About Blockchain & DLT!
According to IDC Worldwide spending on blockchain solutions is forecast to be nearly $2.9 billion in 2019, an increase of 88.7% from the $1.5 billion spent in 2018, according to a newly updated Worldwide Semi-annual Blockchain Spending Guide. IDC expects blockchain spending to grow at a robust pace over the 2018-2022 forecast period with a five-year compound annual growth rate (CAGR) of 76.0% and total spending of $12.4 billion in 2022.
The business value-add of blockchain will grow to slightly more than $176 billion by 2025, and it will exceed $3.1 trillion by 2030 says Gartner
The blockchain and distributed leger technologies (Read, DLT) continue to lead the innovation curve and remain as a topline agenda of technology innovation leaders towards enabling digital transformation. Strong key tenets like distributed leger, in built cryptographic security and smart contracts make it a preferred choice of technology for niche usecases that need authenticity, repudiation, information security and trusted transactions to record, validate and reconcile by and between intermediaries since each data set is immutably fingerprinted on the blockchain with cryptographic hashes.
The completeness and immutability of blockchain make it possible to eliminate the third-party verification authority or a centralized authority and reduces mistakes from human error and information manipulation. Eliminating the intermediaries also reduces transaction costs, time delays, and other risks associated with employing middlemen. Smart contracts are software protocols used to facilitate, validate, and enforce agreements between two or more counterparties in a contract. They are created to provide a digital and enforceable agreement that supersedes the traditional legal contract. In a way, blockchain technology not only reduces the number of parties involved in a transaction but also reduces its total cost..
Many users store the chain in a decentralized manner so that any changes would also have to occur simultaneously at each of those locations. If differing copies of a chain begin to circulate in the network, the discrepancy is usually solved based on one of three consensus schemes: proof-of-work (POW), proof-of-stake (POS), or round robin.
In POW, each block also includes an additional value called the nonce, which is selected to ensure that the complete block, when hashed, will produce a value with a particular pattern, often some set number of leading zero bits. Nodes hunting for these desirable nonce values are called miners. When a miner uncovers a new nonce value and completes a block, the miner broadcasts that block out to all other miners who append the chain and begin work on the next block, whereas In POS, the network users who hold the most stake in the network hold the power to determine consensus. Both schemes grew in cryptocurrency based public blockchain models, so monetary incentive made sense in the absence of trust. For applications where some level of trust does exist, round robin consensus models are also in use, where nodes simply take turns adding the next block to the chain.
- Durability - Decentralized network allows distributed ledgers to be more durable. Blockchain ledgers are less vulnerable to unfortunate events such as a network attack or power outrage.
- Integrity - Transactions are executed as coded: no need to depend on third-party input.
- Transparency - In public blockchains, distributed ledgers are publicly viewable and changes to the transaction are also traceable.
- Immutability - Validated records are immutable; an unaltered history of activities.
- Longevity- Recorded distributed ledgers can be accessed from anywhere, independent of devices, service providers, or application developers.
- Reliability - Failure of certain nodes does not affect or compromise the functionality or effectiveness of blockchain.
- Availability- The data and information within a blockchain is available to everyone.
However, The cryptocurrencies and such as Hyperledger, have taken of and at time even referred to as a synonym for blockchain, yet seen battling through the govt regulatory frameworks and just recently the draft called Banning of Cryptocurrency & Regulation of Official Digital Currency Bill 2019 was seen leaked to media that proposes a jail term of one to 10 years for those who mine, hold, transact or deal with cryptocurrencies in any form, whether directly or indirectly through an exchange or trading.
Although the draft clarifies that certain terms will not apply to any person using technology or processes underlying any cryptocurrency for the purposes of experiment or research including education provided that no cryptocurrencies are used for making or receiving payment in such activity. It also clarifies that any law would not target blockchain or the use of Distributed Ledger Technology (DLT) for creating a network for delivery of any financial or other services or for creating value, without involving any use of cryptocurrency for making or receiving payment.
As blockchain technology’s influence expands beyond the bounds of the cryptocurrency sector initially proposed by Nakamoto, There are many enthusiast industry verticals / domains looking at the blockchain and DLT with compelling use cases which will greatly reduce inefficiencies and unlock value. Alternative blockchains are new blockchains that are independent of Bitcoin blockchain technology. They still rely on blockchain algorithms to achieve distributed consensus for a transaction and are aiming to reap the benefits, lets explore few of the promising usecases that have a potential and prospect of disrupting the legacy enabling enterprise wide processes, including communication, digitization, design, development, supply chain, manufacturing, service, and customer experience.
