Moving on from the power of augmented reality, the next entry in our ‘Interconnection x Hot Tech’ blog series explores a fast-growing technology in Asia-Pacific (AP) – blockchain, and its power to transform the face of business and disrupt industries in the region.
Blockchain is a game-changing ledger system that consists of a ‘chain’ of timestamped digital records-aka ‘blocks’-that are created to be unalterable and verifiable. It offers a simple way to keep indisputable records that are equally accessible to all stakeholders. By decentralizing business ledgers, blockchain also removes reliance on a mediator, making transactions more efficient. Compared to traditional data banks, it is also easier to manage and less vulnerable to malicious tampering.
Thanks to its potential to completely transform how businesses operate, interest in the application of blockchain technology is rising across Asia-Pacific. IDC1 expects blockchain solution spending in the region (excluding Japan) to reach USD 523.8 million in 2019, which is an increase of 83.9% from the actual spend in 2018. It is further predicted that this spending will grow at a compound annual growth rate of 77.5% over the 2018-2022 period.
Hailed as one of the key drivers of the fourth industrial revolution, blockchain technology is poised to introduce massive disruption to businesses across Asia-Pacific and around the world. There are potential applications in every industry, including the finance, insurance, logistics and election infrastructure, which we will look into in this blog.
Blockchain – the disruptor to Asia-Pacific’s industries
Cross-border money transactions have long been built upon a “correspondent banking” model, making them highly complex, costly, and time-consuming. Multiple entities must be involved, each subject to different jurisdictional regimes as well as separate systems and infrastructure.
In 2016, the Monetary Authority of Singapore (MAS) set up Project Ubin2, which uses a blockchain platform to transform interbank real-time settlement as we know it. Early this year, MAS successfully trialed cross-border and cross-currency transactions with the Bank of Canada. Hashed Time-Locked Contracts (HTLC) were used to bridge their two networks through blockchain technology, allowing Payment versus Payment settlements to take place without a third-party intermediary.
This allows businesses to bypass the correspondent banking model which has been there for centuries, making cross-border payments as quick and cost-effective as local payments in a flexible and secure manner. The sending bank no longer needs a presence or partner in the receiver’s physical location, removing the need for individual bank accounts.
Most insurance policies and claims are still manually processed on paper, involving a long process with many moving parts. This system is vulnerable to misinterpretation, clerical error, and even fraud, ultimately lengthening the settlement process.
Thanks to the emergence of the blockchain technology, Hong Kong-based insurer Blue Cross recently announced the launch of its blockchain-backed medical claims solution in April 2019. By keeping decentralized transaction records under blockchain encryption, it no longer needs to collect and reconcile claim documents from multiple parties and locations, limiting inefficiencies and keeping fraudulent tampering to a minimum, shedding new light on these long unresolved problems.
With blockchain, vulnerabilities and inefficiencies can be limited by replacing paper contracts with secure smart contracts. Insurance liabilities can be digitally verified for all parties involved, and much of the claims processing work can be automated. This has the potential to simplify distribution and reduce dependency on agents and brokers.
Blockchain also ensures better cost efficiency. Within the global property & casualty insurance industry, blockchain applications are estimated to increase the technical margin by more than $200 billion from current gross written premiums, while taking 5 to 13 percentage3 points off the combined operating ratio.
Logistics is another key industry built on paperwork, with administration accounting for 20% of overall costs4. Tracing a package can take days or even weeks, especially for global shipments handled by multiple parties. What’s more, over 8% of pharmaceutical shipments are spoiled by temperature changes, and pinpointing where it happened can take months.
Traceability is especially important for ensuring food safety. Blockchain-enabled Internet of Things (IoT) sensors can compile a real-time changelog for temperature, humidity, and other factors. Walmart, JD.com, IBM, and Tsinghua University formed a Blockchain Food Safety Alliance to develop such a system in China. Every step in the supply chain will be securely recorded in blockchain, from where an item was grown to its delivery in-store. No more unforeseeable “surprises” for the industry when unboxing.
As a secure decentralized ledger, blockchain enhances traceability and transparency across the freight and logistics industries. Stakeholders can add secure records that are almost instantly accessible to everyone else involved, making it a matter of mere seconds to trace a package. Very soon, customers may be able to simply enter or scan the code of a package on their mobile phone to instantly check its origin and every checkpoint it has been through around the world. Besides, smart contracts can be applied to completely replace heavy administrative paperwork by automating supply chain activities, enhancing efficiency and eliminating clerical error.
Voting machines and vote counters are known to be vulnerable to error and electoral fraud. As a result, election results are always called into question, leading to recounts and ‘hanging chads’ that prevent votes from being counted correctly.
To address this, the South Korean Ministry of Science and ICT and the National Election Commission began testing ‘K-Voting’ in early 2019. Secured by a user authentication system, this blockchain-enabled system gives voting a previously unimagined level of transparency without the expense of privacy, by allowing voters to view their ballot and follow through electoral progress, acting as another power to monitor any electoral fraud.
Because blockchain is designed to be unalterable, it presents the ideal platform for storing ironclad voting records, from registration to identity verification to tallying.
Interconnection: Empowering blockchain applications in Asia-Pacific
Asia-Pacific is primed for blockchain adoption, thanks to its dynamic socioeconomic landscape, massive digitization of payments and consistent regulatory environment. However, with the multitude of data exchanges needed and generated by blockchain platforms, transferring all of the traffic across shared resources can pose a high security risk and threaten the stability of performance.
To unlock the full potential of blockchain applications, businesses will need a highly advanced IT infrastructure and mature digital readiness that enable seamless and secure interaction among all nodes. As the leading interconnection provider, Equinix offers private connections that eliminate throughput delays and security risks inherent in internet connections, perfectly complementing the key attributes of blockchain applications including:
Distributed: Blockchain distributes its records across multiple nodes in proximity to the digital edge. As more distributed end points and data and cloud services populate the edge, it becomes increasingly vital to roll out a digital edge strategy that brings infrastructure closer to endpoints for better user experience. To ensure secure, high-performance and low-latency connections, Equinix’s global interconnection platform can provide easy access to any node around the world residing at the edge via private connections in a reliable way.
Decentralized: Blockchain operates on a decentralized infrastructure instead of a centralized legacy IT infrastructure. A single update in the blockchain network will be copied and reflected across all nodes. To achieve seamless data exchanges and transfers on a decentralized platform, it takes a high level of interconnectivity to reach every node almost instantaneously. A global interconnection platform provider like Equinix can make it easy and cost-effective for enterprises to establish fast, secure and reliable private connections among all nodes in a blockchain network. Enterprises can also leverage the SDN-enabled Equinix Cloud Exchange Fabric™ (ECX Fabric™) to extend the reach of their blockchain solutions and gaineasy access to cloud and IT service providers including Amazon Web Services and Microsoft Azure in the ECX Fabric ecosystem.[LL1]
Incorruptible: Blockchain records data and replicates copies of it to all nodes in the blockchain network. The information stored is secured by cryptographic keys and becomes almost impossible to corrupt or change[LL2] . However, managing encryption keys can be complex, especially for enterprises participating in multiple blockchain networks with differing management solutions, tools, and levels of encryption. This complexity can be greatly reduced with SaaS-based Equinix SmartKeyTM as it simplifies the provisioning and control of encryption keys, which is crucial for a cryptography-based technology like blockchain.[LL3]
The future of business lies in the power and security of blockchain. Global pioneers will be the ones who leverage interconnection to discover how blockchain can transform their industries for the better.