By Ann Cuisia
In a fintech conference last year, an attendee approached me after my talk on the blockchain technology. “Ann,” he asked, “My startup is in the real estate industry. I am very interested in this blockchain technology, but I’m not sure if I should jump into it this early in the game.”
Good question, I thought.
Although the answer to that question would require another conference talk to cover all bases, let me explain by delving on the big picture here.
Blockchain Summarized
Blockchain is a form of distributed (or shared) ledger. Let me say that again: Distributed. Shared. Ledger.
It derives its name from the way it stores transaction data: In “blocks” that are linked together to form a “chain”. While it can store transaction data—which means that it can serve as a database for recorded transactions—it has benefits that extend far beyond those of your existing database.
To envision how the technology works, I'd like you to think of your old-school accounting ledger. Imagine creating a digital version of that. Further imagine that you are sharing the use of this ledger with other people online in a manner that is secure, transparent, and immutable. Next, imagine that all the actions you take (let’s call these actions your “transactions”) are record by the shared ledger—a recording that cannot be tampered by anyone else.
Are There Industry Use Cases?
There are two mindsets on blockchain: There are those who are skeptical of the usefulness of blockchain in their industry versus those who see the potential of such a technology. There are those who would prefer to redesign their legacy processes than shift to a new technology versus those who believe that blockchain is here to disrupt and therefore must be embraced.
I am of the belief that the potential of blockchain in businesses is real. It is not just the product of startups’ hype.
Cases in point: Big companies such as IBM, Linux, Samsung, and SAP have existing blockchain-as-a-technology projects. In terms of use cases, New York-based law firm Envision IP reports that Bank of America has 43 blockchain patents or applications. Other big corporations such as Accenture and Dell are not far behind in terms of the number of patent applications on the technology.
In PwC’s Global Blockchain Survey 2018 discloses that the Financial Services sector is far ahead of other industries in terms of developing blockchain. Following behind are Industry Products and Manufacturing, Energy and Utilities, Healthcare, and Government.
All right, in your mind, you may still be asking: “All this information is great, but how does blockchain differ from, say, the existing silo-ed databases found in banks, hospitals, and businesses with value chains? Why should I blockchain my own business?”
Blockchain or the Status Quo?
I cannot answer this last set of questions without mentioning two of the key attributes of blockchain: It being distributed and consensus-based.
Unlike the standalone databases owned by most companies, blockchain’s ledger is shared (or distributed) and even selectively replicated among participants of a certain transaction. Couple that with the fact that all relevant participants on blockchain must agree that a transaction is valid (through some consensus algorithm). These are just two attributes that allow blockchain to work without relying on a single organization or authority.
Although blockchain enables companies to have a distributed database, it may not be for all. The decision to either stay with a legacy database—e.g., a central database or encrypted database or managed database—or shift to blockchain may depend on each company’s processes as well as future plans.
Some of the questions companies should ask themselves are: Will a significant number of participants be transacting on the network? Do I not trust the participants in the network or don’t know them? Do I need an arbitrator in case of a dispute? Does my system need access to external data or have to integrate with other systems? Do I need strict immutability of the records?
Only then can each company make the call on what works best.
Postscript: And, oh, did I tell you that blockchain is not just for business? Some governments are looking into blockchain’s potential for election transparency. More on this soon.