What is blockchain?

What are some important things to consider when thinking about blockchain?

Blockchain-world.jpg

The Dotcom boom and bust was a wild ride. From the rubble came a wave of new tech giants - namely Google, Facebook, and many others. Tremendous investments were made to build out the foundation of the internet.

Wireless communication and the growth of LTE, Wifi, and Bluetooth have completely changed our lives. Mobile communication and the upcoming launch of 5G is going to be really cool.

The financial crisis and housing crash was an interesting experiment that seems to be repeating itself. Banking is primed for a major technology overhaul.

Every now and then we encounter seismic shifts in how technology will shape our future. Currently, that new technology is the Blockchain.

You have probably heard of it by now. If you haven't then this article is not for you and we  want to know if you living in cave.

Bitcoin and Ethereum are examples of applications built on the blockchain.

A quick summary, a blockchain is a digital ledger of records or transactions arranged in data blocks. Blocks of data are linked together through a cryptographic validation known as a hashing function. Follow the link if you want to nerd out for a bit or have trouble sleeping.

Linking the blocks together forms a blockchain.

What makes blockchain and this type of data structure so hot is applications can be decentralized. Meaning data is not stored in any single location, data is accessible by everyone, and is immutable. Meaning it is nearly impossible to hack.

There are tons of resources online that dive into the basics of blockchain. We won’t be covering that here but focus more on enterprise blockchain applications.

Our goal is to discuss important aspects to consider when working with blockchain technology as well as a few use cases for enterprises.

IBM

IBM

Enter the enterprise

A survey of 800 executives, featured in the same book, suggests 58 percent believe that up to 10 percent of global GDP will be stored using blockchain technology.
— McKinsey

Decentralization, cryptocurrencies, and Bitcoin? How can enterprises of all sizes take advantage of blockchain technology?

Mainly for enterprises Blockchain plays an important role in fundamentally changing how we think about exchanging value and assets, contracts, and sharing data. The blockchain allows enterprises to transparently and digitally track assets as one example. As well as creating new ways of cross-organization communications.

Do you need Blockchain?

In 2017, many enterprises began experimenting with blockchain technology. This will continue in 2018 but for some blockchain will be ready to go from experimentation to a live deployment.

There are several enhancements being made to technologies such as Bitcoin, Hyperledger, and Ethereum to handle a higher scale.

A current limitation of blockchain are transaction latency and higher throughput. A large enterprise may handle 100,000 transaction per seconds where ethereum can handle only 14 transactions per second.

Enterprises will need higher throughput and better latency. You will need to evaluate your current and future needs and have a good understanding of the volume you expect to see. This will surely be a major factor in whether blockchain can work for a particular application. This isn't to say you should rule out blockchain. Just something to consider.

In addition, a blockchain enterprise proof of concept (PoC) may include only a dozen participants where a truly scaled permissioned blockchain will have dozens or thousands of participants. Onboarding and architecture design will play a critical role in how successful a blockchain will be in your enterprise.

Other considerations are ensuring the system avoids downtime. Traditional systems use replication and redundancy to ensure system avoid outages. Similar techniques are available with the right blockchain technologies.

Further, security is the most important aspect to consider. Permissioning models and authentication enable members to digitally sign messages and transactions.

Deploying blockchain is always the moment of truth as now it is exposed to the world. Any blockchain project must consider security early on in the development process to avoid major changes later. Basically, be friendly with the IT person. They’ll help you avoid trouble later.

Use cases for Enterprise

Let's get to the more practical aspects of using blockchain technology. There are many potential use cases. Quite a few are looking way too far ahead in what can actually be deployed and be usable.

Our belief is software should always be usable and thoughtful. This starts with taking an iterative approach and build a strong foundation. Whether we are working on a core project or something with an innovation lab, the process of testing and learning is a skill often forgot today.

Smart Contracts

The fundamental benefit of blockchain technology is a consensus of the participants on the network is needed to verify and approve transactions. This would allow an enterprise to dramatically limit fraud.

In theory, blockchain features can be used in supply chains, product development, internal workflows, pretty much in every department.

A good proof of concept may be around developing smart contracts. Software contracts built on the blockchain that enforce the performance of a contract without third parties. The transactions on the contract are tracked and cannot be reversed.

In addition, smart contracts eliminate or reduce the need for a middle-man. Dramatically reducing human errors and associated costs.

Smart contracts are great use case to test blockchain capability for your supply chain. Industries such as banking and insurance are already pushing forward to deploy smart contracts on blockchain secure platform such as Ethereum.

The benefits of a smart contract:

  • Security

  • Speed

  • Potential lower costs

  • Standardization

Potential areas where you could use smart contracts:

  • Shipping and logistics

  • Asset management

  • Infrastructure management

  • Supply chain

  • Cross-border financial systems

  • Life-term insurance

  • Real estate contracts

  • Hospitality services like Airbnb

Blockchain technology is going to play a major role in shaping our future. We can all agree the internet needs to be more secure. There is a tremendous amount of hype around it but make no doubt blockchain is here to stay.

As you build elite talent, bringing them into your organization can take time without any guarantees or productive outcomes.

Blockchain projects are a great use case to partner with a development firm such as Skiplist. The first step is a short discussion to see where we could potentially help. Often we can guide you to the best path whether that may be to do more research or start on a potential proof of concept then move to scaling the project from a MVP to a fully deployed product.

Where do you begin with blockchain?

proofofconcept.jpg

Start with a proof of concept with blockchain.

Most of what is written today about Blockchain technology is theoretical. What could potentially happen with blockchain and how disruptive it will be. 

