A guide to using blockchain technology

The technology behind the cryptocurrency Bitcoin is one of the most promising new developments on the Internet. Here's how businesses are using it to streamline operations and create new opportunities.
Blockchains are one of the most important technologies to emerge in recent years, and many experts believe they will change our world in the next two decades, much like the Internet did in the past two years.

Although in its early stages of development, companies pursuing blockchain technology include IBM, Microsoft, Walmart, JPMorgan Chase, Nasdaq, Foxconn, Visa and shipping giant Maersk. Venture capitalists have poured $1.5 billion into the space so far, with big names like Andreessen Horowitz, Kleiner Perkins Caufield and Byers, as well as Khosla Ventures, investing in startups.

The applications for blockchain technology are seemingly endless. While the first obvious ones are financial international payments, remittances, and complex financial products, it can also solve problems and create new opportunities in healthcare, defence, supply chain management, luxury goods, government and other industries. At a more advanced stage, this technology may give rise to what Gartner calls a "programmable economy" driven by entirely new business models that eliminate middlemen, machine networks of devices doing economic activities, and "intelligent intelligence" Assets” Some forms of property, such as company shares, can be traded according to programmable or artificial intelligence-based rules rather than being controlled by a centralized entity.

Executive Summary (TL;DR)
What is Blockchain: A blockchain is a single version of truth, via an immutable, secure, timestamped ledger, copies of which are held by multiple parties.

Why it matters: It shifts corporate trust from an institution or entity to software, and could one day lead to the demise of many traditional companies. It also promises to be able to trade many very illiquid assets today, empower our devices and gadgets as consumers, and instill trust in many areas of business, eliminating fraud and counterfeiting.

How it works: Cryptography keeps data secure, and new transactions are tied to previous transactions, making it nearly impossible to change old records without having to change subsequent records. And since multiple "nodes" (computers) run the network, in order to make changes, more than half of them need to be controlled.

Why this is disruptive: At the very least it makes a company's back-end operations more efficient and cheaper, but down the line it could completely replace the company.

Business Opportunities: New services and products will emerge in areas such as creating and trading assets, tracking provenance, managing supply chains, managing identities, and providing ancillary services to software.

Key vendors: More than a dozen platform vendors have emerged, and dozens of consulting and implementation providers assist blockchain adoption projects.

Career options: Key blockchain experts include developers, business and technical architects. But roles are also needed in risk management, security, cryptography, business process management, product strategy and analytics.

What is blockchain
Blockchain is the golden record of truth that establishes trust between multiple parties. Specifically, it’s a secure, tamper-proof ledger with timestamped transactions distributed among multiple entities.

This means that blockchain – a technology – can replace intermediaries in situations where a trusted third party is required. So, for example, we now need a bank (or banks) to send payments to foreign countries, but a piece of software – the program that runs Bitcoin – can now send money to people all over the world. The latter is cheaper, faster – and, in the case of the Bitcoin cryptocurrency, transparent so you can see when the money arrives, whereas with a bank wire you have to find out from the recipient. (Blockchains can also be private to protect data.) Overall, blockchain technology promises to offer greater security and lower costs than traditional databases.

David Furlonger, vice president and fellow at Gartner, said: “The problem with the market is that blockchain is used as a collective noun for Bitcoin, blockchain and everything else, and that’s not entirely true. Blockchain has become known as ‘distribution’ "Distributed Ledger Technology" or DLT is the full term for a large group of technologies. Technically speaking, it is possible to have a distributed ledger instead of a blockchain (discussed below), however, when one refers to blockchain technology , they often talk about DLT.

If you want to get to the real technology, "where DLT falls short is that it assumes that information is fragmented in many cases," said Javier Paz, senior analyst at financial services research firm Aite Group. But "blockchain," "distributed ledger," or "DLT" should suffice for all but the most technical discussions.

why it's important
“The main difference between a database and a blockchain is that the database is managed and controlled by someone,” said Eric Piscini, financial services technology leader at Deloitte. “A blockchain doesn’t need to be managed by someone, so you don’t have to trust someone to run the platform. , it’s run by everyone at the same time, which is a business model shift.

Ultimately, blockchain may result in many peer-to-peer networks that are not run by any centralized party and can create and transfer funds or other assets. For example, the technology could be used to create an Airbnb-style network without corporate Airbnb. Combined with the Internet of Things (IoT), it is possible to create an Uber-like program without the Uber. Such peer-to-peer networks are often called distributed autonomous organizations (DAOs), and they could one day change our entire concept of enterprise.

Gartner predicts that blockchain will bring $176 billion in new business value by 2025 and reach $3.1 trillion by 2030.

how it works
Not every blockchain works the same way. For example, they may differ in their consensus mechanisms, which are the rules by which the technology updates the ledger. But broadly speaking, a blockchain is a ledger in which new transactions are recorded in blocks, with each block identified by a cryptographic hash of that data. The data will always produce the same hash value, but it is impossible to recreate the data from the hash value. Likewise, if even the smallest detail of the transaction data changes, it will create a very different hash, and since the hash of each block is included as a data point in the next block, subsequent blocks will also have a different hash. End of hashing. This is what makes the ledger tamper-proof. Finally, security also comes from the fact that multiple computers called nodes store the blockchain, so to make changes to the ledger,

why this is destructive
A common refrain is that blockchain technology will do what the Internet did to media, and this is also true for industries such as financial services, legal, and other industries that provide trust as a service.

