Blockchain In Business: Challenges And Use Cases Barriers To Blockchain Technology Adoption And Use Cases Across Industries

LHBS is a strategy and innovation consulting firm with offices in Berlin and Moscow. We help legacy organizations become customer-centric and agile.

www.lhbs.com

Siim Pettai lhbs.com | sp@lhbs.com

This report explores the main benefits of blockchain technology, how it is impacting business, its main challenges and the potential it has to disrupt numerous industries, illustrated with some of the best use cases.

Despite still being in development, blockchain has already established itself as a game changer in supply chain, customer experience and sharing economy where it brings tremendous value to both customers and organizations.

THE EMERGING BLOCKCHAIN TECHNOLOGYIntroduction.

INTRODUCTION.LHBS // BLOCKCHAIN TECHNOLOGY

- 02 -

BLOCKCHAIN AND ITS BENEFITS

IMPACT ON BUSINESS

USE CASES AND IMPLICATIONS

CHAPTER 1 CHAPTER 2 CHAPTER 4

CONTENT.LHBS // BLOCKCHAIN TECHNOLOGY

- 03 -

CHAPTER 3

CHALLENGES OF BLOCKCHAIN

- 04 -

59%OF CONSUMERS HAVE NEVER HEARD OF BLOCKCHAIN TECHNOLOGY

84%OF EXECUTIVES SAY THEIR ORGANIZATION HAS SOME KIND OF INVOLVEMENT WITH BLOCKCHAIN TECHNOLOGY

46%OF REPORTED BLOCKCHAIN USE CASES ARE IN FINANCIAL SERVICES.

Source: Coindesk, PwC Global Blockchain Survey

CONTEXT.

- 0 -5

30% of global executives see China as the emerging leader in developing blockchain projects, followed by the United States and Australia.

Source: PwC Global Blockchain Survey

CONTEXT.

Herman Gref.

Sberbank’s CEO Predicts Blockchain Will Soon Be

Commercial

“…The hype surrounding the technology has passed, and

it has entered a stage of industrial development. The

technology will take a year or two to be applied on an

industrial scale.”

CEO AND CHAIRMAN, SBERBANK.

CONTEXT.LHBS // BLOCKCHAIN TECHNOLOGY

- 06 -

01.CHAPTER

- 07 -

Blockchain And Its Benefits

- 08 -

What Is Blockchain?

Source: Upfolio

WHAT IS BLOCKCHAIN?

Blockchain acts as a database that keeps a permanent record of all transactions that have

ever happened on it.

BLOCKCHAIN AND ITS BENEFITS.LHBS // BLOCKCHAIN TECHNOLOGY

- 09 -

Source: Upfolio

WHAT IS BLOCKCHAIN?

It is designed to let you safely transfer digital property such as money without the need for

middlemen such as banks.

LHBS // BLOCKCHAIN TECHNOLOGY

- 10 -

BLOCKCHAIN AND ITS BENEFITS.

- 11 -

Benefits Of Blockchain

Skipping middlemen allows transfers

on blockchain to be much quicker than

traditional, paper-heavy processes

which oftentimes require third-party

involvement.

- ! -12

INCREASED EFFICIENCY.

BLOCKCHAIN AND ITS BENEFITS.LHBS // BLOCKCHAIN TECHNOLOGY

Source: IBM

Eliminating third-party involvement

also makes the transactions on

blockchain much cheaper, since banks

are notoriously known for charging

high fees.

- ! -13

REDUCED COSTS.

BLOCKCHAIN AND ITS BENEFITS.LHBS // BLOCKCHAIN TECHNOLOGY

Source: IBM

What makes blockchain so secure is the fact that each

transaction on blockchain is linked to the previous one.

Once a transaction is approved on blockchain, it is

impossible to remove it.

- ! -14

ENHANCED SECURITY.

BLOCKCHAIN AND ITS BENEFITS.LHBS // BLOCKCHAIN TECHNOLOGY

Because nobody can change the records, blockchain

becomes a trustworthy source of information even strangers

can agree upon.

