In this 6-part blog series, Rodrigo Mejia Ricart and Camilo Tellez of the Better Than Cash Alliance explore Distributed Ledger Technology (DLT), commonly known as blockchain. Offering an impartial view, this series looks to provide practical insights for those interested in DLT-based programs.
Ricart and Tellez’s analysis seeks to dismantle the "excessive hype and disillusionment" around blockchain and instead offers an informed look at how the technology works, its benefits, and applications. Citing existing literature and use cases, the blogs also explore the use of DLT in three specific areas: supply chains, remittances, and digital identity.
In the first blog, the authors answer the basic question of what DLT is and why it matters. The piece poses several questions that the remaining blogs seek to answer, including: why is DLT unique; what problems does DLT solve; what are the advantages of a shared ledger; and what challenges does the technology present.
The second blog tackles the hype around DLT, laying bare the reality behind the technology. The authors note that, while distributed ledgers are transparent in principle, this isn’t a universal trait. And while blockchain is potentially more efficient than centralized systems, the amount of savings varies between each use case. Finally, while DLT is in principle more secure, it is not invulnerable to security risks, particularly when connected to other systems outside of the ledger. The authors conclude:
In the third blog, the authors tackle what they refer to as "the central question of the debate:" what can DLT solve that we couldn’t solve otherwise? They then present three areas in which blockchain has the potential to create meaningful change: supply chains, remittances, and digital identity.
For supply chains, the authors note the increased use of DLT to improve traceability and ensure supplier standards, observing that the technology is already helping companies to quickly and efficiently monitor their supply chains and trace the origins of their products.
In the case of cross-border payments, Ricart and Tellez observe, DLT can help to reduce fragmentation and the use of intermediaries. Cryptocurrencies may provide an efficient means of banks trading across borders, without the additional reconciliation and compliance costs.
Finally, in the case of digital identity, the authors note the inherent social and economic benefits of DLT, citing both the technology’s capacity for enhancing financial and legal inclusion and its cost-saving potential.
The blog on DLT and digital identity highlights Omidyar Network’s stipulations for Good ID, quoting Thea Anderson: “to be considered a Good ID it must be inclusive, offer significant personal value, and empower individuals with privacy, security and choice.”
With this in mind, the authors note that DLT could be used alongside other innovations, including biometric data, digital wallets and mobile technology, to support the development of superior digital identity systems. In particular, because they are decentralised, DLT’s could support cross-border verification of identity; they could also help to empower users by allowing them to easily track transactions and interactions.
Ricart and Tellez conclude that blockchain technology has a potentially impactful application in digital identity, but that there are several challenges to overcome first, including issues around transparency, record-keeping and inclusion. The blog finishes by noting that: