The DLT opportunity: who’s driving adoption and disruption?
Joe Christopherson, CMO & Co-Founder of Atlas City
Tuesday, July 30, 2019
Advocates of distributed ledger technology (DLT) will tell you that it has the potential to change the world. The real challenge is how we implement it. Joe Christopherson, CMO at Atlas City shares his insight on why some sectors are more ripe than others for allowing blockchain disruption, and how we can overcome challenges to DLT adoption...
The DLT opportunity, explained
At the heart of DLT is the ‘ledger’. This tracks every move and transaction associated with a piece of data: when and where it originated, who owns it, and where it goes next. Not only does DLT create total honesty and robust security on a network, it does this while protecting the privacy of users.
Despite the opportunities afforded by DLT today, it is not yet a mainstream solution. This is partly due to technical limitations: no public blockchain currently exists that is able to process the volume of data produced by enterprises in the real-world. However, tech innovators are fast developing the capabilities of DLT. The real challenge to its adoption is consumer attitudes.
A recent report by KPMG shows that while 41% of tech leaders want to adopt blockchain in business in the next three years, 28% said they were unlikely to be able to harness the tech in this period. A further 31% said they were “on the fence” about blockchain and DLT.
As with any new tech, mainstream DLT adoption will take time. Fortunately, there are already a number of well-suited sectors leading the charge.
Leading the charge
One of the earliest sectors to adopt and explore DLT is the financial services industry. In many ways, this is an obvious choice. DLT’s features are naturally suited as a payment mechanism, allowing payments to be tracked securely, and with complete transparency.
In the UK in particular, we have seen plenty of DLT proof-of-concepts among the growing FinTech community. More recently, we have seen DLT innovation applied within the financial market infrastructure, including equity, bonds, and derivatives. Although this work is exploratory at the moment, the pace is quickening, and we expect to see more financial DLT developments very soon.
Another — perhaps unexpected — early adopter of DLT is the supply chain and logistics industry. Challenges in this sector frequently arise from the negotiating of many interlinked participants. A successful supply chain must be smooth and efficient, with total visibility of what’s going on in each moving part. A shared DLT infrastructure allows participants transfer and share information along the life cycle of a good in transit. Automation can be embedded in the network, which would allow processes to be handled quicker with reduced chances of human error.
In both finance and supply chain logistics, DLT creates the opportunity for massive cost saving due to faster processing, and a reduction in friction points and human error. These industries already rely on technically sophisticated operations and automation, so the integration with DLT is the next logical step.
With businesses across sectors exploring what’s possible with DLT, we are starting to see new types of primitives emerge which are only possible because of blockchain. Tokenisation is one such primitive.
Using tokenisation, any physical asset is represented through a digital token. This method is typically used for high-cost goods, such as antiques and collectibles, real estate property, jewellery, and even luxury wines. These tokens help ensure the item being sold is authentic, by providing a log of the item using the ledger. The tracking ability enabled by DLT keeps high-cost items safe in sale and transit.
We predict DLT will soon transform the world’s critical infrastructure and energy sector. By necessity, these industries generate vast quantities of data concerning temperature, water flow, and power surges. DLT can improve efficiency by increasing visibility of this data, enabling engineers to use predictive maintenance and spot faults before they cause a problem. Sharing energy data across industrial device networks also gives regulators better visibility into the operations of energy providers, giving them more accountability. All of this saves money, and provides the end customer with a higher quality of service.
Challenges of adoption
DLT adoption for enterprises is hindered by the learning curved involved. There are new concepts and paradigms involved which make it difficult to adopt, especially, as established industries have used legacy systems for decades. This means retraining staff and introducing technical debt in areas of their businesses.
Most established players don’t want to be innovators as they view it as a strategic risk. While this leaves opportunity for incumbents to leverage emerging technology to their advantage, this isn’t a perfect solution. Younger, fast-moving players do not have the same budgets as business giants, which may hinder what they are able to develop and implement. Until DLT is embraced by enterprise, it will continue to be seen as a risky choice.
In our opinion, mainstream adoption will come when people start using DLT without even realising they are doing so. There won’t be one influential app that brings DLT usage into the limelight. Rather, it will come from multiple interlinked services and applications integral to our daily lives. The core protocols which power the decentralised web will become invisible, and most people won’t even realise they are using a blockchain or multiple blockchains.
Taking the adoption of the internet as a reference point, it is likely that DLT will become ubiquitous within the next twenty years. However, we suspect the growth of the decentralised web will outpace the adoption of the current web we have today, as people are already online and the infrastructure is in place.