What Can Fuel the Blockchain Adoption Engine?

March 5, 2016     By : Sofia

2016 seems to be all about Blockchain. Every self-respecting company is now either in some collaboration with a blockchain startup or has a team dedicated to exploring opportunities with blockchain. We at LTP have long been contributing to the thought leaders in the field and have developed deep expertise on blockchain applications as well as performed extensive research on what FIs are doing with blockchain. For those looking to learn about the various blockchain applications, the LTP team has organized a blockchain workshop, where professionals can learn about the applications of distributed ledger technology.

Needham & Company, an investment banking and asset management firm focused on growth companies, has recently published an extensive report providing insights on the factors facilitating blockchain adoption and hurdles with blockchain technology. At this point, let’s focus on the factors that can facilitate blockchain adoption.

 

Large corporate adoption and governmental support

Large corporations can serve as catalysts of trust and desire to try out new technology. With Nasdaq Linq enabling the first-ever private securities issuance using blockchain, distributed ledger technology gained a certain level of trust as a major player demonstrated its viability and a beneficial application. Now trusted by enterprises, blockchain will gain the trust of the common public.

Even better effect on blockchain adoption comes from applications in/for government. The same Nasdaq and the Republic of Estonia have recently announced that Estonia’s e-Residency platform will be facilitating a blockchain-based e-voting service to allow shareholders of companies listed on Nasdaq’s Tallinn Stock Exchange, Estonia’s only regulated securities market, to vote in shareholder meetings. The country’s e-Residency platform is an electronic identity system, used by both Estonian residents and those with business interests in the country, to access government services through e-Residency digital authentication.

Another government took a step towards blockchain based democracy 2.0 – a political utopia in Australia. One of the Australian parties – the Flux Party – claims to be very different from traditional political parties as it won’t have any policies. The legislation will be supported or blocked by the members who will be able to trade their votes for every bill online. Blockchain-based voting with bitcoin-like tokens eliminates the friction that usually exists between the voters’ desired outcome and the senators’ decision.

The loop of adoption can be perpetuated, but someone needs to start. The chances are that large corporations, due to their scale and power in the market, can facilitate adoption if they implement it in their own value chains. Technology adoption by major enterprises can solidify confidence in the technology in the minds of the public who look to these companies for thought and technology leadership.

 

The IoT

Distributed ledger technology can become an integral part of IoT. As the number of connected devices continues to grow, blockchain-powered devices can spread the adoption throughout the IoT ecosystem.

 

The power of the user

With the frequency at which data breaches are happening, users are seeking to have control over sensitive data. Blockchain by its nature puts users in total control. Applied to payments, blockchain allows users to retain control of their information and enable access to information about only one act of transaction. While  transaction data is traditionally stored by merchants, distributed ledger technology allows users to own their data and share only pieces of it.

 

Usage-cost efficiency

Blockchain-based software can facilitate the efficient alignment between service usage and cost, being a variation of a SaaS model. Organizations will be able to pay in real-time according to the usage and value attained. Blockchain is able to ensure the most effective alignment between usage and cost due to its transparency, degree of documentation accuracy and the significantly lower cost of cryptocurrency transaction.

 

Mindset

Distributed ledger has an opportunity to significantly boost operational efficiency. Business owners truly dedicated to cost reduction and functionality expansion, will be imaginative enough to find ways to implement blockchain technology in their supply chains, payments processing and other processes, where they are looking to eliminate intermediaries. It will take dedication and desire to take organizational operations to another level to find a place for blockchain.

 

Regulations  

Clarity of regulations can become a driver for blockchain adoption. Clear understanding of the procedures and requirements will allow large businesses to formally embrace the technology and for investors to confidently fund the next wave of use cases and applications.

BitLicense could be an example of a step taken by a government towards clear-cut regulation for cryptocurrency. Blockchain, in the future. may encounter similar actions once it’s massively adopted and applied.

 

Technology availability and low innovation barriers   

Blockchain adoption can experience a significant boost if the ecosystem is rich enough with a wide range of easily available, off-the-shelf, plug-and-play technologies from industry vendors. Availability of technologies can diminish the barriers to innovation within the industry. Over time, as the ecosystem develops, mainstream adoption will increase as businesses and individuals will be more fully able to leverage the security, durability, autonomy, and cost efficiencies of blockchain technology.

 

Robust and mature smart contracts

As Needham & Company believes, a robust and mature smart contracts platform would be valuable across many industries and the opportunity to easily code business logic into regular operations could greatly reduce errors and also costs in basic operations and therefore rapidly accelerate blockchain adoption.

 

Emerging Markets

Three factors will be able to drive blockchain adoption in emerging markets as the report indicates: a lack of alternatives, mobile phone access and a marginal cost advantage.

In emerging markets, individuals and businesses have fewer, if any, alternatives, for many of the applications that can be efficiently built on blockchain technology and profitably deployed in low-income countries. While not a positive state overall, it can certainly positively affect the pace of blockchain adoption as the only best option.

We have explored earlier that a majority of the population in emerging markets is unbanked. However, the majority has access to a mobile phone, which could be a critical link to accessing blockchain-based services such as money storage/transfer, and other blockchain-based services.

Most importantly, because of the efficiency-powering blockchain technology, the unbanked and price sensitive part of the population (which is a large group of people) in the developing world may be one of the most important growth drivers of blockchain technology. Due to the low marginal cost associated with blockchain-based services, distributed ledger technology can be especially successful in adoption in the developing world.

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Sofia

Sofia is a contributing writer for LTP based in New York. She is a market research professional skilled in data analysis and visualization. Sofia has an extensive experience in consumer behavior studies and marketing analytics. She is passionate about disruptive startups with innovative business models that are having a powerful impact on the industries.

If you have any suggestions or questions for the author, please email us at follow@letstalkpayments.com