What is Blockchain and What Does it Mean for Us?
The World Economic Forum has identified blockchain as one of six computing “mega-trends” over the coming decade, with companies including Deloitte LLP, JPMorgan Chase & Co. and Toyota Motor Corp already experimenting how this technology can be used.
Originally developed by Bitcoin - a digital payment system that manages transactions of virtual currency – a blockchain is type of database for recording transactions. What makes a blockchain new and innovative is its ability to copy all transactions to all computers in a distributed (called peer2peer) network.
How does it work?
The data contained in a blockchain is stored in blocks. These blocks are distributed across multiple computers (nodes) and each node in the network uses cryptography to validate transactions. This removes the need to have a single storage point for the data and/or the need for third party to perform any validation.
According to Bank of England a blockchain is
“…a technology that allows people who don’t know each other to trust a shared record of events..”
Each block contains:
Header with metadata such as ID, reference number, creation date/time
Content with the actual assets or details around the transaction.
Every block references the previous block in the chain, giving the ability to see the full history of all associated blocks.
What about Benefits?
The blockchain technology can bring about efficiencies in securing and establishing ownership of assets by reducing errors, streamlining end to end processes and increasing transparency of transactions. The data is fully auditable with every transaction stored and a proof of work validation process used to reduce / deter abuse of the system. The distributed network means its is less susceptible to impact from malicious attacks and removes single points of failure. Data quality is improved and exists across the entire network hence significantly more secure and potentially lower costs of ownership for the individual.
Opportunities for Business going forward…
Many applications exist in the financial sector and financial institutes are already working on applying the technology, however other pioneers are working on other opportunities which will be of interest…
- Smart grid energy market – distributed generators and consumers exchange and transact buying / selling power in a smart grid; enable local distributed networks to operate and transact without the need to deal with the large utility suppliers.
- Distributed cloud storage - store encrypted data across a distributed network rather than in one single database; opportunity to reduce cost to store, increase security and disaster recovery.
- Distributed asset ledger – combined ledger storing data for properties, financial assets, land titles or virtualized assets; lower the cost to maintain systems and ease movement / transfer of ownership.
- Distributed purchasing approvals – ledger to track an auditable record of goods and services made across multiple systems / organization; to reduce fraud, improve data accuracy and remove duplication.
- Communication storage – record of company's online conversations; potential use in contact center environments.
What next… A number of the big vendors such as SAP are actively recruiting and looking at how they can exploit the technology. So I think depending upon your appetite for risk it is a case of being at the ‘bleeding edge’, partnering with an innovator or looking to wait until the product offerings start to emerge and quickly respond.