Source: IBM

Blockchain also makes it possible to

track and provide information about

the product journey. The data can be

used to verify the authenticity of assets

and prevent fraud.

- ! -15

IMPROVED TRACEABILITY.

BLOCKCHAIN AND ITS BENEFITS.LHBS // BLOCKCHAIN TECHNOLOGY

Source: IBM

With the use of blockchain, transaction histories

are also becoming more transparent. On

blockchain, all participants share the same

documentation, which means everyone must

agree on it.

- ! -16

GREATER TRANSPARENCY.

BLOCKCHAIN AND ITS BENEFITS.LHBS // BLOCKCHAIN TECHNOLOGY

Source: IBM

02.CHAPTER

- 17 -

Blockchain’s Impact On Business

TOKENIZATION OF ASSETS

BLOCKCHAIN’S IMPACT ON BUSINESS

LHBS // BLOCKCHAIN TECHNOLOGY BLOCKCHAIN’S IMPACT ON BUSINESS.

INITIAL COIN OFFERINGS

(ICOS)

ENTERPRISE SOFTWARE PLATFORMS

Source: PwC Global Blockchain Survey

Tokenization Of Assets

- is a method that converts ownership of an asset into a

digital token. Blockchain makes it possible to digitize a

real-world physical asset such as real estate and

represent it on blockchain.

Let’s say a person is interested in investing in real estate.

Instead of purchasing a whole property, tokenization divides

the asset into separate pieces.

This allows the person to purchase a certain amount of

tokens and become a partial owner of that property.

EXAMPLE:

BLOCKCHAIN’S IMPACT ON BUSINESS.

Source: PwC Global Blockchain Survey

ACCESSIBILITY Tokens can be bought from anywhere in the world at any time.

PERMANENT Once an investor buys tokens, its ownership cannot be refuted.

FRACTIONAL OWNERSHIP Tokens open up the opportunity for investors to own a fraction of an asset such as real estate or paintings. 

COST-EFFECTIVE Tokenization of real-world assets eliminates the middlemen (like banks) which oftentimes demand high fees and restrict investments to accredited investors only. Instead, tokenization enables straightforward peer-to-peer transfers which are faster and cheaper.

Source: Medium

BLOCKCHAIN’S IMPACT ON BUSINESS.

Benefits Of Tokenization

Initial Coin Offerings (ICOs)

- is a type of crowdsale funding method conducted entirely

on the blockchain. During the funding period, investors

purchase tokens with already established digital currencies

such as Bitcoin or Ethereum.

The funding method has become an alternative for small

and medium-sized enterprises (SMEs) in addition to

traditional capital funding provided by venture capital

firms.

BLOCKCHAIN’S IMPACT ON BUSINESS.

Source: PwC Global Blockchain Survey

Benefits Of ICOs

OPENESS

The funding is open to the public, meaning anyone can contribute at any time. This is different to the traditional ways of funding, where it is nearly impossible to become an early investor, unless you are well connected to the founders of the company.

LIQUIDITY

Compared to many traditional investment options where capital is inaccessible for several years, ICOs provide investors with high liquidity.

LOWER COMPETITION

ICOs allow projects which normally would not find funding through traditional methods to receive investments, mainly because the projects are not required to be located in wealthy areas.

Source: Medium

BLOCKCHAIN’S IMPACT ON BUSINESS.

Enterprise Software Platforms

A growing number of enterprises are incorporating blockchain

into their business operations such as finance, human resources

and customer relationship management.

Major players such as Microsoft, Oracle, SAP and Salesforce have

all announced blockchain-based initiatives.

In the future, many core business processes will run

on blockchain-based systems. Using blockchain in concert with

enterprise resource planning platforms will enable companies

to streamline processes, reduce human error and fraud,

enhance transparency and more.

BLOCKCHAIN’S IMPACT ON BUSINESS.

Source: PwC Global Blockchain Survey

03.CHAPTER

- 24 -

Challenges Of Blockchain

To this day, many executives are uncertain of what

blockchain really is and how it is impacting business.

