What is the new technology behind cryptocurrencies and how it might change the way we do business?
Unless you have been living under a rock or have just got back to earth after a return trip to Mars, you have certainly heard of Bitcoin as well as the meteoric growth of interest around cryptocurrencies. But what is Blockchain, the technology underpinning Bitcoin? And, what should you care about it? What is the real hype about Blockchain and cryptocurrencies all about? What all that have to do with your business, industry or marketplace?
Right now, your customers might already be involved in some form of crypto-transaction or researching new Blockchain applications and technologies. In today’s information-driven society, people do not wait for companies to show them the way. They search and learn and soon start demanding products and services that can make their lives more efficient and pleasant.
In this article, I will be exploring the nature of the technology behind Blockchain with its various potential applications for different sectors, industries, companies and individuals. I will consider how this technology comes with a promise to disrupt the way we do business, transact, exchange data or simply engage in menial day-to-day life activities. Some of the high-tech new start-up projects as well as large businesses and governmental institutions experimenting with Blockchain will also be introduced. There are a sizeable number of them starting to disrupt various industries and sectors. Once this is established, it would be up to you to decide whether Blockchain is right for your business or if it will ever be relevant to your industry and sector.
How did it all start?
Blockchain and the Bitcoin protocol is said to be created by a mysterious unidentified person under the moniker of Satoshi Nakamoto. Whether this is a real person or a small group of people nobody really knows. He is attributed to have created the bitcoin protocol and then published that in a paper via the Cryptography Mailing List in November 2008. For the first time in history ‘his’ invention allowed money to be transferred around the world without the need for banks, government and other intermediaries.
The first version of the bitcoin software client was released in 2009 and other later projects were still attributed to Nakamoto until 2010, when he finally made his stage exit. It was the starting point of what came to be known as Distributed Ledger Technology or DLT (a group of computers sharing information). It provides a decentralized and transparent method for transactions, while maintaining a high level of security.
According to Professor Leemon Baird, the inventor of the Hashgraph distributed consensus algorithm (another similar DLT application), many of the most influential Blockchain systems, including Bitcoin, rely on a concept called ‘proof of work’ (PoW). Under this model, anyone who wants to add to the Blockchain must perform a work-intensive task using information from the existing Blockchain in order to add new information. It is built on a system called asynchronous byzantine fault tolerant (BFT) which is the gold standard for security in distributed systems. Most computer experts agree that perhaps nowhere is BFT more essential than on a Blockchain system. In contrast to Blockchain, most traditional distributed computing environments have central configuration databases or authorities that can help right wrongs in the event that Byzantine failures occur. The difference is that, in Blockchain systems, there is by definition, no central authority. Blockchain’s ability to legitimate transactions is based on what is referred to as ‘trustless consensus’ and that is exactly what makes it so singular and unique.
Being consensus-based, it means that Blockchain allows for fairness and transparency in distribution and transactions besides being incorruptible, eliminating forgery. In his book, Blockchain Revolution, technology author Don Tapscott argues that this new technology allows for ‘companies and individuals to collaborate with an unprecedented degree of trust and transparency’. According to Tapscott there are seven distinct design principles for the Blockchain economy: networked integrity, distributed power, value as incentive, security, privacy, rights preserved and inclusion. He believes that these seven principles may offer guidance in the designing of the next generation of high-performance and innovative companies, organisations and institutions. You will be able to read from the list below some of the many sectors that have already been disrupted by the technology that many have already hailed as the “third wave of the Internet”.
This raises questions such as:
- Can blockchain be used in your own industry?
- Can it increase efficiency, transparency and safety while speeding the volume of transactions?
- Can it help to improve consumers’ trust and enhance competitiveness?
“We believe that Blockchain technology could be an important tool for protecting and preserving humanity and the rights of every human being. A means of communicating the truth, distributing prosperity…” Don Tapscott
Tapscott is one of the global leading Blockchain advocates who believes that the internet will never be the same again with these types of applications; it will soon be ubiquitous and help us to reshape the world’s economy.
Generations of development
According to Baird, the development of Blockchain technology has gone through four generations of development. Firstly, through Bitcoin and cryptocurrency transactions, people realised they could have money (in digital wallets) without the need of a government through fairer transaction using PoW and agreeable timestamps to eliminate forgery and corruption. It then allows for micro-transactions to be performed, more anonymity while still being transparent and for utility tokens to be created. Developers then realised they could do more than only put money in the ledger. In that way, lands, files and other assets could be added to the Blockchain, thus enabling the second generation. This involved the creation of small files systems that no one could change, people having a shared view and rules being enforced by the whole community. The second generation moved beyond money and began storing ownership, performing revocation, uploading and updating of shared medical records, etc. With the third generation, blockchain application was extended to sales, purchasing and swapping of goods and services through smart contracts, agreements with non-repudiation, voting and distributed applications to organisations. Then the fourth generation made possible matching buyers and sellers, stock markets and dark pools application, games, auctions, patent office and domains. Many new business cases and models are coming into being every day as we write this article there are hundreds of new ICOs (initial coin offers) and tokens from new start-ups offering blockchain DLT and consensus-based applications in some of the areas above and many more.