There are articles after articles on how blockchain will disrupt X industry and change everything. Finance, supply chains, contracts, or venture capital, nothing is safe from blockchain's disruptive force. 

Let me know tell this is a lot of hype. Not to say it isn't true but hyped what too fast. This is the environment we live in now where something can go viral immediately. 

Hype is good thing when it comes to technology particularly. This is mainly how so much money gets poured into new projects and companies. The hype train brings in money so the infrastructure can be laid out today for a better tomorrow. 

Blockchain is not going anywhere. In the US we have a fairly good banking system and things generally work well. However, for many in the world their infrastructure is terrible. 

A basic thing such as keeping your money with you is not possible. Governments and banks hold all the cards. Extremely inflation in certain countries make the Bitcoin volatility look like a kids seesaw. 

Proof Of Concept

What most companies should be doing though is to start dipping their toes into blockchain. Start with a proof of concept (POC) and see what results you get from these tests. Maybe a smart contract can streamline the supply chain better and reduce costs by 15%. Then make bigger investments into a more wide spread architecture. 

There is not also a strong need to build out a full blockchain group internally. Use outside resources and freelance developers to build POCs. 

Test. Iterate. Test. Iterate. Look for areas to double down on. Then full steam ahead. 

My Thoughts on Blockchain Technology

What is blockchain?

blockchain.jpg

BLOCKCHAIN IS SO HOT RIGHT NOW

For me personally, I have always been fascinated by technology and finance. The Dotcom boom and bust was a wild ride. From the rubble came a wave of new tech companies. Namely Google, Facebook, and many others. Tremendous investments were made to build out the foundation of the internet. 

Wireless communication and the growth of LTE, Wifi, and Bluetooth have completely changed our lives. Mobile communication and the upcoming launch of 5G is going to be really cool. 

The financial crisis and housing crash was an interesting experiment that seems to be repeating itself. Banking is primed for a major technology overhaul. 

Every now and then we encounter seismic shifts in how technology will shape our future. Currently, that new technology is the Blockchain. You have probably heard of it by now. Bitcoin and Ethereum are examples of applications built on the blockchain. 

There is so much to digest. It can be difficult to filter through the noise as most conversations right now are very technical. This is generally a good thing as we need really smart people to build out the infrastructure of what will blockchain do for everyone. 

Although I have been following this technology for some time now. I am just recently focusing more attention to learn more about possible beneficial applications of the blockchain. 

Blockchain Summary

A blockchain is a digital ledger of records or transactions arranged in data blocks. Blocks are linked together through a cryptographic validation known as a hashing function. Follow the link if you want to nerd out for a bit or have trouble sleeping. 

Linking the blocks together forms a blockchain. 

What makes blockchain and this type of data structure so hot is applications can be decentralized. Records are not stored in any single location, are accessible by everyone, and are immutable. Meaning it is nearly impossible to hack. 

How does blockchain help us?

Let’s look at the most popular application of blockchain technology. Bitcoin is a digital currency that is built on the blockchain. There is no physical paper, like a US dollar. It is all digital. 

The challenge with making this purely digital is you could copy it for example. Also, how do I know your Bitcoin is legit and you didn’t counterfeit it. 

This is where blockchain technology enables us to use Bitcoins to buy and sell goods online with the confidence. 

Wait a minute. We can already buy and sell goods online. What’s wrong with PayPal and the current checkout system?

Well, for one thing, these transactions are controlled by just a few companies. We pay a ton in fees just to transfer money. Have you ever sent money overseas? It transfers from bank to bank adding fees upon fees and days to the process. 

There is no central company or person controlling Bitcoin. Bitcoin technology does not recognize a person or entity for validation. Completely decentralized. There are blockchain applications which are hybrids though. So it is not all or nothing. 

Blockchain hopes to make this more efficient by minimizing the middleman and enabling direct peer-to-peer transactions. 

A few more reasons to implement blockchain

  • No single authority in control

  • No center

  • No concentration of power

  • Secure (uses a push mechanism rather than pull). The network only sends what is needed where banks pull information from your account with credit cards for example.

  • Continuous innovation since it is an open network

  • Unchangeable

  • Unforgeable

  • Built-in privacy

  • No prior authorization needed to use the blockchain

  • Consumer protection allowing users direct control of their information

  • Predictable outcomes

My focus here is to summarize my thoughts around Blockchain and related applications. Specifically around how to apply this exponential technology to everyday businesses. The intention is not to be too technical because Ill get lost myself. 

How will blockchain effect banks?

How will blockchain effect supply chains?

How will blockchain be regulated?

How will blockchain affect my parents?

I hope to answer with future discussions. I cannot predict if Bitcoin will hit $20,000 or die out. However, one thing I know for sure is blockchain technology is not going away. 

Decentralized vs Centralized vs Distributed

Peer-to-peer networking and cloud technologies are fascinating when you start to think about how information is moved. 

Particularly with financial institutions that are prone to aggressive and constant cyber attacks. 

A key aspect about blockchain is it is a decentralized network. There is no central control. This is important for security to not have a central point for attackers to focus on.

Illustration from “On Distributed Communication Networks”, showing three types of networks.

Illustration from “On Distributed Communication Networks”, showing three types of networks.

This is different from a distributed network. Even though Amazon may have various cloud services with servers distributed across the globe, it is still controlled by Amazon. An issue arises with Amazon and your data could be in danger. 

I am personally not so concerned that Amazon controls the servers. It seems to be working well and thousands of businesses are built on AWS. They must be doing something right. 

However, the future with blockchain technology promises a decentralized environment where no one company holds all the data.

Cheers,

Fahad