When we hear the word Blockchain most of us will react in two ways. The first is by drawing some vague connection to Bitcoin and other cryptocurrencies. The second is simply a knowing shrug: it's important but pretty complicated so we just smile and nod! So today we're going to try to untangle the complicated mess that is Blockchain. Then we'll move on to discover how the technology could potentially impact the travel industry.
Blockchain technology rose to prominence in 2011 as more people became aware of Bitcoin, a digital currency based on the technology. After a huge spike in the price of Bitcoin, the public sat up and took notice. The promise of Bitcoin was that through using Blockchain technology, its users could take advantage of a new type of payment mechanism: Truly anonymous, free and secure purchases.
The excitement in Bitcoin was partly driven by the interest in something completely new, as well as the opportunity available for early adopters to 'mine' their own Bitcoins - perhaps the digital equivalent of printing money. But how exactly are Bitcoin and Blockchain related?
Put simply, Blockchain is the technology and methodology underpinning Bitcoin. Blockchain can be understood as a database. But it's no ordinary database. It's decentralized and encrypted by design and shared across a network of stakeholders. The result is a distributed ledger that can record transactions across multiple computers. This distribution ensures that all transactions are verified by consensus, allowing the flow of digital value to be stored, organized and certified in a transparent and secure way.
Take a look at the video below from Amadeus:
There are a number of factors that come together to make Blockchain a unique and exciting technology. And they go way beyond digital currencies.
We're living in strange times and there are plenty of people out there talking about alternative facts and half-truths. With Blockchain, there's no room for misinformation. Once an entry is registered on a public blockchain, it's there for the world to see. Because it needs the consensus of users to get onto the public ledger and cannot subsequently be altered, everyone can see a time-stamped version of ‘the truth’.
For this reason, plenty of people out there believe that Blockchain technology is ideal for registering ownership of assets such as houses, cars or financial holdings.
Security is built into the Blockchain process. The consensus mechanism has a very high threshold for cryptographic security. Without this, it would be impossible to maintain the integrity of a ledger shared between multiple parties. This level of security is key when sensitive information and transactions are being sent around the world
It's difficult to say how important blockchain’s decentralised nature really is. In terms of payments, the idea is that middle men - those who take a commission off the top of financial transactions such as Paypal - can be avoided. However, in certain industries, private Blockchains with a more centralised structure can work. The main advantage to having a decentralised database is that there is no single point of failure. If the network is attacked, it's much more resilient.
If there's one point about Blockchain that we need to hit home, it's about this idea of consensus. Because a transaction is processed on all computers in the blockchain, the algorithm ensures that there is a consensus regarding the validity of every transaction. This means that Blockchain data is always complete, accurate, trustworthy and widely available. It's a shared record of the truth.
One major advantage of Blockchain technology is the promise to improve efficiency and reduce costs for stakeholders. With it, there's no need to rely upon bulky, centralised record-keeping entities. Hooray!
So those are a few a few key aspects to Blockchain technology. And it all sounds very interesting, right? But now you're wondering how exactly this technology links into the travel industry? How can the world of travel use Blockchain?
Before we properly delve into Blockchain and its application in the travel industry, we need to fast forward in time from Bitcoin to the rise of another cryptocurrency and now all-around computing platform, Ethereum. Ethereum is a public Blockchain that came to prominence in 2015. Although it has its own cryptocurrency, Ether, it also provides a platform for businesses to build applications based on Blockchain technology.
Arguably its biggest gift to the world has been the introduction of Smart Contracts. What exactly is a Smart Contract? Well, in this case it's smartness is all about automation, and it wouldn't be possible without the Blockchain.
These Smart Contracts can automate a range of business dealings between parties without the need for human intervention. Why is this of interest to the travel industry? Well, consider an industry which has a high amount of commission based business. Market aggregators in travel, for example, could stand to benefit. With Ethereum it's becoming possible to hardcode the stipulations of an agreement between parties into a self-executing blockchain program. For simplicity's sake: Let's say "If I hit X in revenue, automatically send 2.5% of X to Y. In travel, commissions between hotels and aggregators could be settled automatically. No more annoying invoices, no more late payments, no more cash flow worries.