So, if we could just get past the whole Bitcoin and crypto-frenzy greed from ‘investors’ (to avoid using the word ‘gamblers’) at one end and the thirst for control and regulatory power from financial institutions and governments at another, we might just find ourselves in a system that offers a new type of decentralised governance, transparency and fairness. An application that can be used in most industries and marketplaces on earth promoting trust and reliability to any type of transaction, data exchange and records and contracts.
Swiss Professor Roger Wattenhofer from ETH, affirms that there a two main components in the Blockchain technology: asymmetric cryptography and distributed systems. These mean that we are able to create records that are indelible, transfer valuable by making updates to those records and automate the updates through smart contracts. By looking beyond Bitcoin, Ethereum or any other cryptocurrencies, we can start seeing it as a powerful tool with the potential to bring about true parity and balance, transforming the nature and value of transactions through the use of public ledgers while individuals and organisations can access it without any single person, institution or government holding control over it.
Large corporations and new start-ups
Blockchain offers true network capabilities and cooperation between different parties in a trustless consensus and democratic way. For that reason, many ‘big players’ within industry, as well as high ranking officials in government and institutions, feel threatened by it. The current system always seeks to kill and destroy what it cannot understand or control.
However, not all large corporations are shying away from the new technology. Microsoft, for example, has been investing heavily in applications using DLT based on the Ethereum Blockchain system. Derek Martin (Microsoft Blockchain Team) affirmed that though Blockchain might not solve all the worlds’ problem, it might enable the creation of a much opened and decentralised network for businesses and society in a trustless environment.
According to Martin, in 2016 the value projected for blockchain investments was around $226million. Microsoft forecasts a growth by 2023 of around $5.5billion in value and by 2030 the business value generated by Blockchain could well surpass $3.1trillion.
“Global Blockchain technology market size is projected to grow to USD1.693.70 million by 2021 at a CAGR of over 55%” Derek Martin, Microsoft Blockchain Team
It is never an easy ride; new technologies often have a rough start until it gets fully accepted and adopted. The journey can be a bit bumpy for those innovators setting off in the initial stages of the race. However, the later reward far outreaches the initial challenging early development. Some of these challenges in adoption, according to Martin, are: corporate muscle memory (no blue print or past experiences), technology maturity (very early stages of development), enterprise needs (a clear POC – resources needed measured against potential rewards), fragmented technology landscape, regulatory and legal systems and a not so clear ROI.
Nonetheless, some new bold upcoming players are starting to disrupt new as well as old established industries and marketplaces. Take OB1, for example, a leading Blockchain based company in the development of the world’s first widely-used decentralized marketplace called OpenBazaar. They managed to secure a strategic investment from different VCs and investment funds raising a combined $4.2 million to build their innovative peer-to-peer e-commerce protocol using Bitcoin. Nobody controls it, no fees, no oversight! Watch out E-bay, Alibaba and big giants out there…
Start-ups such as OB1 are threatening to turn the tables forcing giant corporations to rethink their centralised corporate strategies towards a more decentralised approach to business. YouTube, the largest video sharing and search platform in the world, offers great visibility and yet original content creators are suffering a slash in revenue within a very fragmented space filled with piggyback or copycat channels. Consumers, by the same token, complain about too much disruptive prevalent advertising. Flixxo is another example of a decentralised community-based video distribution promising to fix these issues.
These are just two of some of the new generation start-ups banking on decentralized platforms to allow freedom and value-exchange among content creators, vendors, artists, and freelancers etc. to interact directly with their audiences using, for example, a crypto token. At the same time, users get more choices and control in how their attention can be monetized. They can choose which ads to watch, control their personal data or even contribute part of their computing power to the operation of the system.
Potential areas for disruption
Blockchain’s decentralised system removes the need for a database to sit at a closed system allowing for more than one website to be built around the same database while decreasing operational costs and improving efficiency inventory management. Take a mobile device for example; it could sit in the same database as many other products, and yet different websites could be built around it and share the same data. That same mobile could be listed in a variety of marketplaces but, when sold on any one marketplace, it would show as sold on all of them.
