Enterprises today say that the benefits of blockchain technology have arrived, with the potential to restore trust and security in transactions. But skeptics say it’s still early days.
LAS VEGAS -- As malicious hackers chip away at public trust—stealing consumer information or holding data hostage for dollars—new systems have emerged to restore confidence and value in transactions. Skeptics, however, wonder whether these alternatives can fill the gap.
Proponents say blockchain technology restores trust and creates value, even where online environments have jeopardized that value through theft and fraud.
A blockchain works this way: When a new transaction takes place, every computer in the blockchain network records the information into a database, or digital ledger, of sorts. That time-stamped transaction is combined with others to form a block, also time-stamped to prevent overwriting or duplication. As a block is added to the larger chain, it is attached with a “hash”— a unique string of characters—to make the chain virtually immutable and unbreakable. A hash from one block is then added to the data in the next block. When the next block goes through the hash function, a portion of it is woven into the new hash.
“The technology likely to have the greatest impact in the next few decades has arrived,” said Don Tapscott, author of Blockchain Revolution, in a TED talk. “This is the next generation of the Internet . . . and holds vast promise for every business.”
Tapscott believes that the benefits of blockchain address certain core problems associated with the Internet. Blockchain technology reduces concern about whether a transaction is valid, and it promotes efficient, documented business processes, even creating new value. As a result, blockchain can solve key digital commerce problems. But the benefits of blockchain can be realized in other scenarios, including contracts for real estate rentals, grocery store food tracking, and election vote verification.
Many executives now see blockchain as the future of commerce. According to 800 such executives surveyed for the book The Fourth Industrial Revolution, nearly 60% believe that, by 2025, 10% of global gross domestic product will be stored using blockchain technology.
Given its application in numerous industries, several companies, including IBM, Cisco, SAP and VMware, have joined the Hyperledger Project, a Linux Foundation initiative to promote open source development of blockchain ledgers.
In the developed world, cryptocurrencies such as bitcoin have generated intense focus, bringing hype and apprehension. But in the developing world, ensuring value brings different challenges. For the more than 2 billion people globally without bank accounts, conducting financial transactions is a hurdle. Many have only cash to pay for goods and services.
The Plastic Bank uses blockchain technology to serve the very poor and creates value along the way. Formed in 2013, the bank pays people to collect plastic waste and take it to recycling markets. People can then redeem that recycled plastic as currency and save it in a digital wallet. But it also can be redeemed to pay for services such as school tuition, medical insurance and cellphone minutes.
“We have provided an opportunity for the world’s unbankable to use plastic as a bankable currency,” said Plastic Bank CEO David Katz at IBM Think 2018.
Using blockchain fits the needs of poor consumers, Katz explained, because trusted transactions can be so difficult where resources are scarce. “There’s an immense need for authenticity amongst the poor, the most diminished, where abject corruption lives,” Katz emphasized. “To transcend that is critical.”
So too, the blockchain system also made sense for the bank’s clients that contribute to the mission. “When they make an investment in us, they want to be sure that the plastic is coming from areas that we serve, and they want that authenticated,” Katz said.
The benefits of blockchain also include providing transparency in complex systems. Consider grocery stores’ complex food system, whose supply chain is distributed, often paper-based and opaque, making it difficult to track food items as they travel through the chain. The digital blockchain benefits manual, paper-based systems that beg for transparency and documentation.
“Trust and transparency is good for all stakeholders,” said Frank Yiannas, vice president of food safety at Walmart.
For companies such as Walmart, “providing safe, affordable and sustainable food is a pretty daunting challenge,” Yiannas said. The company turned to blockchain, first in pilot, now in production, to bring trust and transparency to its processes.
Blockchain gives consumers visibility into the food they consume through digitized records of ingredients, production and origin. It provides retailers the ability to trace items to their origin.
Yiannas explained how difficult it was previously to trace a contaminated product back to its source. “It’s a pretty complicated journey,” he said. “The way records are kept is largely on paper. Sometimes to trace things back to origin, we have to piece it together, and ... it can take weeks.”
At a recent shareholders meeting, the company demonstrated newfound speed in tracking food to its source with a package of sliced mangos. With blockchain, the company reduced the time it takes to trace the fruit from six-plus days to 2.2 seconds. "We can accelerate pinpointing the contaminated food product very quickly and pull it off the shelves," Yiannas said.
Bringing transparency to complex, distributed systems could benefit data center infrastructure as well. Blockchain technology can track, log and store metrics about the health of enterprise networks. Blockchain technology could be a boon for networking engineers and architects, where such documentation is not always a priority.
At the same time, some warn that systems such as blockchain present security and scalability challenges.
Konstantinos Karagiannis, the chief technology officer for security consulting at BT Americas, noted in his “Hacking Blockchain” session at the RSA 2017 conference that blockchain hype could interfere with long-term viability.
“As we rush toward blockchain, I want to make sure that we’re not diving in so quickly that we don’t look at some of the flaws that we hopefully can avoid,” Karagiannis said. He noted, too, that bitcoin fell prey to security breaches in its code.
In the notorious Mt. Gox event, nearly $8 million in Bitcoin was stolen. The digital currency exchange site was originally an amateur gaming site and only later converted into a Bitcoin exchange. “There were a whole lot of mistakes made in the coding,” Karagiannis said, making the back end vulnerable to security loopholes and enabling theft.
Indeed, while blockchain is designed as a secure system, there are concerns that applications of blockchain require smart transactions and contracts to be indisputably linked to personally identifiable information, thus raising important questions about privacy and the security of data stored and accessible on a shared ledger. Another issue is the so-called scalability problem for blockchain. Validating transactions through the peer-to-peer network takes time and computing power, which defies scalability as the number of transactions increases.
Data from the Pew Institute in 2016 indicates that public trust in institutions hit an all-time low. But the city of Dubai is challenging that notion with its digital initiative and blockchain efforts. Its overarching goal, said Wesam Lootah, the CEO of Smart Dubai Government is to make Dubai the happiest city in the world. Part of that effort is to release the city from the chains of paper-based government (For more on Dubai’s use of blockchain, see “Dubai’s seven rules for blockchain success”).
“We’re going to eliminate paper completely from all interactions,” Lootah said with ample pride. “Being 100% digital will be just the norm,” he said.
But, Lootah acknowledged, implementing systems such as blockchain can be a difficult journey for any organization. While the technology takes collaboration, its progress can easily be impeded by stakeholder jockeying.
“You’re going to have conflict and people trying to realize their own objectives,” Lootah warned. “Transcend these individual objectives and have everyone look at the purpose you’re working on and your shared vision.”
Lauren Horwitz is the managing editor of Cisco.com, where she covers the IT infrastructure market and develops content strategy. Previously, Horwitz was a senior executive editor in the Business Applications and Architecture group at TechTarget;, a senior editor at Cutter Consortium, an IT research firm; and an editor at the American Prospect, a political journal. She has received awards from American Society of Business Publication Editors (ASBPE), a min Best of the Web award and the Kimmerling Prize for best graduate paper for her editing work on the journal article "The Fluid Jurisprudence of Israel's Emergency Powers.”