Transcript - Episode 21 - Time for Trust: How blockchain will transform business and the economy

Freddie Martin

Welcome to a brand-new episode of the Economics in Business podcast, I am your host Freddie Martin. In this episode, we'll be discussing blockchain, the disruptive technology that's revolutionising the way we share data that will have huge knock on effects across all industries, with applications as broad as recording Bitcoin transactions, securely sharing medical records, and tracking intellectual property. To discuss the potential impacts of blockchain on businesses and the global economy, I am joined today by Steve Davies, PwC’s blockchain expert; and Dr Jonathan Gillham, who leads PwC UK’s economics practice. Welcome both.

Steve Davies

Thank you.

Jonathan Gillham

Thanks Freddie, nice to be here.

Freddie

Steve, before we delve into the potential impact of blockchain on UK and global economy, it would be great to understand a bit more about what this technology actually consists of and some different use cases, as I'm sure many people tend to just think of cryptocurrency and Bitcoin when we mention blockchain.

Steve

Thanks Freddie, we'll start with a very simple question like what is blockchain on this podcast. It is an issue that quite a few people struggle with, and it’s a complex area. Blockchain is a technology, but it is also a method or way of thinking about how to construct something to solve a problem. One of the other issues of blockchain is it's something that happens, what the tech people call, ‘under the glass’, meaning if we were having a conversation about drones, we could perhaps picture a drone, or for VR/AR we could picture putting on a headset. But with blockchain, you typically don't see something happening or you don't visualise a blockchain thing, perhaps that also adds to the complexity around it.

Effectively, what blockchain is, is a way to move away from having a single area, or person, or authority where records are stored or managed and decisions are made, to a model where that happens on a distributed basis. Meaning each of us on this podcast would have the same view and the same access to the data that we needed to enable what we needed to do. That means that there is no single source of the truth, but there are multiple sources of truth. It also means that it is much more difficult to tamper with that source of the truth, because you have to change everything at the same time for that to work properly. What also happens with blockchain and this is the mining piece that perhaps people have heard about is, that data is encrypted as it is placed on those shared records, and it can only be accessed in a certain way. That encryption and that distribution model means that it's incredibly secure, and that then leads to perhaps why it's important and why we think it's important, because when you have that distributed model working properly, you no longer need somebody in the middle to be able to facilitate things to happen. Trust within that network, within that community is devolved, and sits with each of the members of that community or network.

That is quite far reaching in its implications for how we run things, how we organise businesses, how intermediaries like banks and lawyers work in between to facilitate trust, and how different models can emerge from the back of that. That's why in PwC we really feel that that's important as well, because trust is at the core of what we do and helping our clients and ourselves to understand how this technology can improve trust is critically important.

Freddie

I can see that as we rely more and more on data, and big data sharing, that being able to ensure that our data is secure is actually very fundamental and applies to so many industries.

Steve

Absolutely, you think about, for example, in supply chain, if you go to the supermarket and buy some food, you'll want to know where it came from, or if somebody is making a claim about where something was made or how it was made, and whether or not it has a brand on it. You need to be able to trust that, and that's critically important. You also need to be able to trust if you're going to use digital technology as a form of money, for example. Then also if you think about putting your credentials, your qualifications, or your licenses in digital form, you want to be able to use something where you know that you can trust, that is going to be stored in a safe way, but also people that then use that or consume that know that it comes from a trusted source as well. Those are some of the examples where we will explore in our report that are so important for the future and how blockchain is driving that value.

Freddie

You mention this report that PwC published in October, the ‘Time for Trust’ report and I know that this looked to quantify the potential impact that blockchain can have across all of these use cases. Jonathan, I know your team led the analysis of this report, so could you break down some of the key findings, both globally and for the UK economy.

Jonathan

Thanks very much Freddie. In our report, we estimate that blockchain will contribute around $1.76 trillion to the global economy by 2030. That's a very large number. Let's just try and break that down into some different component parts.

Firstly, provenance; so that's the cyber element that could contribute around $962 billion, that's the biggest single component. Payments and financial instruments, so most people listening to this podcast will be familiar with Bitcoin and payment mechanisms powered by blockchain, that's the second largest component at $433 billion. Identity protection comes in at $244 billion. Contracts and disputes resolution, through blockchain actually supplying that contractual information that people can see and view, $73 billion. The final part is customer engagement (or loyalty schemes is perhaps a more traditional way of referring to that) that could contribute around $54 billion by 2030. Some really big, chunky numbers there.

