Disruption. You can’t have a discussion today about business or technology without the term entering the conversation. I think it’s become an unwritten rule. It’s almost as if no one will take you seriously unless you’re talking about business disruption. Or how disruptive technologies can be used to advance business and provide a competitive edge.
Take Big Data and the Internet of Things (IoT). Both rank highly on the list of disruptive technologies. And as with most technologies, there are areas of great synergy that ultimately provide a yellow brick road to real business value. (See my recent blog Big Data, the Internet of Things, and Russian Nesting Dolls.)
Blockchain enters the disruptive dialogue
But recently, a new topic has enlivened the disruption discussions: Blockchain technology. And with it, the requisite stream of questions. What exactly is it? How does it help (or does it help) provide business value? How will it affect my current initiatives? And are there synergies to be had—or do I have to worry about it blowing everything up?
What is blockchain—and how is it associated with Bitcoin?
If you do a Google search on blockchain, you’ll find several results that inevitably pair the terms “blockchain” and “Bitcoin.” That’s because blockchain technology enables digital currencies like Bitcoin to work. As you may be aware, Bitcoin has no physical form, is not controlled by a single entity, nor is it backed by any government or agency.
(I’m not going to attempt to discuss the pros and cons of Bitcoin here. Those conversations can be almost as emotional as political discussions—and voluminous enough to fill books.)
A permanent digital transaction database…
In simple terms, blockchain is a digital ledger of transactions that you might think of as a spreadsheet. Yet it comprises a constantly growing list of transactions called “blocks”—all of which are sequentially connected. Each block has a link to the previous one in the list. Once a block is in the chain it can’t be removed, so it becomes part of a permanent database containing all the transactions that have occurred since its inception.
…is also the ultimate distributed database
But perhaps the most interesting thing about blockchain is that there’s no central authority or single source of the database. Which means it exists on every system that’s associated with it. Yes, every system has its own complete copy of the blockchain. As new blocks are added, they’re also received by every system—for the ultimate distributed database. So if you lose your copy, no problem. By rejoining the blockchain network you get a fresh new copy of the entire blockchain.
But how do you ensure transactional security?
By now you’re probably wondering, “How can this possibly result in a secure method for conducting digital transactions?” The short answer is through some very complex cryptography, math puzzles, and crowdsourcing consensus. There’s a great video that explains it in some detail on YouTube. It’s a little over 20 minutes long, but is the best explanation I’ve seen of a very complex solution.
The net result is called a “trustless system.” Which is not to say the system can’t be trusted. It simply means that two parties don’t need a trusted third party (such as a bank or credit card company) to maintain a ledger and valid transactions. Because every transaction can always be verified against the distributed ledger, a copy of which resides with all parties.
Note: One thing that’s important to understand is that while you can’t have Bitcoin without blockchain, you can use blockchain without involving Bitcoin—and that’s when things can become very interesting.
Blockchain and Big Data
When you talk about blockchain in the context of Bitcoin, the connection to Big Data seems a little tenuous. What if, instead of Bitcoin, the blockchain was a ledger for other financial transactions? Or business contracts? Or stock trades?
The financial services industry is starting to take a serious look at block chain technology. Citi, Nasdaq, and Visa recently made significant , a Bitcoin blockchain service provider. And Oliver Bussmann, CIO of UBS says that blockchain technology could “pare transaction processing time from days to minutes.”
The business imperative in financial services for blockchain is powerful. Imagine blockchains of that magnitude. Huge data lakes of blocks that contain the full history of every financial transaction, all available for analysis. Blockchain provides for the integrity of the ledger, but not for the analysis. That’s where Big Data and accompanying analysis tools will come into play.
Blockchain and the Internet of Things
There’s no doubt that IoT is a tremendous growth industry. Gartner predicts that the number of “things” will exceed 25 billion (with a B) devices within the next four years. These things can be anything from a small sensor to a large appliance—and everything in between. Two key challenges are securing those devices, and the privacy of the data they exchange.
Traditional centralized authority and message brokering could help address these issues, but will not scale with the number of devices predicted and the 100’s of billions of transactions the devices will generate.
Several major industry leaders put forth blockchain technology is as a possible solution to these challenges. The vision is a decentralized IoT, where the blockchain can act as the framework for facilitating transaction processing and coordination among interacting devices. Each device would manage its own roles and behavior and rules for interaction.
Follow the Yellow Brick Road
The blockchain builds itself a block at a time, always growing and moving forward, but also maintaining the trail of where it’s been. While the blockchain’s original purpose was in support of Bitcoin digital currency, like most disruptive technologies its value is growing in unexpected ways and directions.
As a technologist, I find the technology fascinating. That being said, technology is just a tool. It’s our responsibility to ensure the tools can be leveraged to provide true business value. Whethers its reduction of transaction processing time, analysis of transaction trends, or providing a mechanism to securely scale the Internet of Things messaging, the synergies with Big Data and IoT are one way we can follow that yellow block road to true business value.