The Age of Blockchain
You’re likely familiar with the name, you’ve witnessed the hype, and you’ve probably even done a few Google searches about it on your own. Blockchain. The technology underpinning cryptocurrencies is suddenly being hailed as the international transformer of business. Buzz surrounding blockchain has been deafening over the last couple years, encompassed by plenty of interest and equally as much confusion. Mckinsey&Company reported that in a survey of 800 executives, 58% of the group believed that up to 10% of the global GDP will eventually be stored using blockchain technology. That’s roughly $8 trillion dollars flowing through the distributed network. Pundits have ferociously discussed blockchain’s ability to disrupt the global digital ecosystem, fundamentally transforming the way businesses operate. However, the reality is, there have really only been a handful of defining technological innovations over the last few centuries. Whether or not blockchain proves to be one of them remains to be seen. Given what we’ve witnessed from the emerging technology so far, blockchain certainly is a way of powering and making businesses smarter with its ability to simultaneously put multi-party data on a shared digital ledger.
Blockchain’s core operation
Understanding how blockchain works allows us to envision how the technology can transfer to other real world applications. At its core, blockchain is actually not as complicated of an operation as many experts have made it seem. When referencing blockchain, there are a few key terms to become familiar with, notably: “hash”, “miner”, and “node”. Serving on a distributed network of computers, blockchain is essentially an immutable digital ledger. A blockchain can be permissioned, allowing access to members of a participatory party to view every update and transaction that takes place on the blockchain in real time. Anytime a new transaction occurs, it warrants the addition of a new block onto the chain of existing blocks. A ‘miner’, one of the computers operators who processes, creates, and helps legitimize the transaction, creates the new block. Each new block is given a unique identity consisting of a string of numbers and letters, known as a ‘hash’. The hash on each block attached to the blockchain is unique to that individual block, but also contains the hash of the previous block. Thus, all the blocks on the blockchain are actually connected. The new block is placed in the existing network once it is verified by a one of the computers in that network, also referred to as a ‘node’.
Blockchain often garners praise from cyber security and developer communities for its immutability. If a hacker were to attempt to access and change information on a blockchain, even if they were to alter the data of a single block, every other block in the chain would then be invalidated because the hash from the subsequent blocks wouldn’t contain the same functions as those before it. Conversely, if a hacker were able to somehow alter every single block in a blockchain, it would be nearly impossible to also hack and do the same to every other computer within the distributed network. The security and transparency benefits of blockchain make it easy to see why it’s considered an upgrade over most centralized, private databases that operate in today’s business landscape. While financial services is often the industry most commonly associated as the perfect pairing with blockchain, there are a host of other areas we can examine where the technology can improve current practices in as well. Given the versatility of blockchain, the distributed ledger technology is arguably an application for the entire business ecosystem.
Blockchain across the board
Supply Chain Management
Supply chain management is perhaps the area where blockchain has already had a profound impact. Most of the worlds largest companies utilize various supply chain software and computerized enterprise resource planning. The combination of these systems helps merge business units and streamline processes and information across the entire organization. Between tracing unaccounted parts back to the supplier, to payment delays between vendors and customers, supply chain has become complicated and cumbersome. Regardless of the product or commodity involved, blockchain serves to eliminate much of the friction across all participatory parties in the supply chain management by introducing greater traceability, transparency, and trust.
A good example of blockchain use on a large scale within supply chain management is IBM. Through its partnerships with Walmart and Kroger, IBM touts the strength of their Food Trust Solution blockchain in optimizing logistics and traceability of international produce shipped from farms to store shelves. Aside from assuring you that the dragon fruit you purchased actually came from Taiwan like the label says it does, blockchain can also help mitigate risks involved in the safety of produce consumption. We’ve seen a number of recent E. coli outbreaks, most recently in November of last year, associated with romaine lettuce. If major grocers had created and used a blockchain to track their lettuce and other produce across the supply chain, they would have been able to identify the contaminated items and remove them from their shelves within minutes, compared to a traditional approach of tracking and verifying products, which takes approximately 7 days. However, visibility and transparency alone are not the key features of blockchain in supply chain. Rather, its ability to generate trust and confidence among the parties involved in the transactions at each procedural check point across the supply chain that creates so much value for the emerging technology.
Global shipping leader, Maersk is another industry titan looking to utilize blockchain in efforts to build a revolutionary new global trade platform. Recognized as the largest container shipping company in the world, Maersk has also partnered with IBM to form TradeLens, a distributed ledger technology for supply chains. The blockchain serves to provide full spectrum visibility along the supply chain to everyone involved, while allowing parties to exchange information in real-time as well. Admittedly however, the young blockchain has struggled to gain traction in solidifying partners on its platform, but experts attribute these issues primarily to a lack of share in ownership among parties involved. If the joint venture between IBM and Maersk can secure partners such as General Motors and Proctor & Gamble, it could go a long way in opening the floodgates for a host of other international enterprises to make their way onto the blockchain.