Now, the countries that will perhaps benefit the most from the blockchain revolution are the US and China. The UK will also be a significant beneficiary, but so too will perhaps some smaller countries with really strong tech hubs at their core. If we just go into that and break that down in a bit more detail. We’d expect the UK to gain by around £72 billion over the next decade, which is quite sizable, and compares favourably to other big major technologies that are actually out there that perhaps people are more familiar with, like artificial intelligence, for instance. The U.S. that could gain by around $407 billion, and China by around $440 billion. Both of those two economies are absolutely key in a lot of the research and development that’s underpinning blockchain technology today. Also, blockchain will create and augment a significant number of jobs over the next decade. Our estimate is just short of around 21 million people will start to find their jobs actually being enhanced by blockchain over the next decade.

Freddie

Those are some very significant impacts that you've outlined there. How did you go about estimating these impacts?

Jonathan

We looked very closely at the different use cases and started to explore, well which of those use cases are really ready yet, how fast will be the pace of market adoption, how that could affect productivity and economic efficiency in different sectors, how will it affect business’ cost base. Once we started to get a clearer picture of that at quite a granular level, we were able to use a large scale global economic model that we have here at PwC, and model the effects of those different types of efficiencies and cost savings as they flow through the economy. Then we add them all up, and that's where our main number comes from, $1.76 trillion.

Freddie

What's the time frame that these impacts will occur across, is this a medium-term or long-term view?

Jonathan

At the moment, blockchain is relatively small from a global economic perspective. We think will probably contribute around $66 billion next year, but it's going to ramp up, really quickly. You could expect something like a seven-fold increase in the size of the blockchain market over the next five years, and probably a 25-fold increase out to 2030, so over the next decade. This is a market that is just going to expand really rapidly. Our clients, our customers who are users of blockchain, they're aware of that, but perhaps not quite understanding quite how that will happen, which uses of blockchain would be perhaps the most popular.

Freddie

And so actually again, it's this under the glass element that you mentioned earlier, Steve, which could present a really key barrier to the widespread adoption of blockchain, as its use cases can be really difficult for businesses to conceptualise. Given these obstacles Steve, what advice do you have for businesses and governments looking to harness the full potential of blockchain technology?

Steve

Exactly. One of the key messages here for us is, we’ve seen the hype come away from this space and that's a really positive thing. What I would encourage different organisations to do, different businesses is don't relegate this to the basement. Don't think that because you’ve built a proof of concept, and that you've seen something that works in blockchain that you've got it covered, and don't think that it's a hedge. In other words, I've built something, and if somebody begins to use blockchain in a way that impacts my business and I'll be able to react to that quickly. It's about taking the technology seriously, recognising it as a genuine disruptive threat, but also opportunity to the way in which things are run today.

Focus around collaboration, not necessarily building things for our own sake, but building things that solve common problems amongst either between our business and its customers, or between our business and it is suppliers, or between our business and other businesses that we transact with. Really focusing, as you said, on some of those complex areas and recognising that the complexity is there for a reason. Therefore, it is going to take time to able to work those things through. Investing in the technology, absolutely experiment, to go beyond that and start to forge networks and leverage the blockchain ecosystem to understand how and where to use the technology and where it's best to deliver value. But as we've highlighted in the report around these five key areas, we see these as already emerging as the key areas that are going to drive growth in blockchain usage over the next 10 years provenance payments or financial instruments identity, contracts and dispute resolution and customer engagement. These are the areas where we think it is critical for organisations to engage and work through and understand how those solutions can provide a positive benefit rather than be a disruptive threat.

Freddie

That’s really very interesting and its useful how actually the report itself and this type of analysis is going to be really fundamental to progressing how blockchain is adopted in future across businesses. It is so important to have this information to hand to understand the potential. I just wonder, Jonathan, did you have any final thoughts based on the analysis that you conducted about the best way to adopt blockchain?

Jonathan

It is just important to stress the overall size of prize here, because $1.76 trillion is a very large number. It sometimes can be quite difficult to put in context, but probably about four or five years ago that was roughly the size of the whole UK economy. If you think about adding another UK economy to the global economy over the next decade, this is a very sizable proposition. Perhaps one thing, and Steve has explained this really well, is that what's been holding back the technology is businesses perhaps being slow to realise the application, and perhaps often thinking of it as a niche offering. But this secure passing of information just has so many different opportunities. We've been quite conservative in our estimates. So, we think that potentially, it could be perhaps bigger than what we've stated in this report.

Freddie

Thank you so much for providing that extra context and figures. The figures are useful to understand the scale of what we're talking about here. That's all we have time for on today's episode. Thank you, Jonathan and thank you Steve for joining me today.

To find out more on the topics discussed in this episode, take a look at PwC’s site, where we have a dedicated blockchain page containing current thought leadership, advice for businesses, and more information on the work that PwC is doing in this space. A link to the full version of the ‘Time for Trust’ report mentioned in this episode will be provided in the description of the podcast as well as on the PwC website. Make sure to subscribe to keep up to date with the latest episodes of the Economics in Business podcast. Thank you for listening.