Breaking into the Blockchain
Blockchain has been shrouded in both mystery and hype since its creation. With both Ted Talks and Google Talk’s speakers praising it as a new foundation for trade, with limitless potential. We are told it will be the digital ledger of the future. While most people are left wondering what is a Blockchain? And why does this supposedly new innovative technology sound so relentlessly boring? If you can get passed the name the technology has a lot to offer. On the Blockchain website they describe themselves as “ The worlds leading software platform for digital assets” and “using new technology to build a radically better financial system”. So what is it, and why are all businesses not using Blockchain?
There are probably more businesses than you think using Blockchain, even though very few have fully replaced existing frameworks with it. Blockchain’s social perception has been deeply intertwined with Bitcoin, the cryptocurrency that most assume is used purely by the tech savvy underworld. It’s correct that the birth of Blockchain and Bitcoin are interlinked, however, there is far more versatility to the digital ledger than just as a platform for cryptocurrencies to operate on.
What is Blockchain?
One of the most challenging aspects of the Blockchain is describing what it is. The Blockchain works by storing data in ‘blocks’, these blocks are all interlinked with one another and the validity of each block is dependant on the others. So this ‘chain’ of blocks functions to create a digital decentralised peer to peer ledger. While describing the Blockchain requires a lot of jargon which can be difficult to penetrate, the purpose of the Blockchain is not so impenetrable. It’s purpose is to create a completely secure and reliable database for trading value and storing information. This ledger or database would be transparent and distributed – therefore the chain would not have a weak link or be centralised. It is simple to break down the Blockchain in technical, legal and business terms: Technically it would function as a distributed database or ledger. Legally it would work as a transaction validation mechanism without intermediaries. From a business standpoint it would be a network for exchange.
This ‘network for exchange’ would be peer to peer which is perhaps why some businesses feel threatened by Blockchain, as they might suspect Blockchain aims to render some businesses obsolete. However, Businesses that utilise Blockchain can hope to free themselves of time and financial cost, by dealing with less middle-men when trading.
Blockchain – in the Trough of Disillusionment?
For those who are not familiar with the Gartner Height Curve, (pictured above) the Trough of Disillusionment is the state in which a new technology falls before it rises towards the plateau of productivity. The exact timeframe that Blockchain is moving on is difficult to understand. It seems while people are aware of the potential of the Blockchain, they are reluctant to completely replace the systems they already use. Especially when most people view those systems as satisfactory. Perhaps people see this new technology as just too good to be true? The Blockchain claims to be secure and un-hackable but the Titanic claimed to be unsinkable. Businesses tend to be cynical when it comes to bombastic promises. Marco Iansiti and Karim Lakani wrote an article for the Harvard Business Review concluding in the sentence, “ No matter what the context, there’s a strong possibility that blockchain will affect your business. The very big question is when.” The reason it’s such a big question is because it all seems a bit up in the air, nobody has quite found the all the jobs that only Blockchain can do. Even if Blockchain functions as a possible improvement, businesses are reluctant to risk a complete overhaul pf their systems for a possibility.
It is this lack of a burning need that is holding Blockchain back, until businesses feel they can’t operate without it they won’t completely convert to it.
So who is using Blockchain?
Despite the current lack of momentum in the Blockchain revolution, the business world has not ignored the promise a decentralised digital ledger offers. The Blockchain website boasts it is behind 160,000 daily transactions and has raised $70,000,000 from Wallstreet, London and Silicon Valley. The US Federal Reserve, Goldman Sachs, Barclays and Deutche Bank are all implementing blockchain technology. These major banks are using Blockchain technology, to establish departments that specialise in Blockchain and Bitcoin. They are testing ways to innovate with the new technology. However, it feels as if they are doing so more to keep their ear to the ground and their fingers on the beat, so not to be caught off-guard; rather than planning to remodel the way they do business.
There are far more uses for Blockchain outside the financial sector, and it is outside finance that it has been used more creatively within businesses. Walmart employees can use Blockchain to track some of their products back to their origins helping validate things such as Fair Trade items. British Airways have been experimenting with Blockchain to track the data of their flights, the single database has helped reduce conflicting information between mobile apps, gate monitors and websites. Fedex and UPS have also been testing Blockchain to help resolve customer disputes and manage freight from a single database tracking. While this implementing of the Blockchain is promising, the research of Supply Chain & Logistics Business Intelligence show that in 2018 69% of businesses investment in Blockchain was just to understand the technology, with just 15% being implementation.
Businesses have been keen to scope out the potential of Blockchain within their industries.The two areas in which Blockchain has seen real value are in Bitcoin, (the leading cryptocurrency) and with ethereum.org. Bitcoin uses Blockchain as a platform for exchange, to assure the currency has stability and security. Ethereums describes itself as: “a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.” This is possible for Ethereum owing to the distributed and flexible nature of the Blockchain.
There has however not been any truly great value produced by Blockchain outside of Bitcoin and Ethereum to date, though that could be about to change. It is obvious that this does not mean Blockchain is incapable of producing value outside of these two areas. Businesses are just scrambling to be the first to innovate with this new and complex technology, within their respective sectors. Bitcoin could be about to climb the Slope of Enlightenment.
The Potential of Blockchain
One thing is certain though – Blockchain use is growing, albeit subtly. There were around 5 million Blockchain Wallet users in 2015. In 2018’s first quarter there are nearly 25 Million. Interest continues to climb, though a significant amount of the investment companies put into Blockchain continues to appear less like implementation and more like understanding, and in some cases apprehension.
The secure nature of the Blockchain means it could contain he greatest prospects for the most vulnerable in society. This is perhaps where the burning need for Blockchain is located. The security of value is essential in establishing growth in society, and land is perhaps one of the most common high value assets. In parts of both South America and Africa land records tend to be vulnerable to corruption and imbalance in wealth, as most deeds are routed in colonial times, making them fragile. Blockchain can be used to create an interference immune, transparent database that can grant land owners total protection. A Reuters article from February 2018 states that Rwanda, Georgia and Honduras have all signed deals to build Blockchain based land titling systems.
It seems that where Blockchain’s true value lies currently is not in replacing existent functioning systems but in building completely new ones, and replacing the failing.