There is no doubt that Blockchain is one of the hottest talking points right now. If you have knowledge of the IT world, several relatives may have asked you if they should invest in Bitcoins or “any of those currencies” during the December cryptocurrency spike, or more recently with the plummeting of prices at the start of this year.
If you have a profile that is more alien to the technical world, it’s highly likely that you have read articles about how blockchain will change the rules of the game for your business.
There is talk of the “Internet Industrial Revolution” or the “Internet of Value”. But what is behind all this? Is it a fad? Although it may seem like a passing fad, in reality blockchain brings a new technological paradigm that can change the way we work.
What is Blockchain?
Essentially a blockchain or block chain is just a ledger where records are stored and which is “distributed” or shared in different places.
These records can contain all kinds of information, from monetary transactions, purchase of shares, appointments on the waiting list of a hospital or contracts made between companies … They must be marked with a hash with a special characteristic and have a particularity: they are not predictable. A change in one bit generates a completely different hash.
This type of technology is known as Distributed Ledger Technologies (Distributed Ledger Technologies, DLTs) and the most popular is Bitcoin’s Blockchain network. Blockchain is the technology that makes Bitcoin possible, but it would be very wrong to think that the only use of blockchain technology are cryptocurrencies.
What does the blockchain add?
1. Decentralization of trust
This is the main characteristic of blockchain technologies and here lies the most disruptive concept because of our way of understanding the world. In practically all areas of our lives we have delegated our trust over to a third party that seems sufficiently worthy of our trust. We can think of the following cases:
- Bank entities where we deposit our money trusting that it will be there when required.
- Health system: when we ask for a medical appointment, we trust that the system will give me one of the available appointments.
- Online cartography providers: when we search for a route on our mobile phones we trust that the road exists and that the map provider of our phone doesn’t take us off on a secondary road because someone paid for it.
With blockchains the trust resides in the network itself, so that there is no single entity that centralizes, governs and controls the data.
In fact, returning to the most immediate case of banking entities, in financial transactions there is no third party, but there are up to “3 third parties” involved: the issuing bank, which makes a transfer note; the receiving bank, which has to write it down in its database when that note arrives; and an independent entity such as the Bank of Spain or the European Central Bank that mediates between both banks.
All this activity disappears with blockchain since the money is changed from the owner modifying the issuing and receiving account, and keeping the transaction in the decentralized registry, and all this in a very short period of time compared to conventional transfers.
2. Decentralized storage
All the nodes of the network keep the blockchain with all the registries. This means that we do not depend on the data policies of a third party.
With the arrival of the Internet, the information became accessible from almost anywhere, but we still depend on a third party to store it and make it available through the channels it considers appropiate.
With blockchain this figure of the guardian of information disappears, since it is distributed and the network itself guarantees its availability.
The written blocks cannot be changed and when a new block is agreed, it is written on all the nodes, so that the network acts as a guarantee against possible attempts of fraud or manipulation.
This feature gives us an increase in transparency because although the levels of visibility will depend on the type of network we are talking about, a blockchain network guarantees that anyone with the necessary permissions will be able to query the transaction history, being able to perform an audit of the same ones without the possibility that they are altered or eliminated.
One of the biggest concerns in the implementation of any technology is the security it provides against failures and attacks. Despite the fact that no technology is totally safe, blockchain resorts to cryptography and algorithms of consensus to have a practically unbreakable security.
To be able to alter a record it would be necessary to control or deceive the majority of the network, which in terms of cost (hardware and electricity) makes it practically impossible.
This is so because although we managed to modify a record and cheat that entire chain by calculating the hash of all the following blocks, when it is compared with the copy of the chain of the rest of the nodes, this false string would be discarded since it does not conform a majority.
Beyond a registry
One might wonder if blockchain is just a registry, something that we could emulate with the technologies that existed years ago. But blockchain is much more.
Blockchain also allows execution of intelligent contracts that are executed automatically when the necessary conditions apply. These contracts are still a program that is executed in the blockchain, being able to interact with the information therein (and in the outside, through agents). One of the most widespread Smart Contracts platforms worldwide is Ethereum.
The potential of blockchain as a catalyst for business processes is enormous. Currently, a large part of the processes require a more or less manual intervention to check whether the agreed conditions are met, and also to require that verification is carried out by someone “of trust”.
With blockchain these restrictions are eliminated while allowing any group to self-regulate itself around a specific objective.
Why is the world going to change?
Although it has been previously hinted, I think it is important to highlight that the change offered by blockchain is not a technological change like the shift from mainframe applications to distributed applications, or the use of NoSQL databases versus the more rigid relational databases.
Blockchain is a change of paradigm, a way of understanding social relations in a globalized and totally connected world.
Can you imagine a transport service without any central entity, with every guarantee? Can you imagine a platform for buying flats where supply and demand connect directly? That is what is really going to change the world.
With blockchain we could have a decentralized property control: the existence of the goods would be registered in the network at the moment of its creation, and the property would be transferred depending on the sale.
This would allow us to have a full knowledge of the legal provenance of the property, its history, going as far as including details such as a record of accidents in which a vehicle has been involved, or the history of reforms that have been made in a building.
Blockchain could allow transfer of control of intellectual property to creators by offering a record of authorship of intellectual property (music, images, etc.) without control of a central entity, and facilitating the payment of licenses for use.
Do you have an idea of how much time users lose with calls to their service provider to avoid a quota increase that they do not understand? Blockchain would allow contracting a service with public and unalterable renewal conditions, so that the fee could only be altered depending on certain events such as greater or lesser use, absence of accidents or any other circumstance.
Blockchain could revolutionize the insurance market, simplifying the payment of certain indemnities according to public conditions and updating quotas automatically based on previously agreed parameters.
One of the blockchain areas that are most interesting and disrupting is the field of Identity Management. For example, we can think about when to pick up an order that we have made online. Upon arrival, we are asked for an ID to verify that we are the person that appears in the order.
However, having access to our ID gives much more information than just our name: the name of our parents, the ID number, the postal address, etc.
The same happens when hiring a rental vehicle. What the agency needs to know is if I am of legal age and that I have the necessary license to drive that vehicle, they do not need to know my current address or other information that appears on the drivers license.
Transiting to an Identity Management model that, centered on the capabilities, would be very expensive to implement and maintain at the moment, since only the processes of generating the information and keeping it updated in all the systems involved would have a very high cost.
With blockchain technology it would be much easier to create this model as it would allow users to govern their information in a secure way.
Precisely the security of blockchain, and its distributed nature will also be decisive for the democratization of new methods of identification based on sensors such as fingerprint, iris or voice recognition.
These methods will give rise to a world of business possibilities that are currently very limited due to the sensitive nature of the information they deal with.
As we can see, the possibilities of DLT technologies are practically endless and affect all areas of business we can think of, and some new ones that are about to appear.
“The technology of the future we already know, is what we call science fiction today.”
It may be a somewhat exaggerated phrase, but if we go back ten years and review those technologies that promised a similar revolution then, we can be surprised when we see among them Big Data, social networks, solid hard drives, Cloud Computing or electronic books, and as “dreams” the 3D printers.
Without doubt, in a few years we will be surprised that we ever doubted that the DLT paradigm had a future.