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Blockchain: One string to rule them all?
THE potential of blockchain's impact could be far reaching, especially since Gartner estimates that blockchains will create at least one business worth US$10 billion by 2022. At the same time, some pundits claim the ledger-based model which powers cryptocurrencies like Bitcoin and Ethereum could literally end poverty.
That's a lot of potential for what is essentially a new method of record-keeping. In Singapore, the Monetary Authority of Singapore (MAS) has announced that it was partnering R3 and a consortium of the world's largest financial institutions to launch Project Ubin, a digital cash-on-ledger project.
In addition, Singapore Airlines is also rolling out later this year a system where Krisflyer frequent flyer miles can be used for purchases at retail outlets, through a digital wallet app that employs blockchain-based technology.
WHY SO PRECIOUS?
Blockchains are essentially lists of records, but more importantly, blockchains can offer us something that's sorely missing in today's digital world: trust. Each record, or "block", is linked to others by a cryptographic algorithm, forming a "chain" of connected records. By changing any individual block after it joins the chain, you'll end up altering all of them. Therefore, they are nearly incorruptible and are capable of transforming not just financial transactions, but the fundamentals of how humans digitally interact with organisations and one another.
At present, our digital identities are by and large fragmented. To determine whether an individual or business can be trusted, we reconcile numerous records from different sources. Think of the various background checks, credit scores, and other hoops you jump through to prove you can be trusted with a bank loan, for example.
Using blockchains, these different records can demonstrate how they relate to one another without requiring those high-intensity checks and balances. In other words, the blockchain becomes a marker that says: "this data can be trusted".
An example is a digital identity for every Singapore citizen which the Government Technology Agency (GovTech) is developing. It serves as a form of software-based security token. Besides better protecting online identities, it can also allow users to ditch multiple e-banking tokens with different banks, and do away with the hassle of remembering different usernames and passwords.
Eliminating traditional data verification processes could transform almost every aspect of business. Organisations that keep huge volumes of sensitive records no longer need to worry about misplacing or accidentally modifying their information.
Blockchains can not only detect if that happens, but demonstrate to regulators the integrity of such records. Industries where transactions touch numerous other entities, like the airline industry, no longer need to go through rigorous and time-consuming data reconciliation; the cryptographic elements of blockchains essentially verify themselves. Any business dealing in personally identifying information, from health care to e-commerce, can use blockchain to prove beyond reasonable doubt to customers that their data is indeed secure.
Blockchains provide an elegant solution to the problem of trust: if you verify one block of data in the chain, you verify all of them. And like the One Ring of Tolkien's saga, a blockchain can't be duplicated or broken. Perhaps blockchains will someday rule over all data - but adopting them, like their Middle Earth equivalent, also comes at a price.
IN ADOPTION, BIND THEM
It takes many blocks to build a chain - and each of them can cause an organisation to stumble. If Bitcoin has taught us anything, it's that blockchains are only as good as the underlying performance of the systems that encrypt, track, and reconcile them.
When these systems crash, either because the volume or complexity of chains involved grows too large, the business value bound up in these blockchains also disappears. And if their security gets compromised - as happened with Mount Gox, once the biggest Bitcoin exchange in the world - so too do the basic operations of any businesses relying on them.
How can we avoid these Mount Doom (or Gox) scenarios? Organisations will have to treat blockchain adoption like any other IT project. The infrastructure beneath it will need to be scalable, speedy, and secure - even more so because of the sheer amount of data and value at stake.
I expect that most blockchains will soon operate through an "as-a-service" model, mainly through large cloud providers. While various organisations are currently pursuing private ledgers, these will inevitably struggle to meet the performance, durability, and cost-efficiency that cloud-hosted blockchains - like most other platforms in the cloud - will provide. Private blockchains will also prove harder to adapt to different applications and data, meaning businesses that invest in their development may meet an innovation dead-end faster than those who opt for publicly hosted chains.
Ultimately, the success of any blockchain platform will hinge on its ability to deliver high throughput, low latency, and a frictionless user experience - just like any project since the dawn of IT. With the sheer amount of hope and value placed on blockchains, IT will need to maintain even greater visibility of their systems than the All-Seeing Eye. Fortunately, the same basic rules for IT success still apply: monitor your infrastructure performance, optimise your various networking and storage systems, and always assume your platform is less secure than you want it to be. Even the seemingly indestructible One Ring had a fatal vulnerability to exploit.
- The writer is executive vice-president of engineering and global chief technology officer at SolarWinds