Some have called blockchain ‘the most important IT invention since the internet itself.’ Yet, if you ask folks on the street, few can succinctly define it. In layman’s terms, what is blockchain and how does it work?
Blockchain is a technology that lets people who do not know or trust each other build a shared, dependable ledger. In other words: It is a way of recording transactions securely and reliably without the trusted third party — like a bank — that is usually required for verification.
There are some very interesting mathematical and computational underpinnings for blockchain, but the fundamental idea is that blocks of information can be securely tied into chains. Each block can represent information like a transaction. Each time a block is added to the chain, it is securely connected to the preceding blocks, and anyone trying to change a link will be detected. There are also multiple copies of the chain, which avoids having a central authority or a single copy of a record. Everyone can see the blockchain and confirm what it contains.
In May 2016, Fortune magazine published an article entitled, Why blockchain will change the world. One month later, Forbes ran a competing piece headlined, Blockchain is not going to change the world. Who is right and why?
I would take a slightly different angle and say that, over time, the business innovations that arise from blockchain will change the world. The Forbes piece focused on immediate, direct implications of the technology. I think blockchain today is comparable to the early days of e-commerce. The opportunities for increased efficiency and disintermediation will be disruptive. We are just starting to see interesting applications of this technology take shape, in ways never before imagined, including the design-to-production processes in additive manufacturing. I don’t think we’ve even begun to seen the transformative impact yet.
What industries will be most impacted by blockchain technology?
In the near term, it looks like the financial sector will be most impacted. We are already seeing financial transactions performed with blockchain, with few barriers. Bitcoin is probably the best known. Even regulators generally seem supportive.
The potential impacts on other industries, though, go much farther. Blockchain can provide a clear chain of custody and ensure data is not altered as it is moved. For example, there is work underway to explore blockchain as a fast, efficient, and secure conduit for health information.
I expect to see blockchain used in situations where traceability is of the utmost importance. The creation of smart contracts is one possible — albeit complicated — application. These are built between entities whereby the contract is enforced by pre-negotiated actions and conditions recognized by the blockchain. This helps manage risk in situations where trust may be lacking.
Some have suggested that blockchain will revolutionize physical supply chains, removing barriers to sourcing, designing, and transportation. What changes do you see coming in this space?
This is perhaps one of the most interesting applications of blockchain technology. One of the earliest case studies is around gemstones, like diamonds. There are efforts ongoing to use blockchain to track the origin, history, characteristics, and ownership of rare or high-value gemstones, providing visibility into the global chain supply chain, which — in turn — can help deter fraud and ensure compliance with conflict minerals legislation. The same theoretical approach is now being used to track food origins and statuses, like organic certifications, from producer to consumer.
What is one piece of advice you have for Prairie manufacturers and processors to better understand or embrace blockchain?
Don’t ignore it because you don’t understand it. I expect blockchain to touch all industries. Watch for business innovations that are enabled and fast-tracked by blockchain. Some of the world’s largest companies are investing heavily into this technology, and that may result in your business changing quickly by way of necessity, whether you like it or not.
Look for more local applications, too. There is some money being sunk into leveraging blockchain for the development of trusted registries, such as land ownership. We are still seeing new ideas spring up every day for blockchain to streamline privacy and confidentiality, improve traceability, accelerate processing, and enhance efficiency. If those sound like traits important to the success of your business, you probably don’t want to ignore blockchain for very much longer.