Microsoft, Amazon, and IBM are racing to bring Blockchain-as-a-Service (BaaS) – hailed as a key competitive differentiator – to the Cloud environment. Here are some insights into how it works.
A blockchain is a digital ledger in which transactions made in Bitcoin or another cryptocurrency are recorded chronologically and publicly. The blockchain revolution began with bitcoin, which used distributed ledger technology to foster trust in a currency and transaction mechanism not backed by any government or traditional institution. Blockchain technology allows digital information to be distributed but not copied, laying the foundation for a new type of internet.
Originally devised for Bitcoin, the tech community is now finding other potential uses for the technology. To date, the total value of the currency is close to $9 billion, an indication of how blockchains can make other types of digital value. According to Gartner, the blockchain revolution promises to touch every industry: “Visionary entrepreneurs and CIOs building and expanding digital businesses are keeping the flow of transformation going. Their goal is to reinvent the very nature of commercial activity by removing intermediaries and enabling more-fluid business processes to be conducted in diverse ecosystems.” With BaaS from giants like Microsoft, Amazon, and IBM, companies can create private-, public- and consortium-based blockchain environments using industry-leading frameworks very quickly, and distribute their blockchain products equally fast.
“Blockchain is the technology behind Bitcoin, a type of encrypted digital currency. But unlike Bitcoin, Blockchain is not a strictly financial tool. Although it is designed as a general ledger, in its simplest sense, it’s a way to move and store blocks of cryptographically validated data that users can’t corrupt. In other words, it creates a transparent paper trail that anyone can access, but no one can alter. That makes Blockchain far more than a financial tool—it makes it the latest way of sharing, validating, or otherwise endorsing almost any kind of value point, be it “money, titles, deeds, music, art, scientific discoveries, intellectual property, and even votes.” – Forbes
The good news is you don’t need to know how blockchain works to use it, but a basic overview of this new technology will demonstrate why it’s revolutionary and why, as more companies discover its power and what it can do for businesses, it will be in even greater demand.
According to Don and Alex Tapscott, authors of ‘Blockchain Revolution’ (2016), “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Online Blockchain hub BlockGeeks, describes it as follows: “The blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens in ten-minute intervals. Each group of these transactions is referred to as a ‘block’.”
Two important properties result from this:
- Transparency — Data is embedded within the network as a whole, thus by definition it is completely public.
- Incorruptibility — It prevents history from being re-written by allowing information to be extended, but never appended, which ensures complete integrity of all involved. Altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network.
DID YOU KNOW?
A new IBM study found that one-third of C-level executives are using or considering adopting blockchain technology in their organisations. The study found that executives hope to enable new transaction applications that could help establish trust, accountability and transparency among their organisations and partners. 80% of the 3 000 executives surveyed indicated that they were using or considering the technology either to develop new business models or in response to a financial shift in the industry. Furthermore, 71% of business leaders who are actively using blockchain believe that industry consortia play a key role in advancing the technology, suggesting widespread support for industry standards.
How can blockchain be used?
Writing for Forbes, Daniel Newman explains some of the uses of blockchain and how it can fundamentally change businesses.
- It can eliminate the middle man
Blockchain validates transactions, as well as the value of the items being transacted, thereby reducing the middle man. “With Blockchain,” says Newman, “artists can go straight to the people, rather than through music labels, to protect their own music and royalties. Move over, Spotify. Artists may once again be able to make money for their music.”
- It can manage “smart contracts”
Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract. They are self-executing contractual states, stored on the blockchain, which nobody controls and therefore everyone can trust. “You think digital signatures are the wave of the future?” asks Newman. “Think again. With Blockchain, smart contracts will not just facilitate the gathering of signatures, but the enforcement of a contract’s performance.”
- It can bring the unbanked into the global economy
Because a distributed ledger or smart contract uses the blockchain as payment protection, a remittance system or even a bank account, it paves the way for an alternative financial system and more financial inclusion for billions of ‘unbanked’ people across the globe. “For those who don’t have a bank – or don’t believe in them – blockchain can help manage and certify their own financial value without the need for working with a banking institution,” says Newman. “It can keep track of their ‘money’ digitally, and allow them to process payment by phone or app.
- It can validate almost anything
The blockchain means it’s possible to receive a digital identity nationally and internationally. In one example, Bitnation, a decentralised organisation incorporated on the Bitcoin blockchain, has set up a system which uses blockchain to help solve the refugee identity crisis in Europe, helping Syrians get emergency identity documents in order to cryptographically prove individual identity and family relationships. By donating €12 anyone can provide one refugee with a Bitnation Bitcoin Visa Debit Card.
“From voter authentication to government processes, health information, and proof of intellectual property, Blockchain can serve as a secure process to validate almost anything of value, and to keep it safe,” Newman explains. “Indeed, because of the Blockchain structure, it’s far safer than standard Cloud environments.”
- It can provide a secure foundation for the IoT
An ecosystem of ever-increasing complexity, the Internet of Things (IoT) is the next wave of innovation and the next level of automation for every object we use. Experts believe that blockchain technology will address the security, privacy and reliability concerns around the IoT as it can be used to track billions of connected devices, enable the processing of transactions, and coordination between devices.
“Many have concerns that the Cloud—and even fog—will not be secure, fast, or large enough to handle the influx of information created by the Internet of Things (IoT),” says Newman. “Blockchain picks up where Cloud technology leaves off by creating highly secure venues for information sharing – far better than Cloud alone.”
The time is right to get educated and understand the blockchain and its many aspects. Yes, it’s a currency, ledger and transaction platform, but it is also much more. Beyond just a process improvement technology, it’s also an enabler for new service models and technologies. The challenge is to use it to go after new customers and do things that were not done before.
- Crowdfunding initiatives like Kickstarter and GoFundMe are extremely popular in the peer-to-peer economy. The popularity of these sites suggests people want to have a direct say in product development. Use blockchains take this interest to the next level, potentially creating crowd-sourced venture capital funds.
- Consumers increasingly want to know that the ethical claims companies make about their products are real. Distributed ledgers provide an easy way to certify that the backstories of the things we buy are genuine. Transparency comes with blockchain-based timestamping of a date and location that corresponds to a product number.
- Smart contracts can protect copyright and automate the sale of creative works online, eliminating the risk of file copying and redistribution.
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