2030.
Until next month!
Meet the Author
William Craig, CPA – Senior Manager - Market Research