By Larry Buzecky
AEM Vice President, Business Intelligence & Strategy
While the fortunes of digital currency have been waxing and waning, the technology that girds digital currency – the blockchain – has been advancing into a compelling stew of industries: banking, health care, IP and contract law, commodities (particularly diamonds), to name just a few.
Before I give a short description of what the blockchain is, I admit up front that I love this technology, partly due to the mystery regarding its authorship.
In short, no one really knows who the author(s) was/were. Most sleuths point to Satoshi Nakamoto, a person or group who published a paper describing digital currency in 2008. Sleuths continue to speculate, mystery not yet solved. Cool!
That aside, the blockchain technology proposed in the paper has really been the emerging star. There are many factors that contribute to its star status, but first, what is it?
The blockchain, simply put, is a database, but unlike a database you might use at work or home which has a single location tied to single computer, a blockchain database is distributed across a decentralized network.
It comprises two types of records: transactions, which are the data that become part of the blockchain, and blocks, which essentially document the details of the transaction.
So why does this technology rock? As mentioned, decentralization, for one. Like other technologies run on a distributed platform (remember peer-to-peer file sharing sites like BitTorrent? Similar concept!), it has no single residence that can be attacked, corrupted, or brought down.
In other words, decentralization provides a significant measure of security. Also, once a transaction has been logged into the blockchain, it becomes incredibly difficult (impossible?) to alter or tamper with the validity of the transaction.
Validation is intentionally made difficult to pull off – there are a number of criteria that must be met. And this transaction is unique, valid only once and never to be repeated.
Proponents for this technology refer to the blockchain as the world’s first completely immutable, decentralized ledger, and anywhere a ledger is used as the basis for an exchange there is a blockchain application opportunity. Consequently startups are hopping onto the blockchain bandwagon faster than Google is adding qbits to its quantum computer.
Per an October 2015 TechCrunch article:
A few startups… plan to use the blockchain to trade physical assets. Thus, Bitproof and Blocknotary are disrupting contracts by recording them on the blockchain; instead of completing your house sale in front of a notary, just store the contract on the public ledger.
If the trade or sale of physical assets can be facilitated through a blockchain implementation, I believe this has a compelling applicability to equipment sellers and how they might transact deals in the future which may not necessarily involve a bank as an intermediary.
In fact, some people believe that the blockchain spells doom for traditional banking. And banks are indeed taking notice. From a September 2015 article from Investopedia website:
Goldman Sachs Group Inc. (GS), while not overtly reporting that they are working on anything in-house, caused some speculation after it participated in a $50 million investment round in funding Bitcoin wallet and payments company Circle, Inc… Barclays (BCS) is viewing blockchain technology as "transformative" and is experimenting with it both internally and via partnerships with start-ups to use it as it relates to financial services.
There’s also an interesting supply chain application for the blockchain. From a Supply Chain24/7 article published in May 2015:
As a shared, secure record of exchange, blockchains can track what went into a product and who handled it along the way, breaking supply chain data out of silos, and revealing the provenance of a product to everyone involved from originator to end user.
With this kind of materials data being aggregated and logged, there is potential here for the blockchain to be used as a tool in meeting REACH compliance requirements.
Keep an eye on blockchain technology advancements. Only now are bleeding edge developers starting to explore the possible applications, applications that could eventually apply directly to multiple parts of the business you run today.