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For example, by plugging into external developer ecosystems, IT shops can begin influencing standardization discussions and exchanging best practices with like-minded organizations. Internally, CIOs can empower their teams to make decisions that drive standards within company ecosