04 Jun, 2018 Blockchain: What’s in for me?
I’m curious about Blockchain, because there are so many reasons why we as a society should get a good understanding how it works and what the principles behind are. After the financial crisis in 2008 a White Paper written by a Pseudonym named Satoshi Nakamoto about Crypto Currency “Bitcoin” got attraction. He announced the principles of Bitcoin based on a decentralized framework called Blockchain. Since then another 1’000+ Crypto Currencies were born.
Important to understand
Bitcoin and blockchain are not the same. Blockchain provides the means to record and store bitcoin transactions, but blockchain has many uses beyond bitcoin. Bitcoin is only the first use case for Blockchain. With traditional methods for recording transactions and tracking assets, participants on a network keep their own ledgers and other records. This traditional method can be expensive, partially because it involves intermediaries authorities that charge fees for their services. It’s clearly inefficient due to delays in executing agreements and the duplication of effort required to maintain numerous ledgers. It’s also vulnerable because if a central system (e.g. a bank) is compromised, due to fraud, cyberattack, or a simple mistake, the entire business network is affected.
The way forward!
Think of Blockchain as an operating system. Blockchain provides the means for recording Bitcoin transactions — the shared ledger — but this shared ledger can be used to record any transaction and track the movement of any asset whether tangible, intangible, or digital. For example, Blockchain enables securities to be settled in minutes instead of days. It can also be used to help companies manage the flow of goods and related payments or enable manufacturers to share production logs with original equipment manufacturers (OEMs) and regulators to reduce product recalls.
The characteristics of a Blockchain are: For a transaction to be valid, all participants must agree on its validity. Participants know where the asset came from and how its ownership has changed over time. No participant can fake with a transaction after it’s been recorded to the ledger. If a transaction is in error, a new transaction must be used to reverse the error, and both transactions are then visible. A single, shared ledger provides one place to go to determine the ownership of an asset or the completion of a transaction. (Source: IBM Blockchain Whitepaper)
The Benefits of the Blockchain are simple but quite important to understand, for private and business reasons as well: Blockchain’s security features protect against tampering, fraud, and cybercrime. If a network is permissioned, it enables the creation of a members-only network with proof that members are who they say they are and that goods or assets traded are exactly as represented. Not all blockchains are built for business. Some are permissioned while others aren’t. A permissioned network is critical for a blockchain for business, especially within a regulated industry. Using enhanced privacy using IDs and permissions, users can specify which transaction details they want other participants to be permitted to view. Permissions can be expanded for special users, such as auditors, who may need access to more transaction detail. Improved auditability means having a shared ledger that serves as a single source of truth improves the ability to monitor and audit transactions. Operational efficiency at glance. Pure digitization of assets streamlines transfer of ownership, so transactions can be conducted at a speed more in line with the pace of doing business. (Source: IBM Blockchain Whitepaper)
The French Company Carrefour (Retailer) recently informed how they use Blockchain for free-range Carrefour Quality Line Auvergne chickens. One million of which are sold every year. It will be rolled out to eight more animal and vegetable product lines, such as eggs, cheese, milk, oranges, tomatoes, salmon and ground beef steak. An innovative system designed guarantee consumers complete product traceability. One million of which are sold every year (Source: Carrefour).
In Switzerland we have a lot of Startups who develop and build Blockchain solutions especially within the FinTech Market. That’s why we call the Region of the Canton of Zug, where most of these companies are based, the “Crypto Valley Zug”. The market potential for these FinTechs is definitely very high but it is also very risky because of the volatility of Crypto Currencies per se. The Future will tell us more about their success. The law and regulations are not able to follow the pace of this ideas and principle shift. That’s not new and often the case when something new comes up and disrupt existing markets with a lot of legacy.
Chief Digital Officer, itnetX AG