Blockchain technology is hard to understand and even harder to predict. But given the promise of blockchain and its golden child, Bitcoin, you’d be wise to start making sense of it now. For the uninitiated, this recent article from the MIT Sloan Newsroom sheds helpful light on these intertwined terms. We’ve also blogged about crypotechnology previously, in posts related to Bitcoin’s role in digital strategy and its meteoric rise in value in 2016.
The MIT Media Lab's Digital Currency Initiative describes blockchain as a decentralized public ledger of debits and credits that no one person or company owns or controls; its users control it directly. This system lets people transfer money without a bank, for example, or write simple, enforceable contracts without a lawyer.
“Blockchain technology is particularly useful when you combine a distributed ledger together with a cryptotoken (as in Bitcoin),” explains MIT Sloan Assistant Professor Christian Catalini. “Suddenly you can bootstrap an entire network that can achieve internet-level consensus about the state and authenticity of a block’s contents in a decentralized way … This is one step away from a distributed marketplace, and will enable new types of digital platforms.”
Blockchain and business
Blockchain and cryptocurrencies have enormous potential impact on global enterprises.
When Bitcoin was introduced in 2008, the Internet saw the effects of a drastic reduction in the cost of verification and the cost of networking. “For the first time in history, value could be reliably transferred between two distant, untrusting parties without the need of a costly intermediary,” writes Catalini in a research paper on the economics of blockchain.
Using technology such as the blockchain, companies can bring a new level of transparency tto their supply chains. According to a recent article in Raconteur, BHP Billiton, the mining company, announced plans to use ethereum blockchain to improve its supply chain processes. "Recording and tracking of geological samples, which can cost millions to produce and are used to make decisions across the world, will be carried out via a web app instead of an Excel spreadsheet. The move allowed BHP to share data with third parties—such high-tech solutions bode well for the future of supplier relationships.
Blockchain technology could also mean greater privacy and security for businesses and their customers. Blockchain has the capacity to make transactions more secure by increasing transparency about sellers, buyers, and supply chains, increasing the speed of transactions, and by providing built-in recourse for unfulfilled contracts. In his paper, Catalini writes, “While this is still an active area of research, new protocols are being developed to obfuscate transaction data, offer full anonymity to users, and implement different degrees of access to transaction information.” Distributed ledgers, secure identity mechanisms, and end-to-end encryption have the potential to revolutionize applications ranging from smart contracts to supply chain management, automation, and artificial intelligence.
The topic of security and trusted data was front and center at the recent MIT Sloan CIO Symposium, where MIT Professor Alex “Sandy” Pentland moderated the panel discussion, “Trusted Data: The Role of Blockchain, Secure Identity, and Encryption.”
“Things that we used to be able to just get by with, like passwords, are becoming increasingly a problem, and digital identity is a burning question for many people because we see double digit fraud,” said Pentland. “Data sharing is a huge issue … Similarly, cyber security—we ain’t seen nothing yet.” You can watch a recording of this panel discussion here.
Of course, blockchain technology is not yet fully mature. As panelist Hu Liang, Senior Managing Director and head of the Emerging Technologies Center at State Street, pointed out, “You cannot build real-world applications on a concept.” Nonetheless, the potential for those applications is nearly unlimited, and Catalini encourages business leaders to be excited by blockchain’s capacity to “upend how business is conducted.” In fact, when asked which industries could be disrupted by blockchain, Catalini responds, “All of them.” The Crowd Companies infographic below shows blockchain as poised to disrupt a range of industries, including legal, supply chain, government, energy, food, retail, healthcare, insurance, travel and hospitality, and even education.
If you are not thinking about how you can leverage blockchain, or about how blockchain might change your industry, maybe now is the time.