What did we learn about the blockchain technology?
We hosted an engaging panel that discussed various facts, fallacies, and issues surrounding blockchain technology. There were two major areas of focus. One was to convey information about what makes blockchain different than other data management platforms from a technical perspective and the other topic of discussion was about various use cases – where it could be applied. We had the honor and privilege to discuss those topics with four experts from completely different areas yet united by one technology.
The first note I made while listening was that Blockchain technology is not something new. In fact, it has existed since 2008 and was the next logical step for ledger technology to take. Blockchain could be the promise of changing how transactional business is done by removing mediators, and how distribution is done by removing walls.
Blockchain is based on something called distributed ledger technology (DLT) which has been around for a while. As the data model that allows you to define the state of your digital records, it will do the following:
- It defines a transactional language that describes how your data is changing and protocols for adding new transactions.
- It contains the sequence of blocks. Each block contains one or more data transactions, trusted timestamps, and the data is serialized, with each block linked to the previous block with something called cryptographic hash or a digital fingerprint – something that cannot be changed.
- The next important component of the consensus algorithm is a protocol that defines how new blocks are added to the blockchain. All participants on the network can see the current state of the data – everybody has the same information and prevents malevolent bodies from manipulating data.
- The fourth component – smart contracts, expanded its applications. Secured in the same manner as data. For different implementations, you need a specialized general purpose.
Today, the use of this technology has expanded across multiple industries. It is every consumer and B2B transaction’s dream – co-transactors work with the same data and reconcile that data despite any number of participants. It is a distributed data management platform, and enables you to securely store data and evaluate the authenticity of the data you stored. It provides a single source of truth for transactional data, immutable, and clear for all to see.
Blockchain is changing consumer behavior and our understanding of how they interact with business. A mechanism where the group of people or entities that may not have mutual trust, can now agree on the set of facts and how those facts would change over time. There is no central intermediary – no bank, no payment network, no escrow service. Bitcoin, for example, is not an entity, it’s a group of people who agreed to use the same software and agree to the same facts.
Where else could it work?
Identity management and asset management in general…it sparks our imagination. What could be some of the practical use cases?
Some of the use cases our guests worked with are testing the transactions between digital wallets, creating blockchain platforms for financial institutions, implementing blockchain in supply chain business, and building platforms for storing, securing and validating data.
Take Facebook for example – their business model today looks something like this: you can log in and provide all the information, Facebook turns around and aggregates that data and makes a fortune off selling it. The self-sovereign identity is a monumental idea for a blockchain use – it’s the idea to own your own data. It is a way to maintain ownership of that data, sell your data, and receive compensation for it as it is used and reused. This allows all the personal data to go to a database that you own…and can lease! You make revenue off the data you are producing.
Another more immediate use case – hospitals. If the hospital has our medical records and they provide an application program interface (API) for other hospitals to read it, they would create immutable security protocols of that transactional data, which would need authentication by you or family member – a powerful concept.
Major considerations with implementing blockchain
Some of the major issues that were topic of discussion:
- Multi-party problems – different parties need to come on board before the technology can be adopted.
- Immaturity, it doesn’t meet the current requirements of usability, scalability, and performance.
- Legacy infrastructure that includes 30-40 years of code with a layer of additional code collected over the years. They will not take all that and bundle it up into smart contracts – it is a serious change.
- Untrusted, anonymous types of blockchain implementations really wouldn’t work very well for things like anti-money laundering.
- A major problem is inefficient framework by which we can choose which platform we build on. The thing you want to avoid – 15 years in future, blockchain is operating full speed and we have 25 different blockchain platforms that don’t speak to each other. Bank 1 has a core system, bank 2 has a different core system and you need to reconcile against them.
- Concerns about setting the standard for blockchain solutions – the standard will be set by someone who reaches commercialization first and large-scale first, which isn’t necessarily the best solution.
Common confusion surrounding blockchain
People tend not to fully grasp the concept of Blockchain and get carried away with all the hype surrounding Bitcoin, Ethereum, and getting rich. It’s tempting to believe that blockchain can apply to every possible process. Some see potential uses of blockchain helping the business processes run more smoothly, but in actuality, when they may just need a workflow application. Though blockchain can help facilitate workflow more transparently, it is still in its infancy, and practicality untested in the enterprise.
The truth is – it is not magic, it doesn’t fix your data, and if the data is not accurate, you implemented a tool to process inaccurate data. You have to go beyond the hype and experiment. But most of all, you can’t throw blockchain at every data driven problem at your company.
Will banks simply disappear in 5 years?
There will always be a role for banks. The injection of cash into the US market is both controlled and maintained. Unless there is some massive shift in people’s mindset, particularly the government mindset, financial services are here to stay, and they are a vital function of the global economy. Philosophically – there are a lot of benefits to adopting digital currency to mediate transactions. Quite possibly, in the next five to ten years you are going to see major central banks beginning to issue their own digital currencies. Possible early adopters to watch are the Monetary Authority of Singapore, and Hong Kong Et. It wouldn’t be surprising if other international banks started to follow suit.
Digital currencies in Everyday Life?
Is there a ceiling for which crypto can be produced and used? Bitcoin has a theoretical limit of about 7 transactions per second, compare that to Visa which has about 12000 transactions per second. If you want to buy a cup coffee with Bitcoin, you can, but it would cost you. The more transactions that are trying to go through a blockchain at one time – the more you need to pay for a transaction to happen. Until Bitcoin and Ethereum find a way to increase their ability to process a larger number of transactions, it is going to be hard for them to achieve mass adoption. They can’t play in the traditional financial industry, at this time – it’s immutable.
Although the concept of blockchain has been around since 1991, its implementation into the enterprise is in its infancy. From what I gathered from the panel discussion, it’s sounds like it’s in the “early majority” of the adoption curve. Only until common platforms prevail and more testing is completed across various use cases, will it move onto “late majority”. Now is the time to experiment with different use cases and to keep a finger on the pulse of what other technologists, strategists and regulators are doing. This way, we’ll mitigate the risks of early adoption, while staying on top of the latest possibilities. I look forward to continuing the discussion and participating in what’s next. <Join us September 13th for our Blockchain Demo Event>. There are opportunities to demonstrate as well as observe.