Unraveling the blocks of Blockchain
What is Blockchain — It is a distributed ledger which is used to record transactions. That’s it. No more complex definitions.
Let’s dive little deeper.
Business Perspective — Blockchain helps to achieve an efficient transfer of assets ( tangible and non-tangible) and values. Thus it saves time, reduces cost and increases trust. Four fundamental components of blockchain.
- Shared Ledger ( append only distributed system of records shared across the business network)
- Smart Contract ( business rules which can be executed or enforced without human interaction)
- Privacy ( transactions are secure and verifiable)
- Trust (transactions are endorsed by relevant participants).
Technical Perspective — It’s a sequence of blocks connected by chain. Each block maintains a time stamp and a link to the previous block. It is suitable for recording event and the other use cases are identity management, transaction management etc.
Microsoft, IBM and Intel are some of the technology companies which are helping to develop, test and deploy blockchain applications. Microsoft Azure’s blockchain solutions, IBM’s bluemix blockchain platform which is powered by the hyperledger project, Intel’s Sawtooth Lake blockchain platform are some of framework’s developed by these companies for implementing blockchain solutions.
Example of first implemented blockchain goes back to 2008 by Satoshi Nakamoto as BITCOIN.
Key Benefits — Blockchain works on decentralized platforms. Transparency, elimination of third parties, cost reduction, micropayments, cryptographic security, and immutability are the key benefits of blockchain solutions.
#InternetOfValues — Blockchain enables value exchange. It has given a new meaning to #InternetOfValues. With the Internet of Value, a value transaction such as a foreign currency payment, can happen instantly, just as how people have been sharing words, images and videos online for decades. And it’s not just money. The Internet of Value will enable the exchange of any asset that is of value to someone, including stocks, votes, frequent flyer points, securities, intellectual property, music, scientific discoveries, and more.
Public vs. Private blockchains
Public blockchains also referred to as as open or permissionless, allow anyone to see or send transactions as long as they’re part of the consensus process. There are also consortium blockchains, where only a pre-selected number of nodes are authorized to use the ledger. Example of public network is bitcoin.
Private blockchains also referred as permissioned, use an access control layer to govern who has access to the network. They restrict the ability to write to a distributed ledger to one organization, such as a group of employees within a corporation. They do not rely on anonymous nodes to validate transactions nor do they benefit from the network effect.
Use Cases — Its highest acceptance and use cases are in the finance sector. Payments, currency exchange, loan settlement, remittance, trading, collateral, claim settlement etc.
Let’s look at some non-financial use cases. Automobile in particular.
Automobile Use cases — These are the existing applications of blockchain in the automobile industry.
•Mobility services such as ride sharing
•Retailing and leasing
•Carrier selection and smart contracts
•Payments and rewards supporting mobility
Till 2016, Blockchain penetration rate for automotive key functional areas is around 2.0% which is expected to reach up to 37% by 2025.
The future use cases for automotive sector will include connected cars, autonomous driving, IoT, Industry 4.0, Smart Manufacturing, 3D Printing, Smart Prognostics, Genesis of Things. Five major growth opportunities are:
Challenges — Is Blockchain a hype, yes to some extent. Because it has its own challenges and is certainly not going to solve all the problems. Security, complexity and inadequate knowledge and skill set are some of the challenges. Blockchain is not a “disruptive” technology but just a foundation, a concept which has huge potential to create future applications and systems. It will still take decades for mass adoption.