What’s the Right Use for Blockchain? Solving a Specific Problem

April 25th, 2018

Topics: Customer eCommerce Finance

The hype around blockchain is immense, both in Silicon Valley and here in Hanover, NH on the campus of the Tuck School of Business. While much of that hype is linked to the rollercoaster ride of Bitcoin and other cryptocurrencies, the underlying blockchain technology that powers many crypto assets is a powerful tool that will transform global business. Due to its unique distributed ledger structure, blockchain can enable incredible transparency and verifiable truth, resulting in the myth that it is a digital panacea. While that’s not accurate, what is the right way to use blockchain in the enterprise? We in the Center for Digital Strategies field that question often, and our answer is to be specific about how it solves a current problem in your business. But what, exactly, does that look like? The answer in the short term can be found by looking at a late-stage FinTech startup called Ripple.

Ripple is aimed squarely at solving the difficult challenge of smoothing global payments. Earlier this week Ripple SVP of Business Operations, Eric van Miltenburg T’91, joined the center and Tuck students to talk about how Ripple solves that problem.

For many, cross-border payments are fairly routine when transmitting between common trading partners in major, developed markets. NFew large corporations struggle moving money between the United States and the UK, for example. But as the world shrinks and emerging markets rise, business leaders increasingly struggle with challenges of moving payments between developing markets without well-established trading partnerships. Further complicating the problem is a shift from high-value, low-frequency global payments toward low-value, high-frequency payments. The current financial system is not structured to facilitate repeated, small dollar payments in small markets using non-fiat currencies.

That’s where Ripple steps into the fray. At a high level, Ripple wants to make moving value around the world as seamless as moving data. We don’t find it difficult to push data across borders, thanks to a whole host of internet technologies and protocols which have been standardized on the web. But value, or more specifically money, is still a laborious process to move globally.

Ripple uses its blockchain and network to move payments around the world at the speed and ease of moving data. Customers on their network do not need to hold currency and dedicated accounts for each local country in which their business operates to make payments. Ripple can convert your local currency into a crypto asset – in this case, XRP, which is not part of the company, but was founded by the same founders of Ripple – and move to the local country where it is converted into local currency and used to pay local vendors or business partners. Because the blockchain provides settlement of payments in seconds, not days, and because the payments are in local currency regardless of amount, vendors and those receiving payment are settled rapidly, keeping them happy.

Ripple is successful because it uses blockchain to solve a very real business problem. Global payments, especially low-value, high frequency payments between non-major markets, has been a struggle requiring several costly transactions between intermediary banks, accruing fees at each stop. It was painful, slow, and costly. With emerging markets increasingly factoring into the global economy, solutions using blockchain focused on very specific problems with clear value are likely to develop and thrive.

So when the center gets questions about blockchain, we’ll use Ripple as an example of an enterprise application that solves business problems in a compelling way. By leveraging blockchain –  supported by standardized processes, protocols, and focused on creating a network – Ripple achieves their mission of moving value globally at the speed of data. I can’t think of a better example of an enterprise application of blockchain than that.

Do you have any thoughts on blockchain and how enterprises can use it to solve business problems? Email us – center.for.digital.strategies@tuck.dartmouth.edu

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