Create a new business model with trust encrypted digitally

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Contracts and transactions – as well as the records of them – are among the most defining and important structures of our economic, legal, and political systems today. They protect assets and set organizational boundaries. They establish and verify identities and chronicle events. They govern interactions among nations, organizations, communities, and individuals.

Blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically. With blockchain we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision.

In this world every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared. Intermediaries of all kinds – accountants, brokers, bankers, and more – might no longer be necessary. Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction. This is the immense potential of blockchain.

It is interesting to see how industries are embracing this new technology around the globe. Based on my interactions working closely with an industry think tank, there are three typical use cases that come to mind and I would like to share with you.

The first example comes from the aviation, and the maintenance, repair, and overhaul (MRO) industry specifically. In this use case, blockchain-based MRO blocks would contain data on aircraft parts – where they came from, which airline operated them for how many hours, when and if they failed, who repaired them and when, and so on. The data could be entered manually or automatically by ERP systems. Once entered according to the rules, the data would be distributed to all participants in the blockchain. It could not be changed without consensus from all participants. Cryptography would make misinformation extremely difficult, and the distribution of data among many companies would make it almost impossible to hack.

Blockchain will also the time-consuming manual processes of duplication, storage, certification, sharing, and searching associated with paperwork.

This would be a breakthrough solution for complex aviation supply chains, as the blockchain becomes a single source of the truth to all parties involved. It would also help significantly improve the repair time while lowering cost – which is so critical in an industry where time on wing is key.

For my second example, let's turn to disruption in the finance and accounting (F&A) industry. Here, the idea is that companies could manage order-to-cash operations via a digital F&A solution that leverages blockchain technology to eliminate billing errors, accelerate payment time, and dramatically transform operations, customer satisfaction, and cash flow management.

At the moment, approximately 70 percent of invoice disputes occur due to inaccurate information and missing or late invoices, which not only frustrates customers but ties up cash in accounts receivable, delays payments, and increases costs. Today, using distributed ledger blockchain technology, it is possible to allow various internal and external stakeholders to easily and transparently share data among multiple computer systems. This eliminates the potential for data mismatches among multiple parties involved in F&A functions – such as accepting and processing orders, managing fulfillment, and generating invoices – and as a result, reduces time spent managing disputes. This blockchain F&A solution also integrates with customer and supplier banks, allowing visibility into transaction status across end-to-end operations. By automating the payment process once the transaction has been validated and approved, the solution eliminates the potential for errors, which speeds payments processing and delivers a more seamless customer experience.

Finally, I would like to discuss a use case in which water resource management and distribution can become more transparent through the application of blockchain technology. Such a use case is so important to agrarian countries like India, where something like 60% of the people depend directly or indirectly upon agriculture.

Water, of course, is a limited resource and must be distributed fairly between agriculture and civil usages. Blockchain-based technology could utilize smart contracts to convert water rights into digital assets.

Each individual farmer will be assigned a digital token representing a fractional ownership in actual water rights, which removes the financial barrier to entry. These asset-backed tokens offer stability and value.

This will ensure complete transparency in the movement, collection, distribution, usage and recycling of water. By eliminating the role of the middleman, such a solution also reduces the chances of corruption.

In summary, blockchain represents a great opportunity for all industries to transform and decentralize records, transactions, and payments frameworks, while also creating new business models with trust encrypted digitally.

The article was authored by Diwakar Singhal, Senior Vice President & Global Head of IoT Business at Genpact. CIO Review published this blog in May 2018.

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