I recently attended the Consensus conference in New York, and although I was disappointed in the “technical” level of most of the presentations (more focussed on business applications than blockchain tech) I came away with a strong feeling of “collaboration” and growing maturity of the industry. (Minus all the ICO frenzy and crypto-speculation of course.)
For example, I learned a little bit about the state of banking in the Caribbean, and a couple of ways that blockchain-based solutions are providing real-world value today.
Due to the amount of money-laundering and lax regulation, banking in the Caribbean is under heavy scrutiny. In fact, even when trading between the islands, payments are denominated in US dollars and have to flow through New York or Toronto. That means that inter-island trading gets hit with currency exchange twice, and settlement takes longer. In addition, the banks are always at risk of being “de-risked”, which means that Canadian and US banks can cut them off if they feel the risk is not commensurate with the reward.
Use of a crypto-currency is an obvious remedy for the former problem – Caribbean islands can trade with each other directly and settle with the use of Bitcoin or any other crypto-currency of choice. However, crypto-currencies are currently very volatile and this is not amenable to trading. Recently a solution has been developed in partnership between one bank and a vendor, whereby they use a blockchain-based secure ledger to authenticate and record their KYC (“Know Your Customer”) compliance for all their customers. This allows them to share this information in a secure and non-repudiatable way, satisfy compliance obligations and manage and reduce the “de-risk” risk.
These are two examples where blockchain can have an immediate impact, and in a way that improves the democratization of large-scale de-centralized computing.
Blockchain technology is exploding, with hundreds if not thousands of coins and chains emerging. However, a large portion of the industry is settling around either Ethereum or the Enterprise Ethereum Alliance as a development platform (according to my non-scientific informal survey), and there are many large organizations that are exploring solutions using Hyperledger Fabric. There are countless other platforms available, most of which have specific differentiators, and many of which are forked originally from Ethereum or Bitcoin.
Are you considering blockchain for your business?
Collaboration is the key. A common theme from the Consensus 2017 presenters was: focus on your key use cases, and make sure you are developing of value to the business. The benefits of a blockchain-based solution are pretty specific (sharing of a secure, de-centralized ledger) so it’s important for the technical stakeholders and the business work together. It’s also key, since a blockchain solution is all about “sharing”, that you work with partners from the beginning, and establish a “minimum viable ecosystem” of stakeholders when developing the initial solution. Establishing the ecosystem of participants early will validate the business case as well as ensure that the blockchain is used for what it does best, which is consensus-based sharing of data.
A few things to consider:
- What is the data being shared and who are the participants? What are the other possible solutions, and what additional benefits does a blockchain-based solution promise? If the solution is not a good fit, then the blockchain might wind up acting as a poorly performing database.
- Is the solution “open” or “closed”? e. is the solution open for anyone to join, or will it be restricted to a closed set of participants? What is the process to “on board” new participants in the network and what roles can they play? (BitCoin and Ethereum are both open, in that anyone can generate a set of keys for themselves and join the network, whereas Hyperledger Fabric depends on a CA to issue certificates that nodes must present when transacting. The former is self-identifying but the latter requires a strong identity management infrastructure.)
- What are the performance requirements? Is the solution required to support high transaction volumes and fast settlement cycles? Or is the solution targeted at lower volumes and slower, perhaps unpredictable, settlement times? (Bitcoin generates a block every 10 minutes “on average”, dependant on the random nature of its proof-of-work. In contrast, Ripple has a very fast, dependable settlement cycle. Bitcoin’s scaling issues are well known and should be a study for anyone implementing blockchain-based solutions.)
- What are the various security aspects of the solution? Can the solution deal with a node that becomes compromised and “goes bad”? Will the solution stay secure if it grows very big (or conversely stays very small)? (Bitcoin’s consensus algorithms ensures that “bad” nodes are filtered out, and the proof-of-work becomes more secure as the network scales (and a “51% attack becomes less feasible).)
- What are the incentive mechanisms in the solution? Is there more incentive to “play by the rules” than there is to “go rogue”? (With the escalating values of Bitcoin and other crypto-currencies, there is a strong incentive to be a “good” miner and earn tokens. For non-currency based solutions, the incentives are in line with traditional enterprise systems – support the business (“good”) or disrupt/attack the business (“bad”) and all traditional security models apply.)
If you’re building a blockchain solution (or planning to build one) do an analysis of your solution to determine the key requirements and how they map to a blockchain implementation, and review the differentiating characteristics of the available technology. If there’s a clear fit, then you’re in the clear, however if not then stick with one of the major players. Also check your local market to see what your peers are using. In Canada there are major initiatives using Hyperledger Fabric, although the majority of the startups are focussing on Ethereum.
There is a lot happening in this space, and academic researchers are taking more notice (academic research and industry is another important area of collaboration), so expect the security and architecture models to become more formalized in the near future.
And of course expect more tokens, and more and even more crazy ICO’s.
If you have any questions about blockchain, or are interested in how blockchain can work for you, please feel free to drop us line.