Blockchain is rapidly attracting attention from investors and mainstream publications alike as the power behind this technology comes into focus. According to CFO.com, companies invested about $1.4 billion into blockchain initiatives in 2017, and in January 2018 the New York Times featured a story about blockchain on the cover of its Sunday magazine.
While blockchain technology has traditionally been associated with cryptocurrencies, which are making headlines – and raising eyebrows – for their wild swings in valuations, enterprise organizations are increasingly focusing on the benefits this peer-to-peer network, which creates secure, efficient, and transparent records between multiple parties within a single network.
CBTS has valuable insights into how this technology can help enterprise organizations. Suman Jillella, Director – Big Data, Analytics and Emerging Technologies at CBTS, is part of the CBTS Consulting Services practice, and his role includes helping customers better understand and prepare for this emerging technology. He recently shared his insights in a roundtable conversation.
Blockchain is largely associated with cryptocurrencies like Bitcoin, but its potential goes far beyond supporting cryptocurrencies. So let’s start with defining what blockchain is.
Blockchain is really a digital ledger that is automatically maintained and updated by a network of computers. It is extraordinarily difficult to corrupt. Here’s how it works at a very basic level. I create a network with another person. Call me ‘A.’ Call the second person ‘B.’ Say that A wants to send B a sum of $500. That transaction request is represented as a block within the network. If ‘A’ and ‘B’ both approve the transaction, that block is added to the chain between A and B, creating an indelible transaction that both parties can see.
Now scale the network. Let’s say there are 10 people in this network. When A initiates and completes the transaction with B, every person in the network sees as that block is created. So if there 10 people in the network, and there have been 100 transactions within that network, every one of those 100 transactions is permanently captured as a block, timestamped, and added to the chain. There is no third-party involvement. The network itself is automatically creating a permanent, timestamped record of all transactions between the parties within that network.
What are some of the practical applications of blockchain technology from a business perspective?
The application of this technology is limitless.
Take a healthcare organization that is part of the continuum of care for a single patient. That organization can enter a network with other providers that also serve that patient. Blockchain technology supports a secure environment where these providers can share information about the patient in an efficient, transparent manner. It eliminates uncertainty around whether a provider ordered an X-Ray, or received or shared information about that patient. All of those transactions are captured as blocks within the network, timestamped, and added to the chain.
Financial organizations are looking at blockchain technology to help them with backroom operations. You can purchase a share of stock in seconds through a broker, but behind the scenes it may take a week to complete the ownership transfer of that share. That’s because multiple parties are involved and have to reconcile individual records to formally complete the trade. Blockchain solves this problem because if all of the relevant parties are part of a network, they will see the record that network creates when somebody executes a trade.
The use cases aren’t limited to financial or healthcare organizations, either. For example, a supermarket or restaurant that markets organic or locally-produced food can leverage blockchain technology to create a transparent sourcing record with vendors, and share that record with customers.
Blockchain technology is also leveraging the modern shared economy model that has brought us companies like Uber and Airbnb. What’s an example?
Cloud computing is a great example. Many organizations are embracing cloud computing, and currently depend on the big players: Microsoft Azure, Amazon Web Services, Google’s Cloud Platform. If you have your own cloud and you want to share or rent a certain piece of the storage, you can do that with another party in a secure, efficient manner through blockchain technology at a lower price than a traditional cloud provider might charge.
Why is this technology important from a security perspective?
It’s extremely difficult to create a false transaction within the network. It would take a tremendous amount of computing power. Remember, every user within a network sees each block that’s created by a transaction within that network, and sees the resulting chain of blocks that is created by all of those transactions. The more users there are, the harder it is to manipulate that network and create a false transaction or false chain.
It’s also much harder for hackers to access a blockchain network. Think about how you access your financial accounts today: You typically enter a user name, and then you enter a password. No matter how tough you make your password, it can be cracked. With blockchain technology, each user within a network obtains a digital signature that is essentially an encrypted key, and that encrypted key is much more difficult to steal than a user name and password.
There are a lot of benefits to blockchain technology. What are the pitfalls?
One issue is the lack of globally accepted standards or regulations around blockchain technology. Even organizations that are absolutely bullish on blockchain don’t currently depend on it for their business-critical applications, because there isn’t a strong regulatory framework in place. Blockchain also consumes massive amounts of computing power and energy.
How is CBTS helping customers make sense of blockchain to ultimately leverage this technology?
Education is the first step with many customers. We want customers to understand that blockchain technology represents a powerful services opportunity for all of the reasons we’ve just discussed. Many clients understandably only associate blockchain with cryptocurrency, and assume it can’t help their organization.
They need to understand that in 2-3 years, this technology will likely be at a point where it can create value for their business. When the time does come, CBTS will be there as a consultant and trusted partner.