LACK OF UNDERSTANDING

CHALLENGES OF BLOCKCHAIN.LHBS // BLOCKCHAIN TECHNOLOGY

Source: PwC Global Blockchain Survey

?

Another challenge of blockchain is lack of trust among

users, which is mainly caused by the lack of confidence

in the technology itself.

LACK OF TRUST

CHALLENGES OF BLOCKCHAIN.LHBS // BLOCKCHAIN TECHNOLOGY

Source: PwC Global Blockchain Survey

WHAT IS HOLDING COMPANIES BACK FROM ADOPTING BLOCKCHAIN?

27Source: Deloitte’s 2019 Global Blockchain Survey - 27 -

CHALLENGES OF BLOCKCHAIN.LHBS // BLOCKCHAIN TECHNOLOGY

Implementation

30%29%

Regulatory Issues

Lack Of In-House Skills

30%

28%

Potential Security Threats

Uncertain ROI

28%

04.CHAPTER

- 28 -

Use Case And Implications

Supply chain is one area where blockchain technology plays a

revolutionary role, mainly because it allows product tracking from

manufacture to sale.

Currently we are seeing several major players in the fashion industry as

well as retail adopting blockchain technology to allow customers to

access permanent information about a product’s journey. This is highly

relevant for consumers who are becoming more conscious about their

impact on the environment.

Supply Chain Management

- 29 -

Supply Chain Management

H&M’s Arket Brand Tests Blockchain Tool

In collaboration with blockchain startup VeChain, H&M’s subsidiary Arket has rolled out a new tool that features supplier storytelling.

The implementation features a tag that can be scanned with either the VeChain mobile app or a NFC reader alternatively. The scanning will result in information being brought up about the item’s origins, which material it’s made from and also the washing instructions.

USE CASES AND IMPLICATIONS.

LVMH To Launch Major Blockchain Project

The French conglomerate is launching a blockchain project that will provide access to a quick confirmation whether a product is authentic or not.

LVMH will likely adopt blockchain technology for luxury goods from both Louis Vuitton and Dior to ensure traceability and guarantee product authenticity.

The initiative comes after a study by Certilogo which found that 83 percent of consumers across the UK, the US, Italy, France and China have at least once been concerned that a product they had bought might be counterfeit.

USE CASES AND IMPLICATIONS.

Supply Chain Management

Walmart Asks Suppliers To Join Blockchain

Walmart recently asked its leafy green suppliers to enter the company's blockchain to be able to track the journey of products.

In order to track the journey of its leafy green vegetables and ensure transparency of the supply chain in case of a viral outbreak, Walmart’s suppliers of leafy greens will be asked to join the company’s blockchain by IBM.

The blockchain can only be joined by the members of Walmart’s supply chain. The technology is said to be very simple so every farmer can simply use “a smart device to capture information”, as Frank Yiannas, Walmart’s VP of Food Safety, explained.

USE CASES AND IMPLICATIONS.

Supply Chain Management

Seafood Company Uses Blockchain To Track Tuna

North American seafood giant Bumble Bee Foods uses SAP Cloud Platform Blockchain to trace the journey of yellowfish tuna from the ocean to the consumer.

The use of blockchain technology gives consumers the opportunity to access information such as the size of the catch, point of capture, the fishing community that caught it, as well as insights to verify freshness, safety, authenticity, fair trade fishing certification and sustainability. This way, it is possible to make sure that the food is safe and sustainably sourced.

To access the information, consumers simply have to scan a QR code on the product package.

USE CASES AND IMPLICATIONS.

Supply Chain Management

There are several companies using blockchain to offer either employees or

customers the chance to purchase experiences and rewards using tokens.

With the use of blockchain, companies can create frictionless loyalty

programs that are cost-effective and help drive the customer experience to

the next level.

Loyalty And Incentive Systems

- 34 -

Loyalty And Incentive Systems

PayPal Launches Blockchain-Based Incentive System For Employees

The new program means employees who contribute to ideas and participate in innovation-related programs will receive tokens as a reward.