Few Usecases / Advantages
- Digital Identity & Assets Management
- Purposes of authenticating a unique physical item, the items are paired with a corresponding digital token to bind the physical and digital worlds. These digital tokens are useful for supply chain management, intellectual property, and anti-counterfeiting and fraud detection. Using blockchain technology, existing illiquid assets can now be digitized (Read, tokenized) form and quickly and efficiently fractionalized, identified and validated via DLT.
- Blockchain-based digital identities allow users to have full control and protection over their personal and financial information as it offers a mechanism for securely storing and adding to a body of collective knowledge in a secured and distributed manner. Not only can the blockchain-based digital identities improve cybersecurity, they can also substantially reduce the cost of digital identity maintenance.
- Blockchain registries: Tracking ownership and identities and enforce rights for creators of digital content, including music, video, books or articles, or even art, offers a means to automatically create a record of who has accessed information or records, and to set controls on permissions required to see information.
- Blockchains can serve as a fully transparent and accessible system of record for regulators and can also be coded to authorize transactions which comply with regulatory reporting.
- Stock Trading / Exchanges / B2B Markets
- Using distributed ledgers to improve the transfer of value and information in trades, trade finance and supply chain financing to enhance their clearing and settlement processes. beyond just recording transactions.Nasdaq, for example, was one of the first to build a platform enabling private companies to issue and trade shares using a blockchain.
- To address the problem of inefficient intermediaries while reducing the settlement period to a matter of minutes or even very close to real time avoiding unnecessarily increasing costs and further delaying the transaction.
- With blockchain technology, the entire lifecycle of a trade – execution, clearing and settlement – occurs at the trade stage. With a digital asset, trade is settlement, and the cryptographic keys and digital ownership they control can lower post-trade latency and counterparty risk.
- Brooklyn startup Transactive Grid enables decentralized energy generation schemes allowing entities to generate, buy, and sell energy to their neighbors.
- DLT can be used to automatically execute agreements once a set of specified conditions are met. These “smart contracts” have the potential to reduce paperwork and bring in accuracy and control.
- Allows for the track-and-trace of a user’s medical insurance claims on the blockchain ostensibly to allow for greater transparency in medical insurance claims and thereby faster resolution of claims for end-users, reduced fraud for providers, and an overall reduction in the cost of delivering these services. It is envisaged that a private, permissioned ledger would be used to fully protect end-user privacy.
- Ability for heterogeneous information technology systems and software applications, such as the Electronic Health Record (EHR) system, to communicate, exchange data, and use the exchanged data securely.
- Data Sharing to Incorporate Telemedicine with Traditional Care, Patient Digital Identity Management for Better Patient Record Matching, Personal Health Records for Accessing and Controlling Complete Health History
- Asset / Goods Tokenization / Automation
- Track and protect assets, transaction activities, audits, data, events and decisions. The use of decentralized trust in blockchain technology helps address this problem by making all actions from inputting to auditing the data more transparent.
- Smart contracts can facilitate machine-to-machine automation, for example, a car with a smart contract can automatically pay for parking.
- IoT - Security, privacy, interconnectivity, and scalability in this IoT world have become more important than ever. blockchain-based decentralized data storage offers a customized, cheap, and secure way to store data for different devices. Users who want more security for valuable IoT data can deploy more nodes for more sharding and redundancy of data storage in a distributed model.
- Supply Chain Management –
- Deploying blockchain for supply chains, using the blockchain to create tamper-proof methods that track incoming shipments and shippers.
- Helping industries across the globe to transform their workflows, making complicated business processes run more smoothly and efficiently, including enabling quick and seamless transaction settlements
- Provenance of Tracking Physical and Digital Goods allow multiple parties to access a database to act as the single source of truth. Recorded transactions are immutable, are append only and provide a time stamped audit trail.
- Helps enhance transparency into an otherwise opaque network, helps stop counterfeits and thefts, improves regulatory compliance, reduces paperwork and lessens costs significantly
- Real Estate –
- Using distributed ledgers to establish ownership history, smart contracts, manage land titles, lien, loans and property documents etc
- Education –
- Authenticating student records and transcripts etc. blockchain-enabled store of verified degrees issued by accredited universities would save employers time and money for offline validations. DLT solutions could streamline verification procedures and reduce fraudulent claims of unearned educational credits.
