Blog: Blockchain in e-commerce and online trading
Blockchain is a revolutionary technology that is already transforming electronic commerce and online trading across sectors from fashion to financial services. As a secure database, it will also release the transformative power of two more emerging technologies – artificial intelligence (AI) and the Internet of Things (IoT).
A few obstacles are slowing progress. Blockchain solutions haven’t yet gained traction among institutional investors, many of whom prefer to trade in conventional commodities and assets and are sceptical of the technology’s ability to transform. In addition, the cryptocurrencies associated with blockchain have experienced extreme volatility and high speculation, exposure to online fraud and a lack of reliable trading facilities.
Perhaps more seriously, for financial service industries blockchain’s decentralised model takes the power away from central authorities, who have traditionally dictated monetary policy and exploited the lack of competition by charging high interest rates and imposing risk selection to shut out poorer individuals and businesses.
As a result says Sloane Brakeville, co-founder of the blockchain-enabled logistics network Fr8, banks and financial services are currently adopting the technology only in a limited capacity, “preferring to use private blockchains that save them money internally, but don’t necessarily provide the same added value to customers that a public blockchain using token economic models would provide.”
These restrictions can only temporarily hold back the momentum though. Blockchain offers the advantages of transparency, reliability, privacy and low operating costs. Combined with its decentralised nature, the benefits offer a competitive advantage to the early adopters in a wide variety of industries.
Blockchain and supply chain management
One reason for expecting much of blockchain is the efficiencies it offers to supply chains and supply chain management not just in a specific industry but across a wide variety of sectors.
Take as an example a recent global trade experiment conducted by the Commonwealth Bank of Australia (CBA). The bank used a new blockchain platform, underpinned by distributed ledger technology (DLT), smart contracts and the Internet of Things (IoT) to track a shipment of 17 tonnes of almonds, sent from Australia to Germany.
Participants in the initiative, including those providing the shipping and rail transport, said its success could prove to be hugely beneficial to the global trade industry by streamlining supply chain management and introducing an authenticated system for keeping track of key documents.
“Our blockchain-enabled global trade platform experiment brought to life the idea of a modern global supply chain that is agile, efficient, and transparent,” commented CBA managing director Chris Scougall. “We believe that blockchain can help our partners reduce the burden of administration on their businesses and enable them to deliver best-in-class services to their customers.”
Blockchain and insurance
In addition to banks, other sectors of the financial service industry have recognised the potential of blockchain. For example, it is assisting the development of insurance policies that diverge from the traditional annually renewable policy for household or motor insurance.
So-called ‘on-demand’ insurance covers are responding to developments such as a growing workforce in the so-called gig economy who don’t automatically receive employers’ liability cover, Millennials who may only want to insure a single item such as a laptop or a drone and those using a car, bike or scooter pool who only require short-term insurance cover.
In addition, this summer has seen Microsoft and auditor Ernst & Young partner on blockchain-based insurance platforms. In May they teamed up with Danish shipping giant AP Moeller- Maersk to launch the world’s first marine insurance blockchain platform. Insurwave will support more than half a million automated ledger transactions and help manage risk for more than 1,000 commercial vessels in the first year.
EY and Microsoft followed up this initiative in June when they launched a blockchain solution for content rights and royalties management. Aiming to streamline the costly and time-consuming processes in entertainment rights and royalties, the solution is initially being deployed within gaming with Microsoft and its game publisher partners but can be applied to any industry where intellectual property or assets are licensed.
Blockchain and the legal profession
The legal profession is also exploring the potential of blockchain. October will see the launch of the Agreements Network, a joint initiative between a group of law firms and tech developers to create a blockchain platform supporting the creation, use and sale of smart contracts for lawyers.
The Agreements Network “seeks to redefine how legal products and services support the networked economy.” Instead of the traditional means of exchange, the network will create a shared infrastructure to eliminate the ‘transactional execution risk’ or the inherent liability that two parties traditionally have assumed when they enter into an agreement.
Contracts, documents, information, and assets will be stored collaboratively across multiple computers, instead of in one location by a single firm or lawyer. One of the co-founders predicts that “the Agreements Network could provide a foundational piece technology for a range of innovative solutions in the legal marketplace.”
Blockchain and open government
Ernst & Young is also the initiator in a scheme to apply blockchain to the work of local government. EY has worked with the City of Vienna in an initiative that uses public blockchain to validate and secure the Austrian capital’s open government data (OGD), which includes data on public transport routes, train schedules and surrounding communities’ voting results.
It’s part of DigitalCity Wien, a digitalisation initiative that uses blockchains to simplify and automate administrative processes, especially for OGD in areas such as energy reports and business registrations that need regular updating frequently. The public blockchain networks are also expected to improve data security.
EY reports that around 350 datasets have been secured on the public blockchain networks since the solution went live last December. The networks – among Europe’s first – secure official documents by storing hashtags of the data sets on the public blockchain. Both city employees and Vienna’s citizens can review the documents’ authenticity, when they were created, and if/when the data was modified.