Blockchain – key to our digital fabricBlog
Today, consumer technologies like Amazon Alexa can anticipate and fulfill our every need and whim.
Alexa commands connected devices around the house to deliver your every consumer need to your doorstep through Amazon's retail services. The more she learns, the more she can achieve as your digital intermediary.
Alexa is at the forefront of rapidly emerging solutions that are enabling a super smart society. The creation of robot servants, autonomous vehicles, and intelligent clothing are reshaping human to machine interaction. Without us thinking too much about it, we’re embracing highly intimate and dependant relationships with these complex digital systems.
Can these systems meet our rising expectations for seamless experiences and trust? Not today. Weaknesses in conventional digital systems are compromising systems of trust.
Enter the blockchain, an entirely new weave of digital fabric.
Before we talk about what it can do, let's set out what it is.
The blockchain started as the system designed to manage bitcoin transactions. Blockchain is a decentralised, global network of computers using distributed records (called ledgers) to manage transactions. It operates as a distributed system of nodes where trust is managed across the nodes and not by any one central authority.
With each node holding a copy of the transaction ledger, cryptographic keys allow parties to only access what is relevant to them. Should an unknown party attempt to penetrate the chain, every node is required to provide permission, which is close to impossible. Because of this, blockchain security is considered much more robust than centralised systems, which are honey pots to cybercrooks.
Beyond its use to manage cybercurrencies such as bitcoin, ledger assets can be anything that is relevant to proving a record of ownership and/or a value chain. There’s an explosion of blockchain innovations, which map to five broad use case scenarios:
- Verification - licences, proof of records, transactions, titles, wills, processes, and events
- Movement of assets – trade settlements, transferring payments, and supply chain tracking
- Ownership - registries, titles, and chain of custody for a physical asset, e.g. diamond trading
- Identity management - e-identities for secure digital services such as voting, tax returns, and travel documents
- Secure sharing – health records, valuable datasets, classified information, private collections, and archives
Private blockchains control who can operate a node and how the nodes are connected to one another. They have become the preferred system for businesses developing blockchain applications.
Smart contracts are blockchain-based software programs that control the transfer of assets between parties according to certain conditions. This allows the relevant assets held by each party to be shared via secure protocols. The executed smart contract becomes a ledger record. This disrupts conventional business process flows as sequential steps become simultaneous, the time to value accelerates as intermediaries are removed and fulfilment costs are reduced.
The scenario of buying a home is an example we can all appreciate. We are already seeing the use of blockchain-based real estate solutions to address the purchase contracts, mortgage and title registration steps of the cycle in Sweden and in some parts of the US.
Countries such as Georgia and Ghana have introduced blockchain-based applications to record property titles and transfers, improving investor confidence in their economies. Our diagram contrasts the conventional experience of a property purchase with a blockchain-based model.
The awareness around the potential of blockchain is growing and around 20% of enterprises are actively exploring the possibilities to innovate and transform. In the next three to five years, there are three strategic contexts where blockchain will be a game changer – as an enabler or catalyst.
Blockchain as an enabler for the Internet of Things (IoT)
IoT is a distributed network, but to be efficient at scale, intelligent processing needs to occur between the nodes. However, existing IT infrastructures remain centralised, requiring unecessary in-out flows, which is hugely inefficient, resource intensive and ultimately a constraint to achieving the grand vision of IoT solutions.
Blockchain provides a native network architecture for IoT and furthermore, provides a stronger security framework to manage a mesh of connected devices. In a world of 21 billion connected things, 5 billion connected people and 44 Zetabytes of data, that is really important.
Blockchain as a catalyst for business ecosystems
Being a distributed system of trust, blockchain requires collaboration at a sector level. This is already occurring across the finance, insurance, health, public sector and resources sectors and is creating step change as a result of the more rapid formation (or formalisation) and overhaul of ecosystems.
For example, a consortium of 14 Japanese companies – shipping, trading and insurance giants – are jointly developing a private blockchain-based platform to streamline the exchange of trade information and procedures, resulting in an industry-wide transformation. This follows a successful series of experimental blockchain applications.
Clearly, there is a willingness from existing, dominant supply chain networks to disrupt themselves in order to sustain their business value into the future.
Blockchain as a protector and liberator of our personal data
Digital business empires are being built on the monetisation of our data. Returning to Alexa, she watches, learns and predicts our behaviours. Within two weeks of Alexa becoming your digital intermediary, this converts into a 10% increase in spending with Amazon retail.
The flip side of convenience is digital entrapment. Alongside this concern is also the alarming growth of cybercrime, stemming from insecure, centralised information models, and as a result conventional systems of trust are being seriously challenged.
Blockchain is the basis of new solutions providing personal data control and protection. These solutions enable individuals to create their own personal ledger, populated with verified data (from an already trusted source such as a bank or passed through a secure vetting process).
In Canada, a group of major banks operate a service called SecureKey. This provides a national digital identity network offering a secure way for consumers to control their personal data and use it to verify identity and other details when wanting to access any government services, banking services and a range of other private sector services.
When we have the ‘blockchain of me’ we also have the power and choice to share and monetise our own data. For example, Datum, is a blockchain network and marketplace that allows people to securely back-up their data from social networks, wearables and smart homes and choose when and with whom they share or sell their data.
This growing movement to liberate our data will disrupt the business models of the digital giants.
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