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Posts Tagged ‘blockchain basics’

We’ve been around long enough to see the advent of computerized (PC-based) accounting go from “nobody wants it (but everybody needs it)” to “everybody has it” in a span of 20 years.  Then we saw the Internet rise seemingly out of nowhere, and next thing you know, a little dorm room operator begets Facebook’s 2 billion users, and in the span of a decade Amazon grows from an online bookseller into a $3 billion revenue behemoth – and last year, nearly $200 billion.

So when it comes to revolutionary change, exploded business models and unforeseen surprises, don’t say it can’t happen.  This thing called Blockchain could, maybe… be next, and it’s worth your paying attention to.

Blockchain is the term used to describe an online, decentralized, distributed-ledger of recent invention (i.e., ten years ago) that is known for its security and simultaneous openness to all its members.  Blockchain has enormous cost-cutting potential in business because it cuts costs by “eliminating the middleman” like say, a bank.   Records cannot be altered retroactively without the alteration of all subsequent ‘blocks,’ thus creating a sense of trust among all parties.  Blockchain has found its way into testing across a variety of applications from supply chain to healthcare, from banking to insurance and a host of others.  Major companies like IBM, JP Morgan, Citi and many others are investing heavily in it.

For now, most blockchain projects remain experimental, largely in their testing phase.  While the concept is as elegant as it is appealing, there are challenges with scaling the technology upwards.  It takes a lot of computing power, after all, to keep an eye on all those ledgers and transactions.  Many projects will doubtless whither on the vine.  But for now, as a recent article in The Economist put it, “the less world-changing a proposed user the better its chance of success.”

The encryption possibilities of blockchain make it appear ideal in the realm of financial documentation and transactions – an easy concept to introduce, given that records are hard to change, making it well-suited for security and potentially very useful.

In supply chains, the back office potential to reduce paperwork, costs, transaction time and administration hold enormous potential, as companies talk directly (digitally) to one another via a shared database that all can use and which, in theory, requires very little regulation or administration.

Clearly, the potential is there, and the appeal is evident to business.  Still, large IT projects always take more time and resources than people usually project – it’s just human nature – and blockchain requires cooperation across multiple firms, so these projects will take even longer.  Backers and participants will need patience.

But then, twenty years ago, how many folks thought the internet would rule so much of commerce today – and still be growing – or that ‘the cloud’ would ultimately become the data repository for so much of the world’s knowledge and the planet’s operations and finance?

 

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Assuming you’ve digested our prior post on blockchain basics and its importance in creating secure transactions, we’ll look now in this second post at some applications that are aimed at proving blockchain’s value to users everywhere

We noted earlier that blockchain provides secure digitally-signed access to transactions to all members of the chain.  The data is distributed across a network of servers rather than just a single server, thus making it transparent, immutable and secure for reasons touted earlier.  So then, what can we do with this new framework that will make a difference in our own lives?  Let’s look at a few examples, as provided in a recent article by Nir Ksahetri, a business professor at the Univ. of North Carolina, in a recent article in The Wall Street Journal.

Let’s start with distribution.  A number of companies including Cisco Systems, Bosch and Bank of New York Mellon have banded together to create a blockchain-based IoT security standard, to bind together weaker IoT identities like serial numbers, barcodes, UPCs and QR codes into stronger crypto-graphic entities.  Widespread use would allow device makers to securely distribute updates and patches, even if a device is moved or sold (since all that information would be part of the blockchain transaction record).  Manufacturers can be sure they’re communicating with the right dev ice.

In health care and banking, providers today store your personal information and we as consumers have little control over who sees it or shares it.  With blockchain, entire medical records or banking records can be stored in encrypted ledgers with the patient’s private-key.  Changes to the record can be communicated via public keys and providers with permission can see the data with patient or customer authorization and permission, but they can’t store it.

In developing countries, land fraud due to administrative corruption is a problem.   Corrupt officials alter property records to benefit themselves in exchange for bribes, creating land fraud.  With blockchain, if a property changes ownership, the transaction record reflects time, location, price and parties involved.  Government agencies can authenticate the title information when entered, and law enforcement agencies can inspect documents to enforce compliance with “know-your-customer” and anti-money laundering policies.  Blockchain of course also protects against unauthorized access to data and the owner controls the ultimate (private-key) record.

All these applications, and many more, are being (or have been) developed utilizing blockchain technology, and we’re only at the beginning.  While challenges loom, like bringing down costs at the IoT and labeling level, creating wider user-community acceptance and providing better communication to decision makers of blockchain’s many benefits, it’s all coming.  Already nearly four in ten companies (of 369) surveyed a year ago by the Journal were deploying or considering deployment of blockchain technology.  It’s only a matter of time.

 

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