Blockchain - the future!
Regardless what you do, in the last few months I am pretty sure you heard about blockchain. Well, even if not blockchain, than you still could not escape bitcoin and the surrounding hype.This technology has an immense potential to disrupt the way we do business, distribute and register value. My number one area of interest is blockchain for business. Blockchain for business is an idea of private networks with shared ledger, increasing speed, transparency and effectiveness in processing transactions.
But what can blockchain technology do exactly? Why is this groundbreaking? What are the questions that arise moving into this new model? Let's find out
What is this thing called blockchain
Blockchain is a shared ledger, where every transaction is a block, locked in a chronological order and secured by cryptography.
A bit clearer: blockchain is like a common register of transactions, used by and visible to all of the members of the network. All blocks contain a certain transaction, and each new block is connected to the previous block. It is a peer-to-peer network, where all transaction are registered with consensus, and without one central entity registering transactions. It uses hash function- turning data of any size into a fixed size- and registers transactions in a hash format. Blockchain technology uses a secret and public cryptographic key- the secret key gives you access to your account on the blockchain, and the public key allows others to view transactions, information from you.
Imagine this- my assets and transactions are in a set of safety deposit boxes. I store there my savings, my car, my house, etc, all in a different safety deposit boxes. All of this information is encrypted, and I am the only one, who with one key can access all of these safety deposit boxes. But in case, I would like to sell my car, I can open my safety deposit box to B party with a public key, show them that I do have a car to sell, and eventually perform the transaction. This transaction will be validated by consensus from the members of the blockchain. It will be registered as a block, with a unique hash, and connected to the rest of the blocks on the chain. This means, that I have just passed the ownership of my car to B party in a fast, transparent, efficient way.
To grab the essence of blockchain please see this amazing TED talk from Don Tapscott.
Key expressions to understand blockchain:
Double entry ledgers have been in use since the 13th century (accounting ledgers!). The novelty lies in having a distributed ledger, where all members of the ledger can easily access the shared records. It is one single source of truth, and reduces the amount of work by avoiding multiple entries on several ledgers.
On a permissioned private blockchain each party has a unique identity, which allows to perform and view a certain set of transactions. For example, if A party transfers an asset to party B, both party A and B are able to view the transaction's all details, and party C is only able to see that they transacted. If an auditor joins the network, they would have access to see all details of the transactions. This is possible via the cryptographic technology of digital certificates (think of it as passports, which gives you access to see some things).
Smart contracts are what make blockchain way more than just a record of transactions. With smart contracts we are able to program agreements on the blockchain. Contracts can be partially or fully self-executing with programming contract triggers- so if a certain event is registered on the blockchain, the contract will automatically make the transaction. They provide excellent security and increased speed to transactions and contract laws. Let's say I have ordered a kilo of organic potatoes on the blockchain. The moment that I sign the delivery receipt of the potatoes (the trigger registered on the blockchain), the farmer will get my payment.
In a business network with known participants transactions can be verified and committed to the blockchain via various forms of consensus. This assures that the transactions are validated, and acceptable by the members of the blockchain.
Let's see in a few sections the biggest benefits blockchain can bring us:
Distributed and sustainable
The ledger is shared, updated with every transaction, and selectively replicated among participants in real time. It reduces time spent and duplication of administering transactions. The existence of the ledger is not dependent on a single entity as it is shared.
Secure and private
As each transaction is connected to be previous block the blockchain cannot be edited, corrections are only made via making new transactions. Permissions and cryptography prevent unauthorized access, and protect privacy. Data partitioning techniques make only that much data visible to selected parties as defined by the owner.
Transactions on the blockchain are visible by every entity, and they are easy to oversee and audit, as all transaction are in one place. This means real time verification of transaction without a third party.
Requiring consensus on the transactions means no arbitrary, gray transactions can take place. The business partners would not approve unacceptable terms in a transactions, thus it could not get on the blockchain and be executed.
Flexible and autonomous
As business rules and smart contracts can be programmed into the blockchain, blockchain can evolve to carry out plenty of different functions, even executing by itself. This provides a huge potential in changing the speed and way we do business.
The idea of blockchain is huge, and very hard to grab. There are still many questions of how this technology would work in practice. Here are some of mine:
- Conflict of interest- in a business blockchain we are able to see transactions between party A and party B. What if a company does not want to us see where their transactions come from? Think about some secret recipes of products- if you would know who does a company do business with you could guess the ingredients.
- Blockchain for business- being part of a supply chain network, would it mean, that for many products and processes we are part of several blockchains, or would it be one big network?
- What could be the motivation for legal authorities to change their current administration for the blockchain? Could the speed of processes outweigh the implementation cost?
- What is the added value of the person who creates and maintains a blockchain platform? Would there be a subscription fee?
There are many companies currently testing this technology, and we can see more and more use cases surfacing as well. The applicability of this technology is endless, and this is just the very beginning of this journey. Here is a very good example from the non-profit sector.
Besides my studies, I have done plenty of independent research, and I would like to send a huge thank you especially to IBM for the amazing study material.
I hope this article could make you think a little bit about blockchain technology, and if I have sparked your interest do not be afraid to go out there and research!
I am super excited for your comments, additions, I love to discuss this topic so do not be afraid to reach out!
Resources: https://blog.frontiersin.org/2018/04/19/blockchain-journal-olinga-taeed-christopher-clack/ https://technofaq.org/posts/2018/04/blockchain-cryptosecurity-cybersecurity/ https://www.ibm.com/blockchain https://www.google.it/search?biw=1440&bih=701&tbm=isch&sa=1&ei=AN8xW7T5DITIsQHJ856ADA&q=blockchain&oq=blockchain&gs_l=img.3..0l6j0i67k1j0l3.10638.11928.0.12188.8.131.52.184.108.40.2060.798.0j2j2.4.0....0...1c.1.64.img..4.6.589....0.YZPL7XAwLgk#imgrc=gl2jTtwGwkc-UM: