Why Blockchain Is Worth The Hype

Blockchain, News, Opinion | July 26, 2019 By:

Once considered the future of everything, blockchain was listed as one of Cognizant’s top ‘Biggest Let Downs of 2018’. Excited for a new era of digitalisation, the word ‘trust’ is thrown around everywhere, as is the idea that blockchain is a suitable solution wherever trust and security are needed. Not surprisingly, there are better ways of building security, and blockchain is not necessarily a suitable solution anywhere that clarity is needed. 

Coordination and implementation is another concern. DLT is often cited as a solution to any inefficiencies based on multiple parties coordinating with standardised data. But its ability to fix this first requires a coordinated shift away from legacy systems and towards interoperable networks. In many ways, its biggest benefit is its main challenge. 

It is important to remember that the technology is still in a nascent state. Solutions to implementation, interoperability, and scalability are likely to be developed. “It’s like when people would ask me in 1995, why are all these websites so lame? Why can’t you do transactions on them? And why is the user interface bad?” says Blockchain Live Keynote speaker, Don Tapscott. “It takes a while for a new paradigm to kick in.

Tapscott is co-founder and executive chairman of the Blockchain Research Institute, and believes that blockchain will help us enter an entirely new era of digitalisation. He talks about the need for a new social contract, arguing that new technologies have a lot of positives, but they also have a dark side, which we are beginning to see: the early days of structural unemployment, our privacy captured by companies, the fragmentation of public discourse and indeed a widening gap between the very rich and the others. 

Oddly, technology itself is breaking down the social contract that we had creating in the industrial age” argues Tapscott. “When we went from the Agrarian age to the industrial age we developed a contract in society. We figured out that people needed to be literate. We created the public education system, and a law that you had to go to school…we knew that people would need to have some kind of social safety net, we found ways of funding that through taxation, income taxes and so on. There were a whole number of decisions that were collectively made by government and society. And today, I don’t think we’ve done any of that.”

The applications throughout financial services are well known, and being adopted by most major banks, with trade finance and cross border payments likely to be the most impacted. While this may enable further innovation in established banking, it is arguably more exciting for emerging markets. 

The ability to set up decentralised networks and avoid established legacy systems will democratise finance. According to Tapscott, “there are 2 billion people in the global economy that don’t have access to financial services. But with blockchain, we could deliver that to a lot of them because they may not have an identity or hardly any money or assets, but a lot of them have a super computer in their pockets, and blockchain can enable the creation of financial services without an institution.” 

Along the same lines as creating safe, accessible, digitalised finance, blockchain offers a way of creating fully digitalised contracts. Smart contracts have been recognised are certainly useful in developed markets, particularly within trade finance, or indeed any deal that includes if/then clauses. 

Once again, the greatest impact will be in areas with an increasing occurrence of corruption and exploitation. Blockchain cannot solve the problem of poor information,” Hilary Carter, Blockchain Live speaker and Managing Director of the BRI says. “It can’t inherently stop ‘garbage in’. But it can say very quickly that somewhere along the chain someone is lying or making something up.” 

In the case of Migrant Workers, this could be life changing. Whenever we rely on a paper-based system, where contracts and identification can literally be removed from migrant workers, they are vulnerable to modern slavery. Some workers leave their home country under one contract and arrive to see that the contract is has since been changed – and have no power to challenge it. A contract that tracks any changes in an immutable manner would help this problem. It does not solve the problem of corruption, but it empowers both migrant worker and investigative authorities to ensure that employers are remaining compliant with a system that is more trustworthy. 

The impact will go far beyond financial services. “When you look at other industries that are all being affected by horizontal factors and implementations, like supply chain – that affects most industries,” says Tapscott. “Rather than having trains, boats, and planes, and trucks, and escrow agents, and tax authorities, and transfer agents, and boarders…communicating by email, and fax, and bills of lading and so on, you can have a single shared network state where everyone can have a real time view of what is going on. A single version of the truth.

Energy is an industry in which blockchain has triggered a reimagination of the status quo: “People want to see how to break open innovation in a space that is traditionally conservative” says Julian Grey, Technology Director at BP and Blockchain Live speaker. And blockchain is enabling just that: by opening up peer to peer trading systems, allowing greater transparency, and automatic payments, we can generate fairer prices, greater efficiency, and encourage a more open marketplace – all the requirements need to enable green energy to thrive. 

Everyone in the industry wants to make more efficient use of existing energy assets,” says Electron CEO Joanna Hubbard, “but no one person has a complete view of what assets are in use.” What’s needed, she continues, is a data layer which contains verifiable information from all relevant parties about where batteries, meters, solar panels and electric cars are – and more importantly who has permissions to deliver or take energy from each asset and bill for it. “The best way to co-ordinate that kind of data is not a big IT project,” Hubbard says. “It’s a way of tracking the references to where assets are, and who has what permissions to check meters and bill and so on.” 

This kind of register is exactly what blockchain excels at, thanks to its distributed nature and ability to manage many parties without central governance. Once you have that data, Hubbard continues, then it becomes possible to build marketplaces for many types of products on top of it. Not just marketplaces for buying and selling electricity, but also insurance products based on supply, for example. 

When considering how blockchain will change our lives, it is worth remembering that blockchain will always be an underlying tech: “The basic rule is that no-one gets to see the blockchain, that’s just the back end,” says Gray. But it will change the playing field – both in terms of the competition between some established industries and challenger companies, and indeed between dominant and emerging markets. The challenge is to balance the will to truly digitalise with the realities of overhauling legacy systems: there may be a more efficient way of doing business, but is this new technology right at this time for this particular problem? 

Understanding the new tools that emerging technologies offer us is one thing, carefully considering the specific problem and appropriate solution is another. Blockchain is certainly a useful and innovative tool, but we must consider the problem at hand while thinking creatively about the possibilities.