"The industry has been living on the back foot," Furlonger said. He noted that banks often control financial activity and governments often control the economic assets we use, adding: "If you think about the way you authenticate and identify, the way you identify your customers, the way you share records, all of this is done in silos, Decades of channels and processes, and here you have a technology that basically says you no longer need a middleman, you have a golden copy of the record that no one can change... anyone can join at any time because it's open Source... This is free, anyone can create any asset and distribute it to anyone else on the planet, and you're basically saying that is going to change the way the economic model that has grown up over the past few centuries works. So. , we will change the way society operates."

The result, he believes, will be what Gartner calls a "programmable economy," which is defined as a global marketplace run by algorithmic businesses and DAOs running on blockchain-based networks, with assets engaging in economic activities based on software or artificial intelligence-encoded rules. By far the two most commonly used public networks are Bitcoin and Ethereum. Public chains like Bitcoin focus on smart contracts, which are software programs that execute transactions when certain conditions are met.

But that will take at least ten years. First, this technology will make many companies' back-end operations more efficient, as now, companies that collaborate with each other or even different departments within an organization tend to maintain their own ledgers and duplicate work. "At least we'll see it impact back and middle offices, eliminating the problems and costs of maintaining multiple versions of the truth," Paz said.

A recent Bain & Company report estimated that the implementation of blockchain technology would save $15 billion to $35 billion annually. As certain companies' services become more efficient and cheaper, market shares among the incumbents may change. And because the technology is open source, Piscini said, "You can build small parts of the platform using traditional technologies. This gives startups and the software itself an open source. For example, people can use the Bitcoin cryptocurrency network (not powered by Any company operates) to make payments cheaply, quickly and efficiently. He said: “If you just enable transactions for other people, you are going to be in big trouble because blockchain can replace you as an entity without A legal entity is required to run it. "

Business opportunity
While some executives may fear software replacing their roles or companies, even email hasn't killed snail mail. While the technology will indeed transform existing market shares, Piscini said companies can avoid obsolescence by seizing new opportunities. “If companies provide incremental services, if they can provide the ability to dispute transactions, do some analytics on top of that platform – value that you’re not adding today – that’s how they will survive.” In fact, blockchain technology will Enabling businesses to provide services that were previously impossible. Gartner predicts that by 2022, at least one new business based on blockchain technology will be worth $10 billion.

Blockchain technology enables new products in industries as diverse as financial services, healthcare, supply chain, oil and gas, retail, music, advertising, publishing, media, energy, government, and more. In finance alone, it can be used to make international payments, trade stocks, bonds and commodities, and provide an audit trail for regulators. It enables the creation of new forms of assets and the ability to trade existing illiquid assets such as mobile phone minutes, energy credits and frequent flyer miles. It can be used to trace provenance and eliminate fraud and counterfeiting in areas such as luxury goods, fine art, pharmaceuticals, food and government documents. This allows musicians, writers and other artists to embed royalties on their MP3s, e-books and other works to be paid each time their work is purchased or resold. Publishers can use it to run publications that are funded not through advertising, but through micropayments issued by readers’ browsers. It allows people to manage the privacy of their identity and data without having to rely on a central entity like Google, Facebook or Twitter. It can show individual voters that their votes were counted correctly and that no vote from the electorate as a whole was fraudulent or counted more than once. These are just some examples.

Gartner predicts that by 2030, devices or things that use blockchain to conduct transactions will account for 30% of the global customer base. One of the more popular future scenarios is that we might one day tell our self-driving cars that we are busy sending micropayments to any car willing to pass on the highway. Funds will be transferred via a combination of blockchain and IoT technologies.
supplier
Many platform vendors have emerged. Although there are over a dozen players in this space, in alphabetical order the most active groups (two are not companies) are:

1.Chain Company, together with Nasdaq, created the first private blockchain (albeit on a smaller scale) – Nasdaq Linq, for managing stocks of private companies. It also has partnerships with Visa, Citi and Capital One.
2. Ethereum is a public P2P network like Bitcoin, but focuses on smart contracts rather than payments, and has an enterprise initiative, the Enterprise Ethereum Alliance (EEA).
3.Hyperledger is an open source project run by the Linux Foundation and is closely linked to IBM, counting companies such as Airbus, American Express, Daimler and Intel as members.
4. R3 is a consortium of financial institutions whose distributed ledger product Corda does not constitute a blockchain, meaning transaction data is not published to the ledger of every participant in the network. Instead, transactions are only published on the ledgers of the parties involved.
Others include Axoni, Digital Asset Holdings, Monax, Ripple, SETL, Symbiont and T0 (T-zero, settling on day zero).

Companies helping enterprises implement blockchain solutions include Accenture, CapGemini, Chainsmiths, Deloitte, Ernst & Young, IBM Global Services, Infosys, KMPG, PwC, Polaris, Tata Consultancy Services, Wipro, and others. IBM and Microsoft are leaders in cloud blockchain services.

career choice
Many executives have noticed a talent shortage, and blockchain developer salaries are high as financial services companies are hiring in the field. William Mougayar, author of "Blockchain for Business: Promises, Practices, and Applications of Next-Generation Internet Technologies," estimates that the number of blockchain developers worldwide will reach 30,000 to 33,000 in 2014 5,000 people.

Roles needed in this area include blockchain developers, technical architects, and business architects, and expertise should include risk management, security, cryptography, business process management, product strategy, and analytics. Technical architects build a blockchain so that it fits business needs, ensures security, and does what it is intended to do. As technology further develops and smart contracts become a reality, workers will also need to integrate IoT and artificial intelligence with blockchain. A blockchain-focused role is also necessary to ensure solutions can be integrated with accounting.

“People underestimate the complexity of replacing a trading platform with a blockchain solution,” Piscini said. "It might work in the lab, but when you go from lab work to production, you face a lot of challenges."