Blockchain technology can be used by organisations to power applications or functions carried out by databases – with a few added benefits and some disadvantages. Before getting into a blockchain however, there are a few things to know and consider.
There are two types of blockchains – the public and private blockchain, said David Pinski, chief strategist financial services – Centre for Social Innovation at Hitachi. In the public blockchain, cryptocurrencies fuel the network, companies pay coins to store business data on the blockchain or for other services and miners and nodes earn coins for processing and storing data. The coins can also be used in commerce, explained Pinski.
Private blockchains, on the other hand, are not cryptocurrency dependent and may run on the company’s hardware, use a subscription model or be pay per transaction. “There are also a number of platform options available for building a private blockchain – HyperLedger and Ethereum being two of them,” added Pinski.
Ethereum has been around for a while and has a number of working examples. HyperLedger is much newer. HyperLedger is an open source collaborative effort created to advance cross industry blockchain technologies. It’s a global organisation hosted by the Linux Foundation. Hitachi has been researching blockchain-like technology since 2000 and is a premier member of the HyperLedger group and a leading source code contributor.
Pinski used R3 and Ripple blockchain networks as examples of how private blockchain technology is replacing legacy technology. Both Ripple and R3 have developed systems, based on blockchain technology, that rewires how money is moved between banks and across borders. These are essentially private networks funded by banks. “Banks transact against a distributed ledger rather than back and forth to a central authority and bypasses clearing houses,” added Pinski.
Pinski then went onto explain why blockchain has captured the attention of so many people. It’s a distributed ledger which means that it has storage reliability and will continue if anything happens to the organisation, it is immutable meaning that records can’t be deleted and are almost impossible to be altered, there is consensus as all parties agree to the transaction and business logic is integrated (such as stored procedures). “I say almost impossible to be altered as if you alter one hash transaction it will get overwritten if it does not match the data in other blocks,” explained Pinski.
As a result blockchain is changing the way many traditional businesses are being run or services are offered. Pinski used Filecoin and the Brooklyn Microgrid to highlight how the storage and energy markets are changing because of bitcoin. Filecoin provides decentralised data storage as a service. It’s blockchain network stores customer’s data. Filecoin generated coins that represent future data storage payments. It manages the network but does not own the resources.
Brooklyn Microgrid leverages blockchain and IoT to buy and sell electrons on an open market. This basically means that if you have a solar or wind generator at your house and produce extra electricity to your needs, the energy can be sold to your neighbour. There is no central authority. “Blockchain enabled meters control energy flow and enables billing and payments,” added Pinski. Again the Brooklyn Microgrid does not own electricity generators and only facilitates the distribution of energy.
If you have read this far, the next question to ask is which blockchain to use. There are a number to choose from Ethereum, HyperLedger, Sawtooth, Corda, EEA, Coco and Burrow to name a few. Selection criteria for a blockchain platform should include private vs public cloud considerations, speed, maturity and capabilities.
“Organisations should be conscious of scope. How many companies are involved, is it only internal use or does it include enterprise partners,” said Pinski adding that it would be wiser to keep the numbers involved to a minimum. Other considerations include the complexity of the business processes as this will determine how many blockchain processes there are, if it is replacing an existing process as this could mean there are organisational change management processes to implement, how many nodes there will be, how many will operate them and processing time requirements. “Traditional databases have much faster processing speeds,” pointed out Pinski.
Organisations should also consider their return on investment by taking into account whether there will be a reduction of the number of systems supporting business process and if there is improved liquidity through faster settlements. Other considerations are whether it facilitates improved compliance and reduces operational risks.
Pinski also talked about the hurdles that face organisations looking to implement blockchain technology. The maturity of the existing blockchain platforms, lack of experienced developers and architects, operational experience in production, understanding the scalability metrics which he feels is not well understood and the lack of integration tools are some of the less helpful aspects of moving to blockchain.
Pinski was a presenter at the Hitachi Next 2017 conference that took place between 18-20 September 2017.
There are no comments
Add yours