When it comes to some of the key infrastructure powering economic, legal, and political documents and transactions, security measures seem to be lagging behind the burgeoning digital revolution.
But many hope blockchain stands to transform security and disrupt business – by decentralizing it.
Imagine if unlocking an iPhone required users to physically enter a code into a padlock to gain access. An old security measure coupled with a new digital technology is an obvious mismatch when it conjures up images of clunky padlocks, heavier than the device they aim to keep secure. Blockchain proponents argue that a digital transaction with a centralized point of access isn’t much different.
With blockchain, everyone has the combination, but no one is allowed to change it.
What is Blockchain?
In the simplest terms, Blockchain is a ledger that can’t be amended or erased. Users can update it, or append additional information, but the historical information is never deleted; instead, it is stored in blocks across a wide number of computers on a network. Each individual user is one node on a blockchain.
The Harvard Business Review breaks blockchain technology into five basic principles:
- Data is distributed. Everyone on the block chain can access the full database, but no one controls the data. This means each individual user can verify transaction records with its partners directly – no middleman needed.
- Communication is direct. Instead of routing through a single, centralized node, users communicate directly. Then, that communication information is distributed to all other nodes.
- Transactions are public, but actors can remain private. While all users have access to all transactions in the system, each individual node is identified with a unique alphanumeric address, and transactions occur between addresses. While users can provide identity proof to others, they aren’t obligated to.
- Records are permanent. As the name suggests, the transactions are building a chain – and the chains in that link cannot be deleted. A recorded transition is linked to each record preceding it, verified by an algorithm to guarantee its permeance, chronologically ordered, and fully available to everyone else in the network.
- Transactions are programmable. Users are able to establish, through algorithms and rules, automatic transactions between nodes.
How is Blockchain used?
Companies best positioned to realize success from implementing blockchain now are those that:
- Center on transactions
- Realize advantages from public examination
- Benefit from permanent historical record
- Will benefit its customers though decentralization
For transactions that currently require piles of paperwork, but could otherwise be conducted digitally, blockchain may streamline the transaction process and eliminate the paperwork, saving an organization both time and money. This could include transferring company shares, purchasing digital artwork, or licensing a product.
While for many organizations this may improve speed, for industries or organizations that act as the middleman, blockchain could disrupt their grip on transactions.
Blockchain for Companies
While today’s most touted application of blockchain is Bitcoin, a cryptocurrency, blockchain can be applied in many different industries. A champion of the technology, IBM’s Blockchain division highlights applications across industries. In the banking industry, blockchain was introduced to lower the cost and time to complete global payments, both for business and consumers.
Blockchain networks are currently being utilized in industries including banking, luxury goods, supply chain, and healthcare.
Applications of blockchain technology may include:
- Smart contracts. Blockchain allows a contract to be coded without risk of interception or fraud. For example, once parties agree on contract terms in an app for a bicycle rental, they would be granted access to the product through a smart lock.
- Clarity on the supply chain. Anyone who has ever felt the pain from a delayed package may appreciate this. Typically, multiple parties must deliver before a customer receives the product he has ordered. When a link in the chain fails, the brand he purchased from is the one that takes the heat. However, blockchain technology would provide a permanent, digital, record, accessible to anyone in the network, to see where the process failed.
- Electronic voting or polling. Blockchain could allow stakeholders to weigh in without outside influence or corruption.
- The next step in storage. By using the excess space on user hard drives, digital storage would be secure and vast in comparison to current cloud offerings.
- Employee, vendor, and contractor payments could be made through blockchain, tracked electronically and permanently recorded.
Why leverage blockchain?
As experts increasingly highlight cybersecurity concerns, with Forbes’ contributor Gil Press declaring “there will be more spectacular data breaches” this year, the decentralized blockchain offers a stronger security front: hackers don’t have a single point of access to breach.
Blockchain also offers consistency: its rigid rules for implanting data dictate that new data cannot be input if it conflicts with already existing data.
Finally, blockchain doesn’t require trust between the parties. While this may sound cold, this is beneficial in opening up new avenues when users can trust the system itself, even if they don’t trust some individuals within it.
Blockchain: A revolution or a ruse?
Interest in blockchain has soared.
Several major companies have enjoyed stock surges by including blockchain in their name or mentioning blockchain as a part of their strategy, Forbes reported. Near the end of 2017, Google searches for the term exploded, more than doubling since the summer.
Critics chalk this up to hype and suggest this is simply a bubble.
In the least, blockchain does come with some important considerations, including:
- The database can be corrupted. When its accurate, a permanent history and append-only system ensures consistency. But when an issue is made, it’s hard, if not impossible, to correct in a decentralized system.
- Blockchain may be vulnerable to frivolous data. In an anonymous, decentralized system, it’s difficult to isolate and exclude a user who is spamming the system, or inputting too much data simply because it’s easy to do, because adjustments require consensus from everyone involved.
- Storage, scaling, and maintenance are significant. Since the same data in blockchain lives everywhere, scaling, storing it, and maintaining it is exponentially more expensive and cumbersome than doing so in a centralized system. Oh – and those scattered nodes may all be on separate software systems, as upgrades aren’t mandatory.
In reality, it will take more time to really understand how blockchain will impact our society, and analysts suggest this understanding isn’t likely to come any time soon.
In its Trend Insight Report, Gartner notes in Blockchain-Based Transformation that most business leaders are looking to blockchain primarily for improvement in current process and records management; however, digital assets and decentralization may benefit as well. These benefits, Gartner predicts, are a long way from being realized. The report predicts a mere 10% of enterprises will realized any monumental transformation from blockchain technology up to 2022; by 2026 value is predicts to exceed $360 billion before surging by 2030 to an estimated $3.1 trillion in additional value from blockchain.
If you’re ready to understand how your business can leverage blockchain to disrupt your industry, we’re happy to help. Curious about cost or want to talk with a Genie?