Gee Chuang, CEO of Listia believes that scenario is possible. He affirms that “Ink Protocol’s vision is to decentralize peer-to-peer marketplaces, taking the power away from the companies that run them and giving it back to the buyers and sellers. As a result, more value is distributed back to the actual user.” Chuang also said that “sellers in decentralized marketplaces have the freedom to use any platform they like at any time, while bringing that hard-earned reputation with them everywhere they go”.
Derek Martin argues that there are some great verticals where Blockchain is ripe for disruption and will experience phenomenal growth in new platforms and apps in the upcoming months:
There strong potential in the financial sector to redesign costly legacy workflow, improve liquidity and free up capital. It will also help to improve infrastructure costs increasing transparency, reducing fraud and improving execution and settlement times. Local currencies can also be replaced or traded with less barriers allowing a flow of capital and investment cross borders more freely. A few governments are already studying how they could replace their local currency entirely by cryptocurrencies. What Blockchain applications are aiming to achieve is faster transactions at less cost and with unsurmounted degree of security. IBM has partnered with Axoni and R3, for example, to develop and deploy distributed ledger technology to the financial industry. It can also allow access to credit and finances to the unbanked.
Retail is normally one of the first sectors to be disrupted by new technologies as it is naturally the one closest to end-users and consumers. We will see better chain management applications, smart contract platforms, various digital currencies used for trading and a tighter cyber-security. Blockchain can, for example, validate and certify product or origin and source, transport data and tracking for better quality control etc…
We could see better trustless global trading empowering local producers, better provenance, and improved logistics allowing for much higher quality of products from the producers to the end user.
For organisations operating within very complex logistic and distribution ecosystems, supply-chain management transactions are documented in a permanent and decentralized record being monitored securely and transparently. It can reduce time, costs, labour, wastage and emissions. An open logistic system may help to understand the environmental impact of products, verify authenticity of fair trade status of products tracking the same from its origins to its final destination.
Blockchain technology in the healthcare can provide direct and safe link to patient records for clinical and financial stakeholders. Able to give patients the ability to grant access or revoke access to their data to private organisations or other medical institutions. It provides fast, secure and authenticated access to personal medical records across healthcare organisations and geographies. It is widely accepted that an easy access to patient data and exchange medical records is paramount to improve the sector’s bad reputation across different countries. The use of Blockchain technology to healthcare records can improved data security, with better access for healthcare professionals and patients alike, granting greater transparency in all healthcare transactions. Gem has partnered with healthcare tech firm Philips in this space with the aim of addressing these needs.
The benefits of Blockchain technology can vary from increased transparency and traceability on how money is spent to tracking asset registration such as vehicles. It can also help to reduce frauds and operational costs. And what about voting? After hearing of so many recent electoral frauds all over the world, who still believes in the voting system? Well, perhaps if you live in Finland or any other Scandinavian country, maybe so? Not the case with most other countries though. According to a recent Techradar article, “The application of blockchain technology could eliminate voter fraud, providing a clear record of the votes cast, preventing any chance of a rigged election.” Voters can simply get their mobile out of their pockets or purse and exercises their democratic civic rights. Followmyvote is a platform that promises to bring transparency and trust back to voting.
Government public records exist mostly in paper or in siloed database. The management of this data is expensive and complex. It must be handled with extreme care, be made readily available without any error and protected against hacking and manipulations. The use of the Blockchain offers an innovative solution to encode this data in a digital ledger, keeping the information safe from being altered. Ubitquity is a US based company which a Blockchain-based system for property record management including titles, being tested now overseas at the Land Records Bureau in Brazil.
Blockchain and the IoT
Everybody is jumping on the new electronic device craze called ‘smart home assistants’, you might as well own now an Alexa or a Google Home or perhaps an Apple Home Pod. These connected devices is part of what we called ‘The Internet of Things’ (IoT). Blockchain technology is allowing connected devices to communicate without the need of using the original manufacturer’s hub. Samsung and IBM for example, are working together to create a decentralised network of IoT devices built on blockchain technology. A project called ADEPT (Autonomous Decentralized Peer-to-Peer Telemetry) comes with a promise to decentralize the IoT allowing devices to communicate directly, by-passing the manufacturer’s hub which tries to lock users into a their own digi-world or ecosystem.
De Muro from Techradar wrote – “The IoT promises an ever-growing number of online devices to monitor and contribute to our connected lifestyle. But a significant barrier to the adoption of various smart gadgets is the walled ecosystems which some manufacturers insist upon, locking out devices from other vendors, and generally making things harder for the consumer looking to use a variety of different bits of hardware.”
