By Bengu Canliel
Blockchain, the digital record-keeping technology, continues to make headlines, capturing global attention. Considered by many as a technological breakthrough, its adoption seems to be gathering steam across industries worldwide, with companies like IBM, Mastercard, Paypal, Microsoft, JP Morgan and BMW leading the way. As with any technological breakthrough, blockchain too, has its challenges. However in an increasingly digital and interconnected world, blockchain’s potential to transform sectors like finance, cryptocurrency and healthcare, is hard to ignore.
Before we dive deeper, let’s briefly address some key questions: What does this buzzword mean, and why do so many consider it revolutionary?
What is Blockchain?
Blockchain technology is an advanced database mechanism designed to make the process of sharing and recording transactions in a business network easy. While there are several types of blockchains, each with its own features and purpose, all of them share the potential to bring unique benefits to businesses.
Blockchain has emerged as a promising solution to the limitations of traditional database technologies. Traditional database technologies present limitations, especially when used for recording financial transactions. They often depend on a trusted third party to supervise and validate transactions, which can add complexity, cause delays and increase expenses. Blockchain technology addresses these issues by streamlining the transaction process – making it faster, more efficient, and cost-effective.
A typical blockchain structure operates as a decentralised ledger system, where data is stored across a network of multiple computers rather than on a single server. This setup eliminates the need for an intermediary to supervise and validate transactions. As each transaction is verified, it is added to a ‘block’ of data, which is then linked to the previous block, forming a chain of data. Every member in the network has a copy of the same data which creates a shared, trustworthy source of truth – a level of transparency and trust that was previously unattainable with traditional database technologies. If someone attempts to alter the history of transactions, the network members are alerted of this change, and can immediately reject it. This decentralised system enhances security, data integrity and anonymity, reducing the risk of fraud and unauthorised tampering.
Blockchain’s compelling characteristics have led to its widespread adoption across a variety of fields, although some sectors and enterprises like financial institutions, healthcare organisations and government agencies, are better suited to the technology than others. It’s also worth noting that blockchain isn’t just a short-term technology. It’s also a technology that can benefit from being paired with AI, machine learning and other innovations in the future.
The Rise of Blockchain-Powered Cryptocurrency
The launch of Bitcoin in 2009 was a milestone for blockchain, helping it transition from a theoretical concept to a real-world application. Serving as the backbone of most cryptocurrencies, blockchain has proven the viability of this digital distributed ledger technology. Since then, cryptocurrency has become one of blockchain’s most well-known applications, with Bitcoin, Ethereum and Tether among the largest players in this space..
In just over a decade, cryptocurrencies have grown from niche digital novelties to trillion-dollar technologies, with the potential to disrupt the traditional financial system. Today, an increasing number of investors hold bitcoin and other cryptocurrencies as assets to make all types of purchases – from software to digital real estate. While each cryptocurrency has its own unique appeal, much of this popularity is due to the decentralised nature of these currencies, enabled by blockchain technology. Unlike traditional currencies, their decentralised structure allows these cryptocurrencies to be transferred both anonymously and quickly across borders without the need for a bank that could charge a fee or block the transaction.
Blockchain in Supply Chain Management
Beyond cryptocurrency, blockchain technology plays a significant role in supply chain Management practices worldwide. Supply chains are, at their core, networks of linked companies. Due to the complexity of their ecosystem, obtaining accessible, complete and accurate data isn’t always easy. On top of the existing complexity of supply chains themselves, we live in an increasingly complex global economy. Consequently, seeing every step involved in getting a product from creation to consumer, is proving to be increasingly difficult.
Today, there is a growing demand for transparency and accountability in supply chains. More and more consumers, businesses, and stakeholders are wanting to understand how goods are produced and distributed in order to act responsibly and make decisions that align with their goals and values. Blockchain provides an enhanced and secured supply chain through its decentralised ledger by providing an unchangeable, shared record of each step in the supply. With blockchain, it becomes possible to verify the origin of goods, monitor compliance with standards, and ensure adherence to ethical practices. Reflecting its growing importance, the blockchain for supply chain traceability market was valued at $2.1 billion in 2023.
Let’s have a look at some real-world applications of blockchain in supply chain management.
IBM’s Food Trust Network is one example of many companies who have deployed blockchain to track the journey of their food products from production to distribution. By using blockchain technology, the company has successfully identified and isolated sources of contamination, increasing food safety standards.
Pharmaceuticals is another sector that has adopted blockchain technology for enhanced traceability. Pharmaceutical supply chains are vulnerable to illicit wholesalers who exploit gaps in under-regulated medicine importation which can lead to compromise the quality and safety of medications that successfully reach patients. In fact, the US pharmaceutical sector bears an estimated loss of $200 billion due to counterfeit medication. Blockchain technology, by digitising the track and trace process, is considered the optimal solution to help the pharmaceutical supply chain tackle counterfeit drug protection and guarantee product quality.
Looking Ahead
In just a couple of decades, blockchain technology has offered a glimpse into its revolutionary potential. Blockchain’s successes in cryptocurrency and supply chain management only serve as two examples of many, where blockchain has demonstrated its value across diverse applications. While this article has given a brief and very simplified overview of what blockchains are, its benefits and a few real-life applications, it has only scratched the surface of what this technology could ultimately achieve. It is also important to note that blockchain has its limitations. And while these haven’t been discussed in this article, these issues must be addressed if blockchain is to achieve its full potential. Looking forward, it will be fascinating to see how the technology will evolve, and how it will cooperate with other advanced technologies to reshape industries.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.
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