2008’s infamous financial crisis wreaked havoc upon economies all around the world, leading to the implementation of stringent regulations in order to repair the damages caused by improper financial management. If history has taught us anything, it’s the potentially devastating effect of mismanaged and poorly structured finances. It’s largely due to this valuable hindsight that modern-day financial infrastructures are undergoing significant reviewing and revision to their investment strategies. Technology has since pioneered the renovation of financial systems in the pursuit of rebuilding public trust. Despite the hype surrounding recent leaps and bounds in technological development, it is crucial to remember that with its rise comes a responsibility to control tech-led carbon footprints via sustainable solutions.

Alongside development, sustainability has become one of the most sought-after characteristics for many businesses. Companies across all types of industries are beginning to look towards Blockchain as the solution to their commercial and social objectives. What’s more, the virus-struck world may greatly benefit from what Blockchain has to offer. Blockchain’s nature as a digital infrastructure – take cryptocurrency for example, which departs from traditional cash transactions by being entirely contactless – runs in line with the new COVID-19 regulations which are set to become the norm. As a result, Blockchain may be the best business solution for a sustainable future.

The technology of the future

Conceived during a time of large corporate changes, increasing digitalization and extensive environmental awareness, Blockchain has been one of the most impactful business-support services from the outset, yet it remains largely underrated and underappreciated. The banking and finance industry is the largest user of Blockchain, accounting for more than 30% of all Blockchain technology usage, followed by the Government and Public Goods industries. Meanwhile, other industries such as healthcare and media are yet to realize even a quarter of Blockchain’s potential. However, given Blockchain’s inherent ever-evolving technologies, even the most technologically advanced industries like the finance industry still have a lot of ground to make before unlocking Blockchain’s full potential.

Promisingly, the adoption rate of Blockchain is faster than ever before – top technology movers and shakers such as Oracle Corporation, Facebook and Amazon are siding with Blockchain in order to widen their spectrum of seamless service. Amazon now offers cloud integration and has partnered up with the Ethereum startup ConsenSys in order to improve its inventory management system’s accuracy and efficiency. Moreover, the Global Blockchain Survey conducted by Deloitte found that of the 1,000 global executives, more than 39% had already planned to invest $5 million or more in Blockchain’s technology.

The 3D development model

As Benoit Laclau, EY’s Global Energy Leader, has stated, the renewable power and energy sectors are being transformed by digital technologies, but so can every other industry if they choose to adopt the 3D development model. The 3D development model refers to the three pillars of sustainable development – decentralization, decarbonization, and digitization. Decentralization is the process of shifting power away from a central authority, take Bitcoin for example which is a “decentralized alternative to government controlled currency”. Decarbonization refers to the effort of tackling pollution by shifting towards low-carbon energy sources such as solar and tidal energy. Digitization is simply the process of converting information into digital formats. Most modern-day technologies excel at digitization and decentralization, but drastically fail when it comes to decarbonization. Take the Asian powerhouse nations China and India for example, whose operations are increasingly digital but whose pollution figures hit new heights year after year.

Blockchain technology, on the other hand, is capable of fulfilling all three aspects of the 3D development model. The technology secures, verifies, and permanently records financial transactions entirely digitally, with all the data stored in highly encrypted blocks. These blocks act as distributed ledgers available to all its users, entirely decentralized from any central authority and completely self-regulated. Moreover, Blockchain’s tokenization methods allow for unmatched efficiency. Despite inevitably producing small levels of digital pollution, Blockchain is able to greatly reduce costs, improve efficiency and tackle greenhouse gas emissions.

Investment management

Investment professionals are also increasingly turning to Blockchain tools in order to enhance their fund management, from the execution and the recording of transactions to their retrieval. In fact, almost anyone nowadays has the option to use the technology to make wise investment decisions. On multiple occasions, Goldman Sachs has shown interest in Blockchain technology and its capacity to shape our future. The financial services company has stated that Blockchain technology “combines the openness of the internet with the security of cryptography to give everyone a faster, safer way to verify key information and establish trust” – it would be of little to no surprise if in the near future, Goldman Sachs were to implement Blockchain technology to simplify their traditional and cryptocurrency investment processes.

As well as being a technological problem solver, Blockchain is able to address many other financial and investment issues. Its multi-faceted benefits include data auditability, value creation/transfer, transparency, automation, and efficiency. Climate Finance and Green Investment have in particular benefited from Blockchain thanks to the ecosystem that it has to offer. Its distributed ledger technology (DLT) is capable of innovating the inefficient and impractical traditional systems. In fact, Dutch bank ABN AMRO’s investment segment collaborated with BUX (an investment platform) in order to create Stocks, a Blockchain-powered app which allows its users to securely keep their money in a Blockchain bank for the purpose of stock trading.  Blockchain’s encryption technology is saving both banks and customers a lot of time, effort and money by creating smaller packets capable of storing enormous amounts of data which would previously have required huge-capacity storage.

A future centre of businesses?

As investors are become increasingly conscious of environmental considerations, Blockchain is set to experience a dramatic surge in adoption and usage. Investment managers are beginning to turn to Blockchain to solve the challenges their financial services face in order to keep up with competitors. Blockchain’s token system of securities is now refining and improving Know Your Customer (KYC) and anti-money laundering (AML) services which were previously time-consuming and expensive.  The technology behind tokenization remains at the core of modern eCommerce businesses. With smart and effective integration and retrieval of data, tokenization has made life easier by removing the overwhelming masses of documents and data which businesses were accustomed to. A perfect example of tokenization is the mobile wallet apps Google Pay and Amazon Pay which store important credit and debit card data in the form of tokens. Its advanced security and authentication measures have made them incredibly successful, making it hard to envision a future where such tokenized platforms won’t end up replacing the conventional methods of payment which have, until now, been unchallenged. Blockchain is also the key to unlocking new investment destinations with little to no carbon emissions. For example, private Blockchains which use algorithms such as Proof of Authority (PoA) don’t use as much energy as traditional database solutions. Blockchain has simplified and streamlined the process of identification while maintaining its top-tier security. Moreover, thanks to Blockchain technology, the number of PoA steps has reduced by more than 50%, leading to an important reduction of its carbon footprint.

Aside from improving the process of buying and selling, Blockchain has also streamlined financial platforms in a number of ways, such as proof of payment and transfer of stocks. The platforms are in real-time, hassle-free, and incredibly simple to use. NASDAQ, for example, has been using Blockchain technologies in order to transfer securities since 2015 as well as in their major customer service activities, such as live and up-to-date information on stocks. The days of lengthy, intermediated, expensive and inefficient investment procedures are long gone as Blockchain is paving its way to radically transforming not only the investment sector, but the world.

  1. David Uzsok, Patrick Guerdat, IISD – April 2019
  2. OECD
  3. KPMG
  4. Brett Scott, Will Martindale, Morgan Slebos, PRI – 2018
Reyan Mishra
Reyan Mishra

Reyan is a member of our writing team which brainstorms on important themes of today and tomorrow – in order to compose pieces to leave seekers with food for thought so that the learning curve of all may turn steeper. His writing experience has so far included blockchain technology and sustainable biodiversity investment.