Blockchain – A Directors Briefing

Blockchain – A Directors Briefing
04/01/2018

Blockchain – A Directors Briefing

By Phil

There is an undeniable surge in various markets, towards using blockchain to revolutionise the way in which business is conducted securely.

The most common application, and perhaps the best known is the advent of the cryptocurrency, with BITCOIN being the most famous.

For those who are understandably vague about what blockchain is, allow me to present a simplified overview, using BITCOIN as an example of a blockchain application.

In the world today, the total “money” in circulation is represented in hard currency (notes and coins) and a computer record of bank accounts. It may surprise you to know that only around 3% of the total money in the world is actually hard currency – that which you carry in your pocket. The rest is a series of 1’s and 0’s in a computer ledger. These “ledgers” are controlled by your bank, and provide you with a sense of how much “money” you have by presenting a “balance” on a screen. Each transaction is certified by your bank to provide a running commentary on the activity on your account.

Now imagine for a moment that your bank doesn’t exist, and that your bank account is verified by thousands of individual nodes or computers, that act together to provide the same service. Don’t worry, it’s all encrypted and no individual can see your bank account details, unless they have your secure passwords. But they all take part in the verification process for every transaction. If someone tries to do something to interfere with this (equivalent of a bank being hacked) then all of the other nodes will reject this as inconsistent with the previous held version of your account. Security and authentication therefore is at an almost unbreakable level. This is called a “distributed ledger” system.

It is predicted by some, that the traditional bank will cease to exist in less than 10 years time, as blockchain technology will remove the need for them.

So, where else could blockchain be applied, apart from the finance scenario above?

The use of blockchain is a decision, based on your need to increase security, enhance visibility of transactions, or share status.

Examples of blockchain applications currently in use, are

  • Logistics – the tracking and sharing of data to cover goods or services in transit. Proving a secure key to your customer to allow them to precisely track the location or status of your service, will improve customer care, reduce your internal costs and enhance your brand
  • File downloads, of any type from documents to images or sound files. Being able to properly authenticate (like the bank transaction above) the requestor, to ensure your digital assets are both secure and only available to those authorised, will promote service, eradicate illegal downloads and provide an enhanced customer experience
  • SMART contracts – these are legally binding digitally authenticated contracts on a blockchain. Having contracts variable by common authenticated agreement, ensures flexibility in commercial relationships, but provides security and assurances at all times. This will in time, negate the need for many legal services currently provided by law firms
  • Blockchain data cloud storage – currently available as a central store by many well known brands, but intrinsically less secure than distributing your data in a security wrapper called a “hash” into many hundreds or thousands of locations. Any breach of data would then provide the hacker with only a tiny piece of your incomplete data. This will disrupt all cloud storage products in todays market within the next 5 years.
  • Digital Identity – blockchain technology make tracking and managing digital identities both secure and efficient, resulting in seamless sign-on and reduced fraud. User authentication is critical to many applications online, and securitisation of your personal details to avoid the well publicised hacks is needed for future trust based trading
  • Online Voting– with full user authentication, it will be possible to conduct polls and even full election voting online. The main barrier to use will be access to computer terminals and the digital ID of every person eligible to vote
  • So how will this apply to the world of VoIP and personal messaging?

It’s a similar concept of authentication, that can be adopted to be delivered by blockchain

Currently your VoIP handset is authenticated by its MAC address, which has to be identified by session border controllers, SBCs. In other words, when you place a call through the internet you have to be identified by an SBC to appear as yourself on the receiver’s side.

If Blockchain were used, it would eliminate the need for SBC’s to exist, as authentication would take place on the distributed ledger network across the globe, which will identify you as the caller, and the person you are calling, billing you where appropriate.

It is estimated that blockchain VoIP applications will be user tested within the 4-7 year time horizon

 

Blockchain will doubtless add value in many scenarios, wherever security and transparency are needed. The migration to blockchain based applications will be unstoppable in the next 10 years, but as with all new technology it will need a steer from major supply chains to make it so.

Even though blockchain’s importance is undeniable, the technology and its use are still in the early stages. However, the take-up of this is extremely rapid, and will soon start to spawn into many industries and sectors. The efficiency and security offered by blockchain, along with the removal of boundaries both physical and virtual, will drive adoption in all areas of business and services, from manufacturing, logistics, finance and services sectors.

Social Impact

Those more observant among readers, you will notice that this world of blockchain relies upon authentication of users to make it work. This authentication process, and the security of transactions that result will rely on each person to have a blockchain digital ID. This may be seen as a national identity scheme by another name, but also linked to international applications.

Issues such as social benefit payments, tax avoidance, money movements (laundering) immigration/asylum, personal location tracking, and many other applications will naturally spill out of such a move. Assets will be tracked and accounted for in the same way, and so moving cash to gold and back again (fencing) will be impossible without leaving an audit trail.

When physical cash disappears in around 15-20 years time, this will complete the cycle, leaving some feeling they are living in a B rate Sci-Fi movie, or an Orwellian world.

 

The social impact will not be a single event, it will creep upon us gradually, offering us convenience and enhanced service levels, (which we are always greedy for), in exchange for our personal identity.

It will be interesting to see how this affects society as a whole, from welcoming the benefits, to rejecting the intrusion of privacy. Indeed the very laws and definitions of privacy will need scrutiny in the years ahead.

 

It’s a brave new world as they say, but stay in touch with our technology updates from RDS Global, by following us on social media, linked from our website. www.rds.global

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