Amid the hype around Bitcoin and its soaring value, there is one underlying technology that is usually mentioned as an afterthought - blockchain. Put simply, blockchain is the record-keeping technology behind the cryptocurrency network.
While blockchain is vital for crypto, its uses extend far beyond currency and is billed as almost a panacea for nearly every transactional pain point. The pandemic has highlighted the many use-cases for blockchain and now in the Middle East, we are starting to see greater usage of the technology, especially in the vaccination drive.
Blockchain works by preserving information in blocks which are chained to each other, according to Investopedia. The system’s uniqueness stems from its sustainability since it makes an irreversible timeline of data in a decentralised nature. When a block is filled, it becomes a timestamped part of this timeline that cannot be changed through one party. Blockchain has the potential to revolutionise the way business is conducted since it includes transparency (due to its decentralised nature), organisation (since new blocks are always stored linearly and chronologically), security and traceability (once a block has been added to the end of the blockchain, it is very difficult to go back and alter its content).
According to Outlier Ventures there is ample enthusiasm for the technology among investors, 3738 blockchain companies have raised $23.7 billion since 2013, while Grand View Research valued the global blockchain market size at $3.67 billion in 2020. The sector is expected to expand at a compound annual growth rate (CAGR) of 82.4 per cent from 2021 to 2028 reaching $395 billion.
GCC governments have been vocal about the potential of blockchain, The Dubai government has identified 20 use cases for the technology which it hopes will increase efficiency by 30 per cent. While much of this support and enthusiasm has come from governments, we are now seeing the private sector in the region embrace blockchain.
Leading the charge is Majid Al Futtaim, the owner and operator of the Carrefour supermarket franchise in the Middle East, Africa and Asia, which in cooperation with IBM Food Trust, has integrated blockchain technology in its operating system to allow customers to track the origins of food items in its retail outlets. This project marks the first time that blockchain has been used in a consumer-facing role in the Middle East on such a large scale.
“The retail sector is entering a trust revolution, in which food traceability is becoming a global trend where consumers obtain visibility on the entire food journey, especially after the Covid-19 pandemic that really accelerated all this impact on safety and hygiene matters,” says Hani Weiss, CEO of Majid Al Futtaim (MAF) Retail.
Users scan a QR code on participating products to get access to food supply chain data, from farm to store shelf. The history of the product, including production process, halal and hygiene certifications, date of birth, nutrition information and temperature data, are available once uploaded onto the blockchain.
The digitisation of transactions and data provides a more efficient way of working across the supply chain for growers, processors, shippers, retailers, regulators, and consumers according to Weiss.
A survey conducted by the IBM Institute for Business Value found that 73 per cent of the consumers indicated that traceability of products is important to them and among them, 71 per cent said they would be willing to pay a premium for brands that provided this traceability.
Currently, Carrefour’s blockchain traceability is used for its own chicken brand and microgreens, which are grown hydroponically in its own stores, but the company is planning to expand the service to include most of its products in all its retail outlets across 16 markets.
Another benefit of applying blockchain technology, the MAF CEO says, is the ease of recalling a specific product if its invalidity is proven. Foodborne disease outbreaks have been a driver for applying blockchain technology in the food industry, such as E. Coli, Hepatitis A, salmonella, listeria, not to mention the hazardous materials that might accidentally intervene in the food production process. In the past, it took weeks, maybe months, to track down the origins of these contaminated foods, recalling the products and investigating the reasons behind the outbreak. Through blockchain, it only takes few hours to allocate the source of these products, which can save the lives of millions of people, as well as the reputation of the brand.
“Before implementing blockchain, the only thing we can do is to collaborate with our suppliers and partners and recall the entire products from our shelves and warehouses. Blockchain will help us recall certain products with a certain date and certain barcodes,” explains Weiss, adding that this technology has spared the company from wasting time and money to deal with invalid products.
Wider use cases
As more and more companies begin accepting Bitcoin and other cryptocurrencies to purchase goods and services, the use and understanding of blockchain technology will likely grow with it. Coupled with the increased digitisation spurred on by the pandemic, blockchain can play a strong role in the development of a sustainable digital economy.
Away from the financial sector, blockchain will empower industries that require adherence to strict quality standards, such as automotive manufacturing, defence, aerospace, aviation, and healthcare, according to Khurram Shroff, chairman of private equity IBC Group. Real estate and hospitals will also benefit from higher standards of customer service and experience, through lowering operational costs, improving profit margins, and enhancing security and verifiability.
“Identity management will become easier and more secure. Applications as varied as election transparency and instant verification of trending news will become possible. All functions in which security and verifiability are non-negotiable will be enhanced by this technology,” says Shroff.
For Wassim Merhaby, the CEO of Verofax, an asset serialisation and tracing service, blockchain is necessary in nine out of 10 cases when it comes to traceability, like tracing the origin of products, tax evasions or money transfer among others, but it is not necessary for all industries.
“You only need blockchain when you want to maintain privacy and General Data Protection Regulation (GDPR) compliance,” says Merhaby, who believes that blockchain is vital in cases like health information and organ donations as it helps to protect the private data of both patients and donors, who might become a target due to their rare blood type or for their organs.
“We created for the government of the UAE a system that allows people to register themselves as organ donors after their death,” says Merhaby. “This system allocates the organs, determines the priority of cases in need of these organs based on certain metrics and criteria. So, yes, we can easily say that blockchain can save lives.”
Despite the benefits of blockchain technology, it faces several challenges. There is a lack of standardisation, it requires massive computing capacity, requiring a great deal of electricity with slow transaction speeds.
In contrast to some legacy transaction processing systems able to process tens of thousands of transactions per second, the Bitcoin blockchain can handle only three to seven transactions per second according to a report from Deloitte. The corresponding figure for Ethereum blockchain is as low as 15 transactions per second.
Across Mena there are fewer than 100 blockchain startups, of which more than half are based in the UAE according to Wamda’s own data. Of all the blockchain startups that have been established in the region to date, 30 per cent are no longer active due to a lack of investment and market need. There is also the challenge of awareness among consumers.
“The key challenges of applying crypto tech revolve around how informed decision-makers and consumers are, about the possibilities that these technologies enable,” says Shroff. While Merhaby considers education is one of the main “tasks” that tech companies should work on to deploy such technology, ruling out that consumers have to be fully aware of the technology.
“The technology itself is not visible to the consumer, they just download an application to track the product they are consuming,” says Merhaby.
Agreeing with both Merhaby and Shroff, Hani Weiss says: “When it comes to systems and using technology, it's always difficult to adopt a new one, it takes time to educate the public about the enormous benefits it allows.”
With greater acceptance and awareness of cryptocurrencies however, there is likely to be a spillover effect for blockchain. The coronavirus pandemic has also spurred the use of blockchain by governments keen to track and trace those who have been vaccinated. Blockchain can facilitate vaccine delivery, store vital data to ensure safe delivery of the vaccine and provide the traceability and transparency for vaccine passports.