A ’Blockchain’ is an open source transfer protocol, distributed on a peer to peer network. It was first published in 2009 as the underlying distributed database for the cryptocurrency ‘Bitcoin’. The Bitcoin blockchain is best described as a ‘peer to peer distributed open ledger’ where a third party isn’t needed for digital money transactions (the role of the bank), because of a complex cryptographic design that ensures nobody can falsify transaction data, without the agreement from the rest of the ‘nodes’ or ‘peers’ in the network. Bitcoin thus made it possible to have a P2P transaction system, without the need of an authority (or bank).
Since 2007 blockchains has been conceptualized in numerous ways. People have used them to create more time and cost efficient international transactions (https://ripple.com/), commission free commodity exchanges (https://www.lykke.com/) and a decentralized private cloud (https://storj.io/).
Blockchain technology is probably most mentioned along with banking related businesses and rightly so. Ripple and Lykke is just two examples for banking usecases, and there is tons of unused potential in the back office of the banking system, waiting to be rethought into a blockchain-based concept. StorJ on the other hand and is not banking related, but shows the possibilities of a ‘peer to peer distributed open ledger’ in the world of cloud storage.
Common for Ripple, Lykke and StorJ is, that the blockchain could help them make a more time and cost efficient platform that their competitors non-blockchain based solutions. The reorganization of the database from a centralized to a decentralized platform itself, cut costs that normally would have been inevitable. Efficiency might be one of the primal forces for corporations to implement Blockchain based infrastructures, but it can be even more than that. As soon as you rethink a given existing IT infrastructure with blockchain reorganization in mind, new possibilities and innovative solutions comes to play – it’s simply a whole other way of thinking digital platforms.
An example of this is the concept of ‘smart contracts’, which is a whole new way of making and enforcing digital contracts. A ‘smart contract’ was described by Nick Szabo in 1994 as follows:
A smart contract is a computerized transaction protocol that executes the terms of a contract. The general objectives are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement), minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitrations and enforcement costs, and other transaction costs.
At first glance, it sounds like a digitalization project for lawyers, but it’s radical implications isn’t industry specific. An example for how smart contracts implementation can change the way we usually organize is Deloittes Smart ID, which is a ‘new way for individuals, organizations and devices to obtain, use and verify identity credentials when communicating with one another’ – and it’s just one of many. You can see a list of Ethereum-based projects at https://dapps.ethercasts.com/.
If you’re interested in rethinking your IT infrastructure or starting a new blockchain based project, you’re welcome to contact us at pemr@fpconsultants.com
