Blockchain’s Biggest Opportunities Aren’t in Bitcoin
By Greg Satell
In 1970, a scientist at IBM Research named Edgar F. Codd make a remarkable discovery that would truly change the world—but few people realized that at the time, including people IBM, who neglected to commercialize it. It was called the relational model for the database and it would spawn a new era of possibility.
What made relational databases important is how they changed how we could manage data. They made data fungible. Classical or “flat file” databases worked very much like an Excel spreadsheet. They stored data in columns and rows which lacked flexibility. You really needed to know how the database was set up to find the information you needed. Anybody who has tried to understand someone else’s spreadsheet knows what that’s like.
With relational databases, however, all you need to know is the query language and you can extract what you need from any database, no matter who set it up. In 1979 Larry Ellison and two friends launched the first commercial product based on Codd’s ideas. Two years later, they would change the company’s name to Oracle . Because of the relational database we can now hop on a system like the Internet and pull data from just about anywhere. It’s what made the information age possible.
Today, nearly 50 years after Codd published his work, we’re embarking on a new era. Blockchain, although it started out as the enabling technology for the cryptocurrency Bitcoin, is essentially a new kind of database. That may seem like a minor thing, but if the impact is anything like that of the relational database, it will transform how we use information.
To see how, consider IBM’s joint venture with Maersk to develop a blockchain infrastructure for global trade. Just think of all the informational bottlenecks cargo needs to go through in ports around the world. A 2013 study by the World Economic Forum found that reducing back-office friction in international trade could increase GDP by nearly 5% and commerce by 15%. Global GDP amounts to about $80 trillion, which means you’re talking about a $4 trillion potential impact. That’s enormous by any standard.
The transformation is already taking shape. Walmart recently announced that it will use blockchain to improve food safety. With conventional technology, it took about a week to trace the origin of contaminated produce back to the farm which it came from, but with blockchain, Walmart has been able to reduce that to 2.2 seconds.
That not only means that less people should get sick, it should also allow the company to pinpoint exactly where the problem is coming from. So rather than having to throw out an entire crop, it could just remove the contaminated produce, which could save farmers millions in lost revenues.
That’s just the start. As Zia Yusuf, who heads up Boston Consulting Group’s Internet of Things practice put it to me, “The combination of blockchain, IoT [internet of things] and AI [artificial intelligence] for optimizing supply chains is profoundly exciting. In certain industries with complex supply chains and thin margins, applying the combination of these emerging technologies to logistics and supply functions has the potential to be a real difference maker.”
In the financial industry, JP Morgan , whose CEO Jamie Dimon once called Bitcoin “a fraud,” is rolling out its own cryptocurrency, JPM Coin, to make transactions more secure and efficient for its clients. Experian is experimenting with using the technology to automate the verification process for loans in very much the same way that firms like Walmart are using it to automate supply chains.
Yet all of this, exciting as it may be, is merely prologue and looking back on Edgar F. Codd and the relational database shows why. Today, very few people utter the term “relational database,” but just about everybody benefits from the industries it has spawned, such as e-commerce and online media. In much the same way, the true potential for blockchain is its role as a secure, distributed data structure that has the power to spawn new business models.
For example, Vijay Mehta, Chief Innovation Officer at Experian’s credit bureau, told me that he envisions enabling the company to marry the sharing economy with financial services, so that contributing data and providing analytics is streamlined while at the same time maintaining control of how and when that data is used, much like Digital Rights Management (DRM) technology enabled the rise of digital media.
This “DRM for data” aspect of blockchain has huge potential. For example, Hu-manity.co is a new startup that plans to give patients more control over their health data. Today, when we sign a consent form for our data to be used for research, we essentially give it away. However, with blockchain, we may be able to track it, decide for ourselves how we want our data to be used, and even be reimbursed for it.
So if you want to think about how you should invest in blockchain, consider how data that is trapped today, either because of bureaucratic bottlenecks or monetization concerns, can be unleashed to create new value. That’s where you’ll find new business models—and possibly even entire industries—being created.
Article source: https://www.barrons.com/articles/blockchains-biggest-opportunities-arent-in-bitcoin-51551191828
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