"Blockchain technology" – it's been buzzing all over the financial news recently if you haven't noticed. The term still hasn't quite exploded onto the public square yet like Bitcoin, the notorious first implementation of the technology, but a quick Google Trend search since the first published Bitcoin whitepaper in 2008 clearly shows a recent outburst of interest in "blockchain" since the end of 2015.
So what is blockchain technology anyway?
A blockchain is type of data structure that can be purposed to create a digital ledger of transactions that can be shared among a distributed network of computers. By using cryptography, each account on the network may access and manipulate the ledger securely, without the need for any central authority or middleman.
Why is blockchain important to me and my business?
As businesses continue to evolve into true digital, industries are awash in a deluge of big data; and two common challenges across SMBs continue to mount:
- As big data's volume increases, the ability to process and manipulate that data quickly and efficiently becomes compromised.
- The sheer size and breadth of data in all of its environments, lifecycles, and formats increases the challenge of keeping business data secure.
Blockchain technology addresses these challenges directly in two ways:
First, with blockchain technology, there is increased transparency, accurate tracking, and a permanent, secure leger. Once a block of data is recorded on the blockchain ledger, it’s extremely difficult to change or remove. When someone wants to add to it, participants in the network — all of which have copies of the existing blockchain — run algorithms to evaluate and verify the proposed transaction.
Second, because blockchain technology obviates the need for a central authority, middleman, or clearing house, transactions can be run and approved automatically in seconds or minutes. This reduces costs and boosts efficiency.
Blockchain will make the financial services industry’s infrastructure much less expensive. The Block Chain Protocol allows the instant transfer of value, irrespective of size. Faster, cheaper settlements could trim billions of dollars from transaction costs while improving transparency.
But blockchain technology's application isn't limited to the financial industry – its uses are endless:
Automotive: Consumers can use the blockchain to manage fractional ownership in autonomous cars.
Voting: Using a blockchain code, constituents can cast votes via smartphone, tablet or computer, resulting in immediately verifiable results.
Healthcare: Patients' encrypted health information can be shared with multiple providers without the risk of privacy breaches.
Meanwhile we are beginning to see a number of developers building APIs on the Block Chain Protocol, across a variety of applications:
API’s to allocate digital resources such as energy, bandwidth, storage, and computation to the connected devices and services that need them. Eg; FileCoin
API’s for Oculus Rift: With access to the virtual world now becoming TRON-esque, developers are looking at creating API’s that can be used in the virtual space to make transactions, blurring the lines between virtual and real economies.
Micropayment API’s tailored to the type of transaction being undertaken. i.e: Tipping a blog versus Tipping a car share driver. Very useful in a shared economy where consumers increasingly become prosumers.
Blockchain: The time is now for progressive businesses.
As I mentioned earlier, Blockchain is still on the cusp of public consciousness. In a recent survey by PWC, 56% of survey respondents recognise the importance of blockchain technology, but 57% say they are unsure about or unlikely to respond to this trend. I wrote in an earlier blog post that progressive SMBs are making huge gains, and the race is already on. According to PwC’s 19th Annual Global CEO Survey, 81% of banking CEOs are concerned about the speed of technological change, more than any other industry sector.
The Wall Street Journal recently reported that in the last year, more than 40 financial institutions said they were working with blockchain. Other sources detail that in 2015, 13 blockchain companies obtained over $365 million in funding, and by the beginning of this year, blockchain companies had raised well over a billion dollars to fund their development and operations.
SMBs should realize that blockchain technology is not just for the globals and multinationals. It is applicable to any sized business and can be scaled accordingly. The technology has reached a stage that some businesses are even experimenting with establishing smaller, "private blockchains" within their own offices, or are exploring how they can deploy their own blockchain on smaller “permissioned” networks.
The time is now for research and analysis – even professional consultation on the full extent of its application in your business. Certainly it's a complex technology, with several yet-to-be determined regulatory implications, and as always, there are the usual difficulties with implementation, and sorting through the swath of competing vendors and platforms. But with a clear strategy of where, why, and how to apply the technology, you will be on the right road to incorporating blockchain into the framework of your business.