Digital Transformation? Just wait until the Blockchain takes hold!
As I write this in the latter months of 2016, I’m in the mood to make a prediction. In recent years we’ve seen the advent of "cloud", the advent of the "app" economy and the adoption of “smart” devices driven by the Internet of Things. However, whilst these things have been "powered" by the World Wide Web, we haven't really seen a fundamental change to the internet itself… until the arrival of Blockchain.
What is this mythical thing we call a “Blockchain” and why will it affect our everyday lives to such an extent? I hear you cry. Let me explain.
You may not have heard of the Blockchain, but you’ll have heard of cryptocurrencies like Bitcoin. Blockchain is the technology at the heart of Bitcoin, first implemented in 2009 and is – to put it as simply as possible - a database distributed in many copies across many users, and it serves as the public ledger for all transactions of these currencies.
Okay, so Blockchain is a kind of superhero database? How’s it going to change our world?
Well, before we go on to that, we need to understand the principles that a concept like a public ledger and distributed data record bring to the party. The appeal of a cryptocurrency is that it allows for the transaction of “value” without needing to use a single, governing, (and more likely as not) charging entity like a bank or financial institution. A cryptocurrency means I can move money from A to B, around the globe to pay for services or goods, without the need to use a bank or transfer service, and to do so all parties need to trust each other.
To achieve this, we need to keep a record of where all the “value” goes and who owns it within the network. This is where the Blockchain comes in. The Blockchain allows us to send, verify and record all these transactions, the validated data being kept in “blocks” which include a link back to the prior block in the Blockchain (hence the “chain” description). We can even “mine” the Blockchain to create new blocks to add records to the network as the volumes grow, but let’s not go into that here.
Everyone in the network keeps a copy of the data “blocks”, hence the distributed description. As there needs to be a consensus of opinion – i.e. a portion of the people holding copies need to agree to any changes being requested in a block/record - we have a trusted, virtually tamper-proof, secure copy of a set of data and its back story of where it’s been and related information such as who has “owned” it. THIS is where the appeal of the Blockchain lies. Not just as the underpinning of Bitcoin, but for its ability to be secure and trustworthy.
Companies such as IBM have recognised that the benefits of the Blockchain can be applied in countless other applications and I believe that 2017 will see the breakout of the technology from small scale, pilot projects and the disruption of financial transactions to early more “mainstream” applications, and I’m not on my own.
Why? Consider this: what’s the biggest threat to the mass adoption of the Internet of Things? Security of the devices and being able to trust the data they create. What’s one of the biggest blockers to start-ups and small scale businesses? Robust business processes and contract management and adherence. What’s the biggest risk to democratic voting? Electoral fraud. And I haven’t even got close to starting.
Imagine this, in a business like the wholesale distribution of goods, the company sets up “smart” contracts utilising the Blockchain. All suppliers and customer transactions are allowed to run via a secure and trusted set of business processes, leaving the business’ supply chain to effectively run itself to given and known parameters, free from fraud. Orders are placed, payments issued and debts collected in line with the contracts created and agreed to by all parties involved.
In a business like the manufacturing of high cost, complex goods such as airplane engines or luxury watches, every product and every component within each product is recorded and catalogued on the Blockchain prior to it leaving the factory. Throughout its life and as that product passes through various owners, as it is serviced and repaired, that history is stored all on the Blockchain in order to create and a birth certificate, a single version of the truth, assure provenance or even meet legislative requirements by producing an indisputable audit trail. This protects the “brand” creating the product and the consumer or current owner, along with the retailer that the part passes through.
I save my favourite for last. In recent months we’ve seen a San Francisco company create a drone with interoperability between itself and the Blockchain. The premise being that in order to deliver medicine to individuals, the drone will (by using Blockchain technology) interact with a “smart” window sensor, verify its identity and permissions - thereby allowing it to self-automate package delivery - triggering the window to open. The drone flies in and delivers its cargo before exiting and triggering the securing of the window once again – all in real time. As a technology demonstrator for securing IoT solutions go, you don’t get much better than this.
So, in the next few years, we’ll see Blockchain not just help us with these things but also with insurance policy renewals and claims, mortgage applications, money transfers, fines and tax payments to government bodies, paying for online orders of books, music and films – ensuring that the artists get their fair cut and that we in turn are protected from copyright pirates, forgers and fakers. It will help to protect the resale value of the goods and services we use, speed up and streamline international trade, secure our smart homes and autonomous cars, cut the costs of our mobile phone contracts and allow us to swap utilities providers more readily and easily. These are just a few of the more obvious applications of the Blockchain.
If this has whetted your appetite to know more or experience the Blockchain for yourself, why not start by looking at IBM’s dedicated pages for Blockchain at: www.ibm.com/blockchain. If you are a developer, talk to Arrow about accessing the Hyperledger via IBM’s Bluemix PaaS platform or visit social media and see what organisations such as the Digital Catapult and individuals such as Alex Tapscott, author of the Blockchain Revolution have to say.
As the title of this blog says “you ain’t seen nothing yet” as far as Blockchain goes. One thing is for certain, it’s here to stay and chances are it’ll disrupt your business or your customers before you know it.
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