The tokens, which hold no value outside of PayPal, can be traded between employees through a public account. The tokens rewarded can be exchanged for over a 100 experiences offered on the platform. The experiences include a poker tournament with PayPal’s vice presidents, a coffee with CFO John Rainey, a martial arts session with Dan Schulman, and more.

USE CASES AND IMPLICATIONS.

KPMG Helps Develop First Blockchain-Based Airline Loyalty Program

In collaboration with Singapore Airlines and Microsoft, KPMG develops the first blockchain based airline loyalty program.

Singapore Airlines recently announced the launch of the new KrisPay digital wallet, which KrisFlyer members can use to instantly convert KrisFlyer miles into KrisPay tokens that can be spent with participating merchants.

According to Singapore Airlines this not only makes it easier for them to create new partners and carry out payments using blockchain technology, it also allows customers to use miles in their KrisFlyer account.

USE CASES AND IMPLICATIONS.

Loyalty And Incentive Systems

Blockchain has also been used to create platforms which

provide a more efficient solution to international payments,

lending and trading.

The technology helps tackle the inefficiencies in banking and

provides a better solution for companies to make worldwide

transactions.

Financial Technology

- 37 -

Financial Technology

British Petroleum and Shell Introduce Blockchain-Based Oil Trading Platform

The trading platform has the potential to revolutionize the market by helping companies significantly cut costs in oil trading.

Called Vakt, the London-based platform allows oil majors and trading companies to make crude oil deals. The platform is the result of a partnership between British Petroleum (BP) and Royal Dutch Shell. Built on blockchain technology, the platform aims to provide a solution to trade and settlement inefficiencies, as well as improve transparency and increase security. Vakt also digitizes and centralizes all the required paperwork between all parties in each deal.

USE CASES AND IMPLICATIONS.

IBM And Twiga Foods Bring Blockchain Technology To Kenya

Nairobi-based Twiga Foods and tech giant IBM partner to build a blockchain-based micro-lending platform to help farmers and vendors access financing.

With help from IBM, mobile-based supply platform Twiga Foods recently developed a micro-lending platform, which allows clients to secure loans for their businesses using blockchain technology.

To predict credit worthiness, IBM analyzed the client’s purchase records from a mobile device and applied machine learning algorithms. This gave lenders the required confidence to provide microloans to small businesses. The platform also provides a benefit for vendors of having their data collected and stored on a distributed ledger.

USE CASES AND IMPLICATIONS.

Financial Technology

JPMorgan’s Blockchain Project Battles Fintech

74 global banks including Spain’s Santander join US-based bank JPMorgan’s blockchain project that looks to tackle difficulties in international transactions.

The 11-month project aims to speed up the error-prone international transactions process using blockchain technology. The mutually-accessible ledger across international banks would allow banks to find a quick solution to issues such as faulty addresses or compliance checks, which can postpone transactions for weeks. In case the project succeeds, JPMorgan could play a significant role in putting banks back on the map for payment technology.

USE CASES AND IMPLICATIONS.

Financial Technology

With the use of blockchain, digital public services are also becoming less

time-consuming, as it eliminates the need for paper-heavy processes.

Currently there’s a lot of testing done by public services and even

governments to see how they can create more seamless digital

experiences for the public using blockchain.

Digital Services

- 41 -

Digital Services

The Dubai Blockchain Strategy

Dubai is looking to implement blockchain technology across its entire public sector and become the first blockchain-powered government.

According to Smart Dubai, the implementation of blockchain technology could save up to 25.1 million man hours or $1.5 billion alternatively. This will also mean moving to a paperless government, as documentation such as visa applications, bill payments and licence renewals will be transacted digitally using blockchain technology.

The Smart Dubai entity is currently working on the results of 20 experiment cases to see whether the technology can be scaled across the entire government.

USE CASES AND IMPLICATIONS.

China’s Blockchain Notary Service

China, world’s leader in developing blockchain projects, launches another project into a new industry.

