Driving Business Success Through the Internet of Value
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5. Summary
"We've had a few decades of the Internet of Information. Now we're getting to the Internet of Value."
Don Tapscott
CEO, Tapscott Group
Nowadays, with the advance of the IoT, everything is linked to creating a net of devices. It indeed has a tremendous impact and transforms our information system. Despite any technological miracles, there are always challenges to appear. In such a case, it is about the exchange of value. We must rely on powerful intermediaries, such as governments, banks, and digital platforms, to exchange goods and services of significant importance. However, these organizations keep all the information on centralized servers, vulnerable to outside attacks. This is where the "Internet of Value" arises, a revolutionary digital solution to ensure our online exchanges' safety and security. Further, we will explore its peculiarities and value for the business.
What is the Internet of Value?
The term "Internet of Value" refers to a digital space that enables individuals to transfer value directly to each other. There's no involvement of intermediaries and their associated costs. It is a global, decentralized platform that facilitates the transfer of monetary assets at the speed of information. It also relates to transferring the data.
In the US, cross-border payments typically take 3-5 days to settle, with an error rate of at least 5% and an average cost of $42. Annually, the global volume of cross-border payments exceeds $180 trillion, with a combined cost of over $1.7 trillion. To compare, the Internet of Value allows for immediate transactions of value. It is similar to how people have been sharing and exchanging digital content for years.
The Internet of Value is not limited only to money operations, as it enables the transfer of your valuable assets, including securities, intellectual property, music, and scientific discoveries. This decentralized platform eliminates the need for mediators, reducing costs and risks associated with traditional transactions.
How is the Internet of Value involved in the business?
The IoV can empower businesses to make transactions more quickly and cost-effectively. It enables the instant transfer of monetary assets, similar to how data is exchanged, which has massive implications for businesses. Eliminating intermediaries and third-party costs means faster and more cost-effective transactions, allowing companies to operate more efficiently.
One key advantage for businesses is international payments. Traditional cross-border transactions can take days to settle and can be costly. With IoV technology, payments can be made instantly and at a fraction of the cost. It is beneficial for businesses with significant international transactions.
The IoV presents businesses with the opportunity to monetize assets that were previously difficult to sell or transfer. For example, a music company could use IoV to sell and transfer ownership of music rights to investors, creating a new source of revenue.
The Internet of Value (IoV) has multiple practical applications across various industries. IoV can enable fast and cost-effective cross-border transactions in payments and financial services by eliminating intermediaries like banks. It can be used as a secure and transparent platform for financial transactions. It could reduce the risk of errors and possible hacker attacks. Ripple is a part of the payments and financial services industry that offers a blockchain-based platform for cross-border payments. It uses the Internet of Value to facilitate quick and pocket-friendly cross-border transactions without banks' involvement.
For supply chain management, IoV can enhance transparency and traceability, ensuring that products and goods are moved from the supplier to the end user. It can prevent fraud, improve efficiency, and overall enhance supply chain management. IBM has developed a blockchain-based platform for supply chain management called IBM Food Trust. This platform uses the Internet of Value to track and verify the movement of food products throughout the supply chain.
Regarding identity verification, IoV can provide a secure and decentralized platform for verifying identity, mitigating the risk of identity theft and fraud. It can be useful in sensitive industries, such as healthcare and banking, where secure identity verification is critical. Mastercard, for example, has introduced blockchain technology to develop a decentralized digital identity solution for its customers to safeguard its transactions.
Advantages and Challenges of the Internet of Value on the example of banking
The IoV offers several benefits that make it attractive for businesses and entrepreneurs, along with several challenges that must be addressed.
One of the key advantages of the IoV is its speed and efficiency. The transactions can be processed almost instantaneously and at a fraction of the cost of traditional banking methods. It helps businesses to save costs and have time to explore new markets. The IoV offers greater transparency and traceability, which can help prevent fraud and increase trust in financial transactions.
The IoV's decentralized nature is one of its most significant benefits, setting it apart from traditional banking systems. This decentralized structure also enables greater financial inclusion, benefiting those currently underserved by traditional banking systems.
However, the IoV is not without its challenges. The biggest issue is scalability, as most blockchain networks are limited to a certain number of transactions per second. Security is another concern. There are known facts of hacks and attacks on blockchain networks. An inappropriate safety system may cause the loss of funds and undermine trust.
Regulation is also a key challenge for the IoV, as there is a lack of clear regulations for blockchain and cryptocurrency. It can make it difficult for businesses and individuals to use the IoV, and there is a risk of regulatory arbitrage where companies move to jurisdictions with less regulation.
Future of the Internet of Value for Businesses
One potential development for the IoV is the use of smart contracts. They are self-executing and can be programmed to alert automatically when certain conditions are met. They can help businesses to automate transactions and reduce the need for intermediaries.
Another promising innovation for the IoV is the adoption of decentralized finance (DeFi). DeFi is a movement to create a more transparent and permissionless financial system using blockchain technology. By leveraging the IoT, businesses could offer a range of financial services that are easier to access, much more affordable, and have a high-security level.
IoV is undergoing rapid developments, and businesses will likely see emerging trends and innovations in this space in the coming years. One such trend is the integration of artificial intelligence (AI) and machine learning (ML) technologies. By leveraging these technologies, businesses can better understand and analyze data, leading to more informed decision-making and improved fraud risk assessment.
Summary
To sum up, the Internet of Value represents a significant opportunity for businesses and organizations to conduct transactions more quickly and cost-effectively than ever before. It has multiple applications in various industries, offering benefits such as increased transparency, greater financial inclusion, and reduced costs. However, there are still several challenges that need to be addressed. The future looks bright, and businesses that embrace this technology will have a significant competitive advantage.