The benefits of verification and authenticity of blockchain, combined with traceability, an improved transaction flow, and programmable automation are clear advantages compared to the standard practices of most supply chains for multinational companies today. Paul Brody, a Blockchain leader at Ernst & Young states “At its most basic level, the core logic of Blockchains means that no piece of inventory can exist in the same place twice.” By definition, the visibility that blockchain provides throughout transactions, makes it a near perfect match in alleviating many of the issues plaguing today’s supply chains burdened by manual record keeping and an increasing lack of accountability.
“At its most basic level, the core logic of Blockchains means that no piece of inventory can exist in the same place twice.”
Law
Law is another arena where blockchain is poised to have a large impact. From simple blockchain solutions, such as eliminating the need for an intermediary, to intellectual property disputes, and more complex matters involving self executing smart contracts, there are a number of legal matters the nascent technology can help tackle. According to the Wall Street Blockchain Alliance, the legal industry was one of the fastest growing industries in adopting blockchain in 2018. However, the marriage between blockchain and lawyers is still very much in its infancy, seeing as the industry as a whole has yet to reach a period of even remote standardization.
Of the key aspects of blockchain that have the power to transform legal practice across the board, the first of these is Smart Contracts. Smart Contracts may arguably be the most radical change agent resulting from greater blockchain implementation in law. Much like a tangible contract, a smart contract is an agreement between one or more parties, contingent on each one of the involved parties abiding by the agreed upon terms. What makes a smart contract unique however, is that it’s programmed to autocomplete a task once certain criteria or triggers for an agreement are met. Smart contracts can be used for a number of applications, such as allowing the easy transfer of titles, obtaining a deed on a home, and shaping the legal frameworks for business partnerships. The parties bound by the smart contract will have their permissioned agreements stored on the blockchain, unalterable by any interference.
As far as use cases go, DLA Piper, one of the world’s most prestigious law firms, appears to be experimenting with blockchain to assist their legal practice. The firm places attorneys specialized in blockchain for matters regarding data protection, cyber security, fund raising, intellectual property matters, and more. DLA Piper states that their specialized global blockchain group offers consulting services and counsel to start ups, entrepreneurs, and big businesses alike on utilizing blockchain in their practices. K&L Gates is another international law firm exploring blockchain use; similar to many of the areas DLA Piper looks to expand within. The firm’s internal blockchain is used to cover even the expanded areas of practice, specializing in: financial services, energy, cryptocurrency, and initial coin offerings (ICO).
Blockchain presents an interesting dichotomy among lawyers, who generally tend to be a bit more risk averse, but will likely have to plunge into the world of blockchain, especially if potential clients are utilizing the technology within their businesses. In this regard, law is a bit unique in terms of its blockchain use. While law firms and lawyers may use blockchain internally as a database to secure documents such as evidence and contracts, they’ll still have to on board themselves with the technology on the consumer-use side, as clients want lawyers who can help them understand its legal use. Inefficient practices and a lack of organization can slow down an attorney’s workflow and damage relationships with clients. At the very least, blockchain presents itself as a tool to handle much of the lower level administrative tasks, allowing lawyers to spend more time on substantive case related work.
Healthcare
Healthcare, regardless of domain, is an industry bogged down by administrative and procedural processes that create a backlog of issues that generally take months to resolve. According to the New England Journal of Medicine, American hospitals spend upwards of $200 billion dollars a year on administrative costs. Easing the pain of paperwork, tracking down payment and insurance information, and managing health records is enough to warrant the implementation of blockchain in the healthcare space. Aside from the cost saving benefits, blockchain can ensure accuracy in pharmaceutical clinical trials, reduce time delay in patient prescription renewal, and limit medical billing fraud. The focal points of blockchain are its clear benefits of keeping information private, accurate, permissioned, and unalterable. These key features naturally align with the need for security and sensitivity that are required throughout regulatory compliance across healthcare.
Unlike the ways in which we’ve witnessed blockchain applied within supply chain management and law, where larger multinational corporations have the resources to experiment with the technology; healthcare is mostly seeing blockchain use stemming from innovative startups and young companies. Among those young companies is BurstiQ, a health record managing blockchain data firm that focuses on putting the control of individual health records back in the hands of patients, providing them the autonomy of its distribution. BurstiQ consolidates all of a patient’s healthcare data from primary care visits, specialists’ visits, hospitals, pharmacy, and more into their unique HealthWallet in the BurstiQ app to give the user a comprehensive history of their health records. With the data in hand, individuals can choose to keep it private, share it, sell it, or even donate it. BurstiQ also promotes its machine learning and data analysis to allow its users to view a forecast of their potential future health to seek provider care, target clinical trials, and share their history with their physicians. BurstiQ’s holistic functionality within health record management has propelled it to the ranks of a global end-to-end blockchain enablement system.
