© 2018 by Integrale Advisors

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A Blockchain Evaluation Past Frenzy and Currencies:

July 7, 2018

 

As the cryptocurrency frenzy has settled down, as discussed back in January, investors should reevaluate the strategic objectives of blockchain, separately from those of the currencies that received much attention. Blockchain does carry benefits from reductions in transaction complexity and cost, as well as helps improve the transparency and therefore fraud control for. Yet, instead of utilizing new technologies, the economic incentives are more aligned to capture value for incumbents by harnessing blockchain rather than be overtaken by it. Therefore, recent research puts the highest likelihood on blockchain as a permissioned, not public, commercial model. Under public blockchains belong the currencies like Bitcoin, which structurally have no central authority and are generally viewed in regards to their disruptive disintermediation. Permissioned blockchains on the other hand are privately hosted and allow controlled access and editing rights.

 

The use of private blockchain allows existing businesses of any size to extract commercial value. Dominant firms are able to maintain their positions as central authorities with or without other industry players. Firms that undertake that route are able to efficiently share data without limiting manually automating what is shared, with whom, and when. Currently value can be created by uses such as that of the ASE (Australian Securities Exchange) where blockchain is used for equities clearing to reduce back-office reconciliation work for its member brokers. IBM and Maersk Line are currently working on marketing  a blockchain trade platform for logistical purposes, where secure, real-time exchange of supply-chain data and paperwork is possible.

 

Keith Knutsson of Integrale Advisors commented, “There is undoubtedly value in blockchain technology, and as the craziness around currencies decays, companies will be able to see gradual ways to involve blockchain and evolve their operations.”

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