In a recent report, consultants Amadeus outlined five ways that Blockchain could impact the travel industry in the near future. At the moment, even while the technology is experiencing plenty of exposure and publicity, it's at an early stage in its development. There don't appear to be any Blockchain systems being put to use in the travel industry today. But there's no doubt that the potential is there. Take a look at these possible use cases.
We've all had experience with loyalty schemes before. But in the travel industry, you can barely book any kind of trip without being bombarded by them. Hotels, booking websites, airlines, retailers... all have different schemes that are a key part of driving return business and keeping customers engaged.
Some are more successful than others. But all depend on outdated systems and principles, with the majority simply offering points in return for purchases. The problem with this method is that points are often left unspent, with travellers frustrated by the lack of leeway and the restrictions on what those points can be spent on.
Sure, some schemes are more flexible than others and allow a wide range of redeemable goodies. But plenty of points out there are left unspent and may even be listed on a travel company's balance sheet as a liability. And we don't want that.
One great example of how Blockchain could improve this situation is California startup Loyyal. The company's loyalty and rewards platform was built with blockchain and smart contract technology to reduce fragmentation in the loyalty business and make it easy for businesses to partner. The result is a secure system that gives customers more value from their loyalty schemes, eventually even in real-time.
As much as the travel industry has developed in recent years, a few age-old problems still linger. One of these is the worst nightmare of any traveller: lost luggage. Lost or damaged bags cost the travel industry a huge amount every year, not to mention the traveller complaints and damage to reputations that comes with it. And the process of tracking it down can be even tougher than losing it in the first place. In part this is due to responsibility for the luggage shifting throughout your journey, from the airline to the airport to ground handling firms.
That's where Blockchain comes in. It could offer a shared, distributed ledger used by all those within and between airports that at some point have control over baggage. The system would allow for a bag and its ownership details to be automatically logged. These records could be shared among everyone concerned to improve accountability and, most important of all, track down lost luggage.
Remember when we mentioned Smart Contracts before? We know more than most about how the travel industry is dependant on an intricate mixture of operators, service providers and OTAs. There's a complex set of relationships between those parties, with money moving between them all of the time.
Smart Contracts based on a Blockchain system could change the way those relationships are managed for the better. For example, let's think about a traveller booking a hotel room. In the background, there's an aggregator, perhaps an OTA and the hotel itself. Eventually, they will need to settle cash and commissions based on agreements already in place. With Blockchain this process could be automated and executed in a way that maximises efficiency and cuts costs for everyone involved.
One of the most exciting potential Blockchain uses in travel is in the realm of identification. We have all experienced the endless showing of IDs and passports throughout a travel journey, from booking to boarding to airport security to hotel check-in.
In future, the trustworthy and immutable nature of blockchain could transform the way travellers are identified throughout the course of a journey. Imagine a trip that didn't require this at every stage. Blockchain technology could offer travellers a more frictionless experience in the coming years. Startups such as Civic are already pioneering in this space.
Blockchain startups are beginning to spring up in all kinds of industries, and you can bet that travel won't be far behind. Our is an industry in which innovation is rife and competition drives progression. With that in mind, what should travel companies start doing now in order to ride the inevitable Blockchain wave?
According to Amadeus' latest report on the matter, there are five steps that should be taken by industry stakeholders.
The first is to appreciate the pace at which decentralised technology is moving. This requires an understanding of what it's all about and its potential impact on the industry. If senior management is going to buy-in to future projects that involve Blockchain, they need to be educated now, not later.
The second step is to explore Blockchain's potential even further. Nobody yet knows the extent to which it could impact the travel industry. There are bound to be more innovations and use cases that come to light aside from those mentioned above.
The third step will be new to many in the travel industry: collaboration. By definition, Blockchain is a system that requires collaboration between partners and competitors in order to work.
The fourth step is to, as with any emerging technology, experiment. Opportunities may present themselves to conduct trials and test Blockchain in a real-world scenario. Why not take the initiative and see where it takes you?
The fifth and final step that Amadeus recommends for potential Blockchain adoptees is to recruit with the technology in mind. Understandably there's a shallow pool of talent out there with the knowledge and skills to turn potential into reality. But working with technology partners and hiring the right people could go a long way towards successful implementation in the future.