Chronicled is another young blockchain firm, and while they focus largely on blockchain within supply chain, the group mentions the notable addition of pharmacy into their ecosystem as well. The Chronicled MediLedger encourages leading pharmaceutical manufacturers to join their blockchain to “meet track and trace regulations, and to provide a functional improvement in recording the change of ownership of prescription medicines”. Pfizer, Genentech, AmerisourceBergen, and a few other pharmaceutical firms have already joined Chronicled’s MediLedger to ensure the traceability and provenance of their products. The pharmaceutical industry is largely a game of copycat when it comes research and innovation. With reputable and notable firms in the sector making the shift towards a blockchain database, their influence will likely call for other industry players to follow suit.
Hospitals might soon join the wave of blockchain integration as well. Massachusetts General Hospital (MGH) is reportedly experimenting with MediBloc, a Korean blockchain startup that is already hosting multiple South Korean medical institutions on its blockchain. The three-year pilot partnership focuses on MGH exploring applications for artificial intelligence for imaging, health analytics, and patient information management on MediBloc’s blockchain. The prevalent issues in healthcare today (data management, counterfeit drugs, clinical trial misreporting, etc.) are not limited in scope. These issues will be exacerbated by both time and an increasing number of patients seeking care, resulting in delayed patient care, mismanaged patient information, and increased administrative costs. Blockchain may be the secure, cost-saving solution for healthcare.
Art
Art and the creative industry is a disproportionally mentioned field when discussing the application of blockchain among its cohort. Blockchain can facilitate the efforts to increase transparency in the art marketplace by simply making it safer and more secure. The industry has faced challenges, particularly in areas of authenticating a work of art where the original artist is no longer alive to verify the piece(s) being sold. On many occasions, this has led to counterfeit art being produced and sold by the name of an artist no longer alive to contest its legitimacy. In 2014, The Fine Arts Expert Institute in Geneva reported on this issue, stating that over 50% of the artworks they had inspected were either forged by unknown parties or attributed to the wrong artist. Blockchain based art platforms help resolve this dilemma for both digital and tangible art created by either living or deceased artists by assigning original artwork a certificate of authenticity. Blockchain’s impact in art space is already undeniable, as growing platforms such as Verisart allow for artists to establish provenance and obtain certificates of authenticity of their work, which is then stored on a blockchain. Depending on the artist’s preference, the art stored on the blockchain can have a fixed number of its editions available on the web that can ever be in existence. We’ve even seen the emergence of online marketplaces that allow for the secure trade of authentic digital art from companies such as Rare Bits, CryptoKitties, and CryptoPunks. The transparency process for each of these marketplaces is relatively similar. An artist will usually create a new digital piece, or a collector or art gallery will purchase and sell the art that certifies its authenticity with a token linked to a blockchain. Depending on the intended copies of the art that is produced, (each with their own token) whenever one of those copies is sold, that token of authenticity transfers to the buyer. If an owner decides to sell the artwork to someone else, the token then transfers with the art once more. Since every transaction is visible on the blockchain, if the art is being resold and its ownership doesn’t properly trace back to the sellers wallet, the legitimacy of the art can be called into question.
Today’s artists are increasingly creating digital artwork, some of which may never actually be tangible. With piracy still presenting itself as a sizable threat to digital files, blockchain at the very least, can be used to establish proof of ownership over a work of art, attenuating the effects of counterfeit pieces. In a broad sense, blockchain serves as an equalizer in the art space, allowing smaller artists to still earn money from the work they create, while gaining exposure and maintaining control of their product. Art is just one of the segments under the umbrella of blockchain that can reinvent itself. The coming months will likely yield greater advancement for music, video streaming, movies, and written content backed by blockchains.
Government
The Public sector isn’t immune to the effects of Blockchain either, which can make itself useful throughout every level of government hierarchy. Voting, tax collection, and identity management systems are a few areas where the robust functionality of Blockchain can improve outdated protocols and practices. We’re seeing this implementation of Blockchain within the international system already, with countries such as Dubai having gone to great lengths to integrate Blockchain into government services, primarily for the purpose of convenience for its citizens. Zeina El Kaissi, the head of emerging technology at Smart Dubai, the city’s leading Blockchain initiative, mentions “We want you to buy a house while you’re lying on a couch somewhere, and Blockchain can make that possible.” Smart Dubai has identified a myriad of uses for Blockchain that the government can infuse into daily life, including remote notary services, charging electric vehicles, and tracking food safety.
