For those following the hype machine that is blockchain, especially over the last few months, there is a lot to be excited about Blockchains. Besides the investment opportunity in Bitcoin, which has proven its high risk, high reward volatility over the past few months, there are many long term implications for using blockchains to change the way we organize the world’s information.
Those most bullish on the technology expect decentralized systems to entirely supplant the need for many “traditional” private and public services. Think of insurance, cyber-security, voting, big data…the list goes on and on for applications with exciting potential bound to fundamentally change the way things are owned and operated. None of these, however, appear to be more promising than the capacity for blockchain to affect the world of finance and transactions.
Blockchains naturally solve for a number of issues common in the world of fintech. At a high level, the technology can be used to create a public, distributed ledger of all transactions ever created on the network.
The network “includes two types of records, transactions and blocks,” says Lois Hansen. “Transactions include the actual data stored in the blockchain, and blocks confirm exactly when and in what sequence transactions have occurred.”
Technical details aside, what you really need to know is that this public, verifiable ledger is immutable and cannot be hacked. All of the information stored in the ledger is encrypted and access-controlled. No one individual can edit or delete any of the nodes in the chain.
Why this matters?
Core to blockchain is the ability to track and manage ownership within a system. Currently, the financial world is plagued with high fees and human errors due to the inefficiency of intermediary parties. With implementations of tokens and cryptocurrencies, we can replace the need for costly middlemen that drive up prices and slow down the entire process.
We can leverage this fundamental piece of blockchain in a number of different ways. We can track exchanges between investors and borrowers. We can tokenize and crowdfund projects, managing their equities via a blockchain. There are also a number of “non-financial” applications of this technology that are being used to disrupt industries by replacing the labor intensive process of managing trust.
A growing startup doing this extremely effectively in the trillion dollar freight industry is ShipChain. They are using Ethereum smart contracts on top of a decentralized ledger to track each and every stage of the shipping process. Currently, there are a number of confusing go-between steps that have splintered the industry across a bunch of independent parties. This is confusing and, above all else, very inefficient.
ShipChain’s platform connects shippers to buyers, and replaces the need for hiring a costly freight broker. As soon as an order is placed, a contract is automatically created that details all of the important shipping information from the transaction. As with any data stored in a blockchain, the information is secured and encrypted such that no single party can harm it. And finally, upon confirmation of delivery of the order, payments are automatically released and the transaction is marked complete on the main blockchain.
Their team is backed by years of experience in the freight and technology worlds. Their newly added Chief Strategy Officer, Roger Crook, is the former CEO, and Global Head of Sales and e-Commerce at DHL Global Forwarding. He has been in and around the industry for decades and has a strong international network of important players.
During this wave of technological progress, it will be interesting to see which startups are able to attract the right talent to build their versions of the future. While there is a lot in the air as to which companies are here to stay versus fizzle out quickly, the only inevitability is that disruption is imminent. Every industry will be affected.