Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 269

Blockchain revolutionises the cyberworld

An international shipment of consumer goods typically comes with about 20 sets of documents, many of which are paper-based and relate to trade finance. About 70% of the information is replicated across the forms. This ‘red tape’ costs the freight industry hundreds of millions of dollars each year and has no real time visibility to all parties, is prone to errors and is often complex enough to delay payments.

No more, according to an Accenture-led syndicate. The consulting firm this year said it had a distributed-ledger solution that could “revolutionise ocean shipping” because it reduces data entry by 80%, simplifies amendments, streamlines cargo checks, and lowers the risk of compliance breaches.

Some observers said the innovation could be shipping’s biggest breakthrough since the first container ship sailed in 1956. The World Economic Forum says simplifying paperwork and other trade impediments “halfway to global best practices” could increase global trade by 15% and lift world GDP by nearly 5%, a greater boost than trade would receive if tariffs were to be abolished.

Distributed ledgers a potential revolution but with risks

Such is the promise of decentralised distributed ledgers that sequentially and immutably record and store data in a way whereby people have immediate access to the same information without having to pass through a central point. These ledgers are better known as ‘blockchains’, the software leap from 2009 that enabled the invention of cryptocurrencies.

Notwithstanding that cryptocurrencies are failing to fulfil money’s most central roles, especially to be a store of value, the blockchain rates as a landmark invention. Its innovation was that a self-sustaining network under no peak control allows strangers to make and accept payments over the unsupervised internet. And that’s the most apt use of the technology from a technical point of view, and pretty much it’s only widespread use so far, though much investment is underway to create blockchain solutions.

These distributed-ledger solutions for the regulated world, however, are likely to be less ground-breaking. Nonetheless, ledgers that are destined to be used in the regulated world could enhance productivity across many industries, even if they are not great advances on existing technology. A danger is that these ledgers will create risks, even systemic ones, when used in critical spheres. These risky uses include if they were used to replace paper-based voting in general elections because they are not tamper-proof, or if central banks adopt them for the monetary system at the risk of upsetting the fractional-reserve banking system.

Creating foundational technology

Future ledger innovations could be akin to blockchain’s development. A big hope is that ledgers can secure the internet’s protocols, the common agreements that enable devices to interact. Ledgers have this potential because they are considered a ‘foundational’ rather than a ‘disruptive’ technology – one that forms the basis of other milestone advances.

But distributed ledgers have drawbacks. These include privacy concerns, cybersecurity risks, that they require networks to be effective, their high power usage, their capacity limits – and there is always the risk that trust between users could break down.

The complexities in establishing networks and drawbacks in ledger technology mean the paperwork and multiple data entry that still exist after a generation of computer use are unlikely to find a ‘hey presto’ solution in blockchain form any time soon.

Worthwhile ledger solutions might only slowly appear in a regulated world as incremental advances on prevailing technology. That will make them valuable enough in a world in need of productivity growth, but only if their inappropriate use can be limited.

For those who are still getting their minds around blockchain, here's a simple illustration. More details are in the link below.

How blockchain works

Source: Financial Times

 

Michael Collins is an Investment Specialist at Magellan Asset Management, a sponsor of Cuffelinks. This article is general information only, not investment advice. For the full version of this article go to: https://magellangroup.com.au/insights/blockchain-has-revolutionised-the-unregulated-cyberworld/

For more articles and papers from Magellan, please click here.


 

Leave a Comment:

RELATED ARTICLES

Which country will be the next China?

We’re number 106, and that’s not good

Technology and investing: this time may be different

banner

Most viewed in recent weeks

16 ASX stocks to buy and hold forever, updated

This time last year, I highlighted 16 ASX stocks that investors could own indefinitely. One year on, I look at whether there should be any changes to the list of stocks as well as which companies are worth buying now. 

UniSuper’s boss flags a potential correction ahead

The CIO of Australia’s fourth largest super fund by assets, John Pearce, suggests the odds favour a flat year for markets, with the possibility of a correction of 10% or more. However, he’ll use any dip as a buying opportunity.

2025-26 super thresholds – key changes and implications

The ABS recently released figures which are used to determine key superannuation rates and thresholds that will apply from 1 July 2025. This outlines the rates and thresholds that are changing and those that aren’t.  

Is Gen X ready for retirement?

With the arrival of the new year, the first members of ‘Generation X’ turned 60, marking the start of the MTV generation’s collective journey towards retirement. Are Gen Xers and our retirement system ready for the transition?

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

What Warren Buffett isn’t saying speaks volumes

Warren Buffett's annual shareholder letter has been fixture for avid investors for decades. In his latest letter, Buffett is reticent on many key topics, but his actions rather than words are sending clear signals to investors.

Latest Updates

Investing

Designing a life, with money to spare

Are you living your life by default or by design? It strikes me that many people are doing the former and living according to others’ expectations of them, leading to poor choices including with their finances.

Investment strategies

A closer look at defensive assets for turbulent times

After the recent market slump, it's a good time to brush up on the defensive asset classes – what they are, why hold them, and how they can both deliver on your goals and increase the reliability of your desired outcomes.

Financial planning

Are lifetime income streams the answer or just the easy way out?

Lately, there's been a push by Government for lifetime income streams as a solution to retirement income challenges. We run the numbers on these products to see whether they deliver on what they promise.

Shares

Is it time to buy the Big Four banks?

The stellar run of the major ASX banks last year left many investors scratching their heads. After a recent share price pullback, has value emerged in these banks, or is it best to steer clear of them?

Investment strategies

The useful role that subordinated debt can play in your portfolio

If you’re struggling to replace the hybrid exposure in your portfolio, you’re not alone. Subordinated debt is an option, and here is a guide on what it is and how it can fit into your investment mix.

Shares

Europe is back and small caps there offer significant opportunities

Trump’s moves on tariffs, defence, and Ukraine, have awoken European Governments after a decade of lethargy. European small cap manager, Alantra Asset Management, says it could herald a new era for the continent.

Shares

Lessons from the rise and fall of founder-led companies

Founder-led companies often attract investors due to leaders' personal stakes and long-term vision. But founder presence alone does not guarantee success, and the challenge is to identify which ones will succeed in the long term.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.