India is another example of technology-empowered countries implementing Blockchain within government, albeit in stark contrast to the initial purposes of its intended use in Dubai. Rather, India plans to leverage Blockchain to mitigate corruption and fraud within its state and national governments. The blossoming tech nation has also implemented Blockchain as a solution to increase transparency in the governments land registry in response to an estimated 38% of land transfer transactions involving some degree of bribery.
While we’re largely seeing Blockchain being increasingly adopted by governments abroad, there are practical domestic use cases for the technology as well. The U.S government has awarded contracts to agencies such the Department of Homeland Security and The Food and Drug Administration for blockchain use to secure the digital identity of the technology used by homeland security agents and to create a network to track foodborne illnesses and patient data respectively. On a smaller scale, states such as Illinois are at the forefront of Blockchain adoption after it launched its Illinois Blockchain Initiative last year, understanding that “Blockchain and distributed ledger technology has the potential to transform the delivery of public and private services and redefine the relationship between government and its citizen in terms of data sharing, transparency, and trust.” Colorado, another state to have implemented blockchain in public service, is taking a more provident approach with their adoption, currently only using the technology specifically for government record keeping.
Integrating Blockchain into government can increase transparency for the public, keeping constituents more informed and involved in their government’s decision-making process. Governments using blockchain to increase efficiency and lower the costs of regular practices can save the taxpayers money and introduce greater accountability throughout all of government.
“We want you to buy a house while you’re lying on a couch somewhere, and Blockchain can make that possible.”
Challenges of blockchain implementation and future forecast
The biggest issues surrounding greater blockchain adoption today revolve around collaboration, regulation, and standardization. As such, these issues present themselves as amendable with the passage of time, rather than an inherent fatal flaw within blockchain itself. Collaboration is a key component of getting blockchain to actually perform the way it’s intended to. Currently, most of the big blockchain firms just aren’t regularly communicating with each other. Increased collaboration among blockchain firms and businesses correlates with increased interoperability, sharing and understanding data to make the technology more useful. Regulation is arguably the greatest roadblock impeding the path of a faster, more widespread blockchain adoption. Rebecca Harold, CEO of The Privacy Professor mentions that “Implementing blockchain does not fit neatly within most legal and regulatory compliance requirements that exist.” Regulatory issues for blockchain are also likely to be resolved as governments and authoritative bodies see partners in the private and public sector starting to adopt blockchain, similar to how Arizona’s government declared that smart contracts are legally binding within the state in 2017. Standardization follows along much of the same path as the issue of collaboration, albeit with subtle differences. As blockchain use among specific industries becomes more common, businesses and organizations start to communicate and develop a greater understanding of how to advance blockchain and take it to their intended markets. Blockchain is also coded in different programming languages, by varying levels of experts, ranging from professional blockchain developers to the casual GitHub user, using their own language to create blockchains. This hampers the race to a more standardized version of blockchain. A uniform foundation of blockchain recognized and utilized across industries will go a long way in facilitating adoption of the digital ledger technology.
That being said, given the noise that surrounded blockchain from Bitcoin’s boom in 2017, the technology underpinning cryptocurrencies was pretty quiet in 2018. In fact, 2019 is expected to be more of the same. Blockchain shows plenty of promise of growth and refinement through its applications this year, and expansion across all industries will likely still occur, albeit without the ribbon cuttings and grand entrances we saw throughout the latter part of 2017. Despite the challenges blockchain faces, MIT Technology Review has noted that there are plenty of innovative projects currently in the works, a few of which involve multinational corporations utilizing blockchain to overhaul large segments of their businesses.
Perhaps it’s time we use our creativity and insight to examine how blockchain can benefit the areas that we work in. By developing a thorough understanding of blockchain and its capabilities, coupled with the subject matter expertise of our own work, we can position ourselves to be ahead of the curve and involved in the large-scale adoption of blockchain. If we’re careless, we risk becoming bystanders and we might just miss out on the innovation happening under our noses. The right time to get involved is now. Welcome to the age of blockchain.
Help from my friends in high places:
Gooch, Kelly. “US Healthcare Prices Reflect Huge Administrative Costs: 6 Statistics.” Becker’s Hospital Review, 16 July 2018.
Janssen, Marijn, et al. “Blockchain in government: Benefits and implications of distributed ledger technology for information sharing.” Government Information Quarterly, Oct. 2017.
Orcutt, Mike. “In 2019, Blockchains Will Start to Become Boring.” MIT Technology Review, MIT Technology Review, 10 Jan. 2019.
Tapscott, Don. “How Blockchains Could Change the World.” McKinsey & Company, McKinsey & Company, May 2016.
Zhao, J. Leon, et al. “Overview of Business Innovations and Research Opportunities in Blockchain and Introduction to the Special Issue.” SpringerLink, Springer Berlin Heidelberg, 15 Dec. 2016.
Zeilinger, M. Philos. Technol. (2018) 31: 15. https://doi.org/10.1007/s13347-016-0243-1
