Blockchain Technologies-Tools for Collaborative Innovation
Jun 21, 2017
The bitcoin mania has taken over the globe; the cryptocurrency is up more than 230% in the last one year and most cryptocurrency enthusiasts believe that there is a lot of steam left in this rally. Bitcoin’s underlying technology – the blockchain – is an electronic and tamper-proof “distributed ledger” where records related to cryptocurrency transactions are maintained by voluntary participants. Anybody can help maintain the blockchain (a process also referred to as mining), and they can be rewarded for their efforts accordingly.
According to Frost & Sullivan, blockchains can be viewed in several different ways, including:
• Platforms for decentralized digital currencies (cryptocurrency)
• Databases with a tamper-proof history
• Development platforms for smart-contract applications
• Trust layers for peer-to-peer asset and data transactions over the Internet
Smart Contracts and Ethereum
A contract is an agreement between two or more entities that includes a promise to do something in return for a valuable benefit known as consideration (usually a payment in exchange for the work done). A smart contract is a blockchain-based implementation that facilitates or enables the negotiation and enforcement of contracts in a transparent manner. While “smart contract” could refer to specific use cases (or codes) that use blockchains to supplement or execute legal contracts, the term smart contract is now used to refer to blockchain-based distributed applications (or Dapps) that can support condition-based decision making. Different types of Dapps, ranging from supply chain management to insurance are currently available on the Ethereum blockchain which has emerged as the leading technology for the lifecycle management of Dapps. Dapps running on Ethereum can leverage the Solidity language to code smart contracts that are then executed by the Ethereum Virtual Machine (EVM).
Examples of applications available on Ethereum blockchain include:
- Golem – an open source global supercomputer where users can offer computing resources for use by customers. It is a decentralized, global sharing economy of computing power.
- Aragon – an initiative to create companies and organizations in a region-independent manner. It is a decentralized, global approach to creating and maintaining companies.
- The Basic Attention Token (BAT) – the BAT is a decentralized, transparent digital ad exchange based on Ethereum Blockchain. It employs a set of technologies for promoting attention-based economics for efficient digital advertising.
- KYC-chain – distributed ledger technology for identity determination and compliance. It is a user-controlled identity management solution.
- WeiFund – decentralized and interoperable crowdfunding platform.
As can be seen in these examples, Dapps can come in different shapes and sizes. According to Frost & Sullivan, the following industry verticals face disruption due to blockchain technologies.
- Financial technologies
- Networking and IoT
- Energy and Utilities
- The Public Sector
The Enterprise Ethereum Alliance (EEA) is the leading industry association for Ethereum technology developments. EEA aspires to build upon Ethereum blockchain to enable enterprise-grade software that can meet the performance requirements of mission-critical enterprise applications. The Linux Foundation’s Hyperledger industry group is also working to develop blockchain based technologies to support global business transactions by technology, financial services, IoT, manufacturing and supply chain companies. Support of leading global companies such as IBM and a focus on addressing enterprise blockchain technology needs are among the key strategic advantages for Hyperledger.
Challenges and Outlook
In a world where literally every industry wants to optimize business operations through technology, collaborative problem solving can infuse higher levels of security, transparency and efficiency. However, in order to deliver on the vision of blockchain, the following issues must be addressed:
- Regulations – Encryption and immutable transactions are considered the strengths of blockchain. However, blockchain applications used in industries such as financial services and healthcare may still have to comply with industry regulations related to monitoring, data privacy and security. Usage of blockchain-based cryptocurrencies (such as bitcoins) in the dark Web and for gambling has not gone down well with regulators that are considering mandates to control the flow of value through these mechanisms.
- Excessive openness – yes, there can be such a thing! In a blockchain environment, every node is in sync with other nodes participating to maintain records and enable transactions. However, this openness could also become a challenge, especially when apps have to import data from external systems in order to execute the coded logic. Establishing trust functions for such processes, even if through an independent trusted service provider could be a possible solution. Such an approach will have to be balanced against the expectations related to freedom from interference by outside parties in blockchain operations.
- Cyber security threats – leading trading exchanges for cryptocurrencies have seen increased attacks on their web properties in the recent months. Several exchanges have been forced to halt operations, leading to significant drops in trading volumes and in the price of the cryptocurrency. It is certainly not good for the confidence of developers and investors to see a 30 % fluctuation in the valuation of their digital assets in a single day when we are talking about building game-changing Dapps that will be monetized via blockchain based currencies. Industry participants are aware of this issue and have shown how blockchain can be made resistant to quantum security threats that are among the most important security issues facing the digital cyber security industry.
- Scalability – the bitcoin ecosystem has already suffered due to limited scalability, slower processing times and uncertainty around the future direction of the technology due to upcoming protocol modifications (such as hard forks and soft forks). Unless these issues are addressed in a manner such that business applications can be handled via blockchains, adoption of blockchain-based technologies could stall.
- Commoditization and lack of interoperability – this could be a long-term challenge. Drawing an analogy from the Internet, blockchain is like the Internet and Dapps are like the web applications that run on the Internet. The differentiation will come from apps; the underlying infrastructure (the blockchain) will be ubiquitous and will/could become a commodity. There will be different approaches and different technologies that will enable such implementations. Industry stakeholders that are promoting their blockchain versions have to determine the right economic models that can benefit the ecosystem participants.
Blockchain-based technologies enable pooling of computing resources to solve every day needs and challenges of businesses – and eventually consumers – in a transparent and secure manner. While there are still several issues that need to be addressed for blockchain to become the preferred mechanism for supporting business functions, the foundational elements are available, and gradually the world is becoming familiar with the potential of distributed and decentralized computing. Cryptocurrencies such as bitcoin are already legal in several leading economies around the world. Critics may call the entire blockchain movement a bubble due to extreme levels of volatility, the massive potential for disruption and the ease of use which seems too good to be true. But then, that is how innovation happens in technology. “First they ignore you, then they laugh at you, then they fight you, then you win”.
Fourteen years of product marketing, research, and consulting expertise, which includes supporting clients’ needs through more than 140 syndicated market research deliverables and consulting assignments. Particular expertise in Assessing next-generation telecommunications trends, technologies and market dynamics; Helping clients develop and execute their go-to-market strategies; Providing continuous inputs to clients into new market developments and helping them understand the strategic implications.