- Smart contracts can control funds based on the actions of its beneficiaries. For example, scholarships can be released in a controlled manner based on a student's attendance record.
- eCommerce –
- Smart contracts can facilitate better online trade in B23, B2C and C2C businesses by reducing transactional costs, human errors, and counterparty risk.
- Using blockchain-based digital identities reduces chargeback fraud and consequently reduces the reimbursement amount covered by merchants.
- Data that has been recorded using the Bitcoin blockchain is immutable, meaning that it cannot be changed once it is input in the system. After the data has been recorded, anyone in the system can prove the existence of the transaction by matching the hash given to him or her to the hash stored in the blockchain.
Highs and Lows
One of the big selling points, and also one of the big detriments, of blockchains is that information regarding new updates to the blockchain is shared through multiple nodes in the network. In this model, every participant in the network for the blockchain can have a complete copy of the blockchain and as updates get passed around from one node to another, the blockchain gets updated for every member. This decentralized system of storage makes it such that if a single node is taken offline, the blockchain can continue to function as normal. On the other hand the biggest issues with blockchain technologies has been making them scalable and a large part of this issue stems from the side-effects of having a peer-to-peer network or even number of participants and/or transactions. There have been efforts to remedy this situation by implementing new innovations on distributed databases to add the benefits of blockchains in cases like BigchainDB.
- The trust factor in blockchain has its limitations, though. If some user checks information in incorrectly, the blockchain will report that immutably and verify that that was all checked in, but it doesn’t itself inherently verify the accuracy of the information and the result of the action. Competing miners and giant mining farms burn a disproportionate amount of electricity when compared to the outcome, the creation of the next block. In a world where current energy generation is a climate issue, blockchain processing does not make much sense. while distributed, it is not a distributed computer system which will benefit all, in fact all of the nodes that maintain a blockchain do exactly the same thing. i.e. verify the same transactions in accordance with the same rules and perform identical operations and store the entire history, which is the same for all of them, for all time.
- Every Node runs the blockchain in order to maintain Consensus across the blockchain. This gives extreme levels of fault tolerance, ensures zero downtime, and makes data stored on the blockchain forever unchangeable and censorship-resistant. But all this is wasteful, as each Node repeats a task to reach Consensus burning electricity and time on the way. This makes computation far slower and more expensive than on a traditional single computer. There is no paralleling, no synergy, and no mutual assistance unlike distributed computing. The data stored on a blockchain is not inherently trustworthy, so events need to be recorded accurately in the first place.
- There is one notable security flaw in bitcoin and other blockchains: if more than half of the computers working as nodes to service the network tell a lie, the lie will becomes the truth. This is called a ‘51% attack’ and was highlighted by Satoshi Nakamoto when he launched bitcoin. For this reason, bitcoin mining pools are monitored closely by the community, ensuring no one unknowingly gains such network influence.
- Another downside of blockchain systems is that once data has been added to the blockchain it is very difficult to modify it. Changing blockchain data or code is usually very demanding and often requires a compute intensive hard fork, where entire chain is abandoned, and replaced with newer one. The phrase ‘garbage in, garbage out’ holds true in a blockchain system of record, just as with a centralized database.
- Blockchain ledgers can grow very large over time. The Bitcoin blockchain currently requires around 200 GB of storage. The current growth in blockchain size appears to be outstripping the growth in hard drives and the network risks losing nodes if the ledger becomes too large for individuals to download and store.
In Summary, Blockchain technology presents an interesting opportunity to solve some of the well documented problems in the digital ecosystem. Blockchains & smart contracts have made it easy for anyone to create a token with just a few lines of code. They can represent anything from an asset to an access right, like gold, diamonds, a fraction of a Picasso painting or an entry ticket to a concert. Tokens could also be used to reward social media contributions, incentivize the reduction of CO2 emissions, or even ones attention for watching an ad. While it has become easy to create a token, which is collectively managed by a public infrastructure like a blockchain, the understanding of how to apply these tokens is still vague. Despite the downsides, blockchain technology presents some unique advantages, and it is definitely here to stay. All though a long road to mainstream adoption, but many industries are getting to grips with the advantages and disadvantages of blockchain systems. The next few years will likely see businesses and governments experimenting with new DApps to find out where blockchain technology adds the most value.
June 2019. Compilation from various publicly available internet sources, authors views are personal.