If you’re up to date on global business or technology, you’ve likely heard a lot of chatter lately about the blockchain—and for a good reason. Just one-quarter into 2017, businesses have already invested millions in blockchain projects, and by 2024, the global blockchain market is expected to be worth $20 billion. In short, the blockchain is an emerging technology that every global leader needs to have on their radar.
Bitcoin, which was released in 2009, has taken a bit of time to catch on. But with the blockchain comes a tremendous opportunity to change the way entire industries operate, and global innovators are already diving in. Here’s what you need to know about the blockchain and how it could impact your business.
What is the blockchain?
In the simplest of terms, the blockchain is a way to organise and structure data. By using “blocks” of transactions, the blockchain creates a digital ledger of transactions made in Bitcoin or other cryptocurrencies across a computer network. There’s no central authority. It’s open-source, peer-to-peer and distributed, and transactions are recorded chronologically.
Global advocates sum up the advantages of the blockchain like this: Because no single company or party has control, the system should, in theory, reduce accountability issues between parties whose interests aren’t aligned. It also gives everyone in the network real-time visibility of all related activities, which can cut down on costly and timely supply chains errors. And by reshaping the way supply chains transmit products, goods and services, blockchains have major potential to boost the global economy.
Following the 2008 global financial collapse, there has been no shortage of calls for major financial system reform. Although the financial industry offers an obvious, immediate application for the blockchain, innovators in a wide array of industries are exploring new ways to utilise the blockchain to build a more secure, transparent business system.
How does the blockchain work?
The intricacies of blockchain technology can quickly overwhelm even the most tech-savvy leader. However, understanding blockchain technology truly boils down to knowing its five key principles.
Blockchains are public-facing, meaning that everyone has access to the same information and the history of any transactions. This allows everyone in the blockchain to interact with the data and keep involved parties accountable for their actions.
Rather than all records and data coming into a central node, every user has access to the same information. This sharing of information eliminates the possibility of central failure and human error or tampering. Data is decentralised so that it can be unbiased.
- Permanency and Trust
Records are permanent. Each transaction is a link in the chain to the data that comes before and after. Its algorithm ensures permanency and prevents tampering by nodes trying to cheat the system or clear their name of a previous faulty transaction. This, in turn, creates an infrastructure of trust.
Users (also called “nodes”) of a blockchain are assigned a 30-plus-character alphanumeric address for identification. This allows them to remain anonymous if they choose, or let others know who they are. All transactions happen between alphanumeric IDs, and all nodes in the system have access to the records.
Because blockchain ledgers are digital, algorithms can be used to programme and automate transactions between nodes.
Who’s leading in the age of blockchain?
Blockchain technology has the implication to transform a variety of industries, starting with finance. Because the blockchain challenges global financial institutions as the “central authority”, it presents an opportunity for banks to overhaul business as usual—transforming everything from their infrastructure to interactions with customers. Industry experts say it’s only a matter of time before the banking industry shifts to a blockchain approach.
The immediate impact of blockchain could bring disruption in the financial industry, but many other industries stand ready to transform into this emerging technology.
- Sharing economy: Users who conduct economic activity online are becoming privy to more secure ways of running their businesses through the blockchain. By transmitting value directly between parties without an intermediary, users are able to take better control of their economies.
- Utilities: Around the world, energy conglomerates and startups are exploring how blockchain technology can optimise the power sector. There’s tremendous interest in decentralising the power industry so that utilities and consumers themselves can produce and sell electricity—thus eliminating the middleman and creating a more reliable, cost-effective system.
- Healthcare: Maintaining compliance with the Health Insurance Portability and Accountability Act (HIPPA) and other global healthcare privacy regulations makes it difficult to store patient records efficiently and securely. Plus, sharing records of medications and other data between hospitals is an inherently messy process. Health care innovators are betting that the encrypted technology of blockchains will provide both security and easy access to records for more consistent care.
Real estate, cybersecurity, trading and even voting are amongst the growing list of industries that could be transformed thanks to the blockchain. Here are a few tech companies already tapping into the blockchain to reshape how users think about data, storage and financial and goods transmissions.
- Tech giants like Google are looking to the future as they begin to explore and adopt blockchain systems for more transparent financial and manufacturing processes.
- Circle, once a sole bitcoin devotee, is now employing the Ethereum blockchain to meet the needs of its newest venture, “Spark.”
- Brave, a blockchain-enabled browser, will be paying users with Ethereum-based digital Basic Attention Tokens, to turn browser ads back on.
- Storj, a cloud storage platform, is shifting its bitcoin blockchain to the lower-cost, faster transmission of the Ethereum blockchain.
- Factom uses blockchain technology to keep data safe and decentralised.
- Blockchain Capital is a VC firm that invests in blockchain technology to create a more secure, transparent future.
The challenges of blockchains
Tech innovators are already singing the praises of the blockchain as a disruptor of massive proportions. However, as with any emerging technology, the blockchain brings key challenges.
Blockchains are meant to provide free and open access to the global supply chain data. But the public nature of them is ripe for challenge by companies wanting to maintain their market share. A number of businesses are already beginning to explore how they can privatise their ledgers and protect their information—challenging the very nature and intent of blockchains. As private ledgers enter the scene, the industry must create standards and agreements between companies and consortiums that allow interoperability between public and private blockchains.
- Lack of standards
Laws and jurisdictions pose a major challenge for blockchains. How should the purely digital nature of the system adhere to regulations, maritime laws and commercial codes? This question and others like it dominate the debate of how to regulate an industry that governments have not yet touched. Experts agree that best practices and standards must be defined to regulate the ways this technology is working across borders and jurisdictions. But navigating the digitally-defined system through the reality of laws and governments is no easy feat. Some global businesses are already rising to this challenge by banding together to initiate effective administration and oversight of the process.
Many blockchain enthusiasts expect that this technology will change the world, and soon. Only time will tell how this emerging technology will disrupt industries outside of the financial realm, but one thing is for certain: In an increasingly competitive digital world, leaders who don’t take the blockchain seriously run the risk of getting left behind if these predictions hold true.