The cloud has become part of our daily lives, individuals and companies alike rely on cloud storage to run their lives and businesses more efficiently although not without its problems. From downtime and losing access to your data temporarily, to more severe malware and the threat of the cloud service being hacked (it has become a pretty common activity for hackers these days and many companies have been attacked already), cloud storage is far from being trouble free. Companies such as Storj use Blockchain for open source cloud storage. Their users connect via Blockchain and peer-to-peer technology with a distributed network to store their data on. People can even rent their spare storage space as a side hustle via the Storj app and make some money, as the storage space is crowd-sourced.
Much has change in recruitment lately, with the help of AI enabled Natural Language Processing and speech recognition technology people can be interviewed by virtual recruiter. Still to date, many companies struggle to fill their job positions with the right candidate. They want to make sure they are hiring the right candidate for the position, the most qualified with the best set of experiences and skills that ultimately matches the company’s culture and values.
In the midst of so many CVs and applications it can be difficult to discern the truth and separate the wheat from the chaff, traditionally it is said that more than half of applicants lie on their job applications. One study showed that a quarter of applicants confirmed they worked for companies they had never worked for. The same goes to universities in need to verify the credentials of their faculty, and hospitals when it comes to medical doctors, nurses and other healthcare professionals.
The Learning Machine is a business applying blockchain technology in the recruitment sector, wherein workers and professional credentials can be verified, kept in a secure digital ledger and used but not altered down the road. It promises companies a fraud protection system in order to facilitate the choice of the right person for the vacant position.
Entertainment is perhaps one of the most disrupted industry by the internet and social technologies in the past two decades. DLT enables the distribution of media content in a decentralised way but it is its immutability and “trustless” nature it is where the clear benefit comes from. Record-keeping and auditable data is the key, including data about who owns what assets, such as music and movies. The validity of an asset can verified as soon as it enters into the “chain” in the first place and then continuity is ensured from then on. It will benefit directly original creators guaranteeing that royalties and right are respected an issued that has plagued the industry since music and video became digitalised.
The entertainment industry is looking to blockchain technology to secure digital rights for music and other media, with the potential to recapture that income. British company JAAK is creating smart content with a “global view of content ownership and rights”.
I may not have been able to convince you that Blockchain technology is here to stay but I would like to suggest that you keep reading and doing your own research. There are still many more applications to Blockchain in a variety of sectors such as photography, crowdfunding, public benefits, charities and third sector, forecasting, insurance, private transport, energy management, etc…
But do you know the most important industry that is being disrupted right now? That’s right, yours! If your industry deals with real data and transactions of any kind then it is very likely that it can also be disrupted by Blockchain technology.
As it has been demonstrated in this article, Blockchain applications go far beyond the cryptocurrency fever. It is more than a technology, it is a movement, it is a way where open networks aggregate real value and transparency via trustless consensus. The question is not if but when Blockchain disrupts our industry and sector. Are we going to be leading the way or playing the losing catching-up game?
In his acclaimed book “The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations”, Ori Brafman tells us how, historically, decentralised systems outlive closed ones. One of the examples is of the Apache tribes (open, decentralised) and the Aztecs (close, centralised) and how they responded respectively to the Spanish conquistadores. The open systems of the Apaches allowed them to survive the invasion while the Aztecs’ closed one drove them to ruins and obliteration.
“This is the first major principle of decentralization: when attacked, a decentralized organization tends to become even more open and decentralized.” ― Ori Brafman, The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations
Personally, I strongly believe that Blockchain offers us a unique possibility to develop truly democratic, decentralised and open network systems that can radically transform the way we do business forever. It is empowering as well as levelling-up the playing field. It has the potential to increase global trade through fairness and transparency across various sectors, organisations, government and institutions, local communities, cities and whole countries. DLT technologies such as Blockchain is just starting…
 Ledger – classifies and summarises information, typically financial but also any other type of data can be used in ledgers
Professor of Computer Science at the Air Force Academy; Adjunct professor or PhD committee member at University of Colorado at Colorado Springs, and Denver University, and University of Cincinnati
 Don Tapscott is the CEO of Tapscott Group and the bestselling author of Wikinomics, the digital Economy and a dozen of other highly acclaimed books about technology, business and society. He is currently he 4th most influential management thinker in the world, according to Thinkers 50.
 Roger Wattenhofer is a professor in the Distributed Computing Group, Swiss Federal Institute of Technology (ETH), Zurich, Switzerland.
 Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract (scripting) functionality. It supports a modified version of Nakamoto consensus via transaction based state transitions. (Wikipedia)
 Derek Martin is a cloud solution architecture working with the Microsoft Blockchain team.
 Gee Chuang is the CEO of Listia, an existing marketplace that’s developing a decentralized version of eBay called Ink Protocol
2 thoughts on “Blockchain: future or fad?”
Thanks for this highly relevant and insightful review. Keep up the good work.
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Hey Aftab, thanks man!