The new blockchain notary allows the certificate holder to verify the information by scanning a QR code located on the document. The notary service aims to leverage the distributed ledger to prevent cases of forgery and fraud.

USE CASES AND IMPLICATIONS.

Digital Services

Australia Developing Blockchain Network For Legal Contracts

The new platform called the Australian National Blockchain (ANB) will enable nationwide companies to exchange data and confirm the authenticity and status of legal contracts.

The network will be the first publicly available blockchain solution available to all businesses from different sectors across Australia. Once the network is fully developed, the ANB will enable organizations to use blockchain-based smart contracts and digitally manage a contract’s lifecycle, with transparency and permission-based access to the network.

USE CASES AND IMPLICATIONS.

Digital Services

- 45 -

Implications

As of now, blockchain is still considered to be a developing technology

which has to be further explored and tested by organizations.

However, there are already three emerging areas - supply chain,

customer experience and sharing economy - where blockchain has

been established as a game changer that helps to bring tremendous

value to both customers and organizations.

Implications

- 46 -

Sustainability:

As consumers are becoming increasingly conscious about the environment, blockchain plays a huge role in providing shoppers with the chance of being

able to track the product journey from production to sale.

A report by Fashion Revolution found that 88% of consumers across the five largest EU markets consider environmental protection to be an important factor.

Authenticity:

On the other hand, for luxury shoppers, blockchain can guarantee product authenticity and prevent fraudulent activity.

According to Michele Casucci, CEO of Certilogo, “This is the beginning of a new era for genuine luxury and it’s good news for everyone.”

-1- Blockchain For Consumers

- 47 -

New services built on blockchain technology provide quicker, cheaper and more efficient customer experience by eliminating paper-heavy processes and

skipping middlemen such as banks.

This is something that legacy organizations need to be aware of to prevent themselves from falling behind in building long-lasting relationships with

customers.

A good example in this case is the battle between neobanks and retail banks.

A study by management consulting firm A.T Kearney predicts that 10 percent of retail banks will disappear in the next five years in Europe due to the rapid

growth of neobanks.

Retail banks could use blockchain to tackle contemporary issues they have in payment technology, and prevent customers from switching to digital services.

-2- Blockchain For Services

- 49 -

Blockchain completely changes the concept of sharing economy.

Unlike traditional sharing economy platforms, blockchain allows value exchange.

Imagine owning a car in San Francisco, and traveling to Bangkok. Instead of renting a place on Airbnb, blockchain allows you to lend your car to person A, while staying in person B’s apartment in Bangkok, perhaps with no extra fees,

because their value is equivalent.

-3- Blockchain For

Sharing Economy

Source: Medium - 51 -

Redefining ownership:

Blockchain also redefines ownership by giving people the chance to own something that was not reachable before.

For example, with blockchain, there is no need to own an enormous amount of capital to get started with investing, instead, people can become a shared

owner of a property.

Even better, instead of owning a car, imagine owning a share of an autonomous vehicle company, and having access to numerous cars anywhere in the world.

-3- Blockchain For

Sharing Economy

Source: Medium - 52 -

LHBS is a strategy and innovation consulting firm with offices in Berlin and Moscow. We help legacy organizations become customer-centric and agile.

Together with our clients we discover business opportunities and deliver integrated customer offers for products, services, experiences and communication. DISCOVER DEFINE DEVELOP DELIVER

Explore further on our website, and discover more industry insight reports.

USE CASES AND IMPLICATIONS.

About.

- ! -54

LHBS // BLOCKCHAIN TECHNOLOGY

Our innovation workshops to help legacy businesses uncover their unique opportunities for innovation.

STEFAN ERSCHWENDNER Managing Partner +49 151 6462 0729 se@lhbs.com

Tech innovations within your business don’t need to be radical to make a real impact.

- ! -55

Or contact Stefan directly to discuss potential collaborations:

LEARN MORE

THANKS FOR READINGLHBS // BLOCKCHAIN TECHNOLOGY

Thank You.You can explore more industry insights

reports on lhbs.com

LHBS // BLOCKCHAIN TECHNOLOGY