The Buzz on Blockchain
Last month, I attended Cleveland’s inaugural Blockland Solutions conference with the goal of wrapping my head around blockchain. This technology has the promise of disrupting the internet with a variety of applications ranging from financial transactions to media and digital identity. With all the hype around this often-misunderstood technology, I wanted to understand where blockchain becomes a solution.
If the internet was created to transfer information, blockchain was created to transfer value. At its core, blockchain is a digital ledger that lives across distributed infrastructure. Data are duplicated in many locations with each copy constantly validating against all others in a process called Consensus. This makes it extraordinarily difficult to manipulate records. This is a useful property if you want to track definitive ownership of a digital asset or verify the accuracy of a record. I found these four key takeaways helpful:
- The key innovation with blockchain is the unique ability to permanently and securely transfer a digital asset. A digital asset can be anything from a document to digital currency.
- Blockchain was built to facilitate trust across organizations. But for blockchain to work, it requires cross-organization collaboration.
- Blockchain is an enabling piece of technology, not the whole technology. You will often hear ‘on the chain’ when referring to components of the solution that are directly using blockchain technology. ‘Off the chain’ refers to components that are blockchain adjacent such as user interfaces or other databases.
- Standards are an absolute must. Getting organizations to collaborate and trusting that data and digital assets are secure on a single system is one challenge, making sure that the data are entered accurately and in the expected formats is another.
That’s great, but where does a digital record that can’t be edited make sense? Here are a handful of applications that I found compelling.
- Audit trails. Automatically keeping a permanent record of anyone who has accessed, or edited, sensitive information.
- Smart contracts. These digital contracts automate the transfer of a digital asset based on hard-coded business rules defined in a contract. This establishes trust to automate digital asset transfers because the contract is tamper-proof on a blockchain. This could mean that home title transfers and mortgage promissory notes would no longer require a notary.
- Tokenization. Creating an immutable digital record for physical items such as cars, or specific goods in a supply chain. Combined with tamper-proof records of sensor data, this can revolutionize supply chain processes by increasing trust across all parties regarding shipping and fulfillment conditions.
- Credentialing. Today, anyone can say whatever they want on LinkedIn, with limited to no verification. Employment verification, background checks, and official University-issued transcripts are critical parts of the employment process. Creating trusted credentialing solutions that can be shared with employers will significantly reduce the complexity and cost of these important verification processes.
While blockchain enabled technology is promising, there are still a handful of challenges that need to be addressed before mainstream adoption:
- Energy consumption. Bitcoin alone consumes more electricity than 159 countries including Ireland and most of Africa. The Consensus process that verifies the authenticity of all copies of a record, also known as mining, is responsible for blockchain’s large energy consumption. Making this process more efficient may make records more susceptible to manipulation.
- GDPR and other regulations. GDPR has had wide-sweeping impacts on organizations that handle or process personally identifiable information on European citizens. The California Consumer Privacy Act will have similar implications on much of this US. The distributed nature of information that makes blockchain so unique and resilient to manipulation can be in direct opposition to these and other regulations.
- Security. Just because blockchain records are tamper-proof doesn’t mean they are hack-proof. Critical or sensitive information can still be exposed and stolen. The distributed nature of information on a blockchain requires the next generation of security tools that can ensure the integrity and security of records.
There is no doubt that blockchain is a compelling solution to the problem of trust in the digital age, but the technology is the easy piece. An enormous amount of education and buy-in is still needed and I imagine that over the next several years, we will see the evolution of business processes to take advantage of blockchain solutions in more diverse ways. The question is, how long will it take for blockchain to make an impact on the way we do business? And will this impact be as big as the current hype suggests?
Cal Al-Dhubaib is the CEO & Chief Data Scientist at Pandata.