Of the participants attending the recent IEDP/ESMT blockchain seminar, 61% believed this disruptive technology would either be a “game changer” or likely to have further dissemination in their industries. In his survey1 of executives in the German energy industry Christoph Burger, the senior associate dean of executive education at ESMT Berlin, found 81% believed the same.
Although blockchain – the support technology behind Bitcoin – is still only in its developmental stage, its potential as a powerful disruptor is clear. Unfortunately, as with much in the era of digital transformation, there is a huge knowledge gap between the pioneers who understand the inner workings of the technology and those millions of businesses and individuals who will be disrupted by it (but very likely benefit from it eventually).
Blockchain is likely to reach maturity between 2018 and 2020, so now is the time to close the knowledge gap. Before getting to grips with what blockchain is and how it works, it is useful to consider how it might be used and how it could benefit your business. Christoph Burger points to two key ways blockchain adds value:
Processes. Blockchain can remove the necessity for third party intermediaries, especially banks. It can enable individuals and businesses to control all of their own information and transactions – paying, billing, metering, accounting – thus eliminating the time and cost of exchanging assets. The value added here comes from both the potential to greatly reduce processing overheads and transaction fees as well as from time savings (e.g., while interbank transactions can take days, blockchain transactions can be processed around the clock in minutes).
Networks. Blockchain’s approach to security enables individuals and organizations to share data easily across networks. Using digital signatures that allow access only when authorized by multiple people, the technology regulates the availability of data and maintains its privacy. This can be a boon to trading platforms and peer-to-peer trading, or for communities where secure exchange of information is critical (e.g., healthcare professionals). Because data is transmitted instantly across the network, organizational silos cannot cause the exchange of information to be delayed.
Having outlined two reasons why you need to know about blockchain, what exactly is it? In brief, blockchain is a distributed, digital transaction technology that allows for securely storing data and executing “smart contracts” in peer-to-peer networks.
The term “smart contract” describes a computer code that can facilitate the exchange of money, content, property, shares, or anything of value. On blockchain, a smart contract can automatically execute when specific conditions are met and without any possibility of third party interference.
Its first major application has been as a distribution channel for the cryptocurrency bitcoin. The Bitcoin blockchain is an electronic cash system that enables online bitcoin payments and tracks ownership of this secure digital currency. As a user, your first step is to set up a digital Bitcoin wallet. (Notably, many major banks will now exchange traditional currency for bitcoins).
Blockchain technology has many other potential applications besides facilitating digital currencies. Until recently, building blockchain applications required a deep knowledge of complex coding and cryptography. However, a new public blockchain network called Ethereum has greatly simplified the program coding for decentralized applications, allowing the building of online platforms for anything from financial trading to electronic voting.
Ethereum now offers the potential for a rapid scaling up of blockchain applications. However, there will be many challenges ahead before this technology gets buy-in and is fully adopted. There are cybersecurity concerns that need to be addressed before businesses, let alone the general public, will be ready entrust their personal data to blockchain solutions. No doubt, many legal and government regulation issues also will need to be resolved before the technology is universally accepted. But its time is coming and businesses need to be prepare
1 Blockchain in the Energy Transition: A survey among decision-makers in the German energy industry, 2016, Christoph Burger, Andreas Kuhlmann, Philipp Richard, Jens Weinmann
Join the ESMT Berlin program ‘Blockchain - a Transaction Technology for Smart Contracts’ - 13-14 Dec 2018
For further information on Blockchain view this recording of the recent IEDP/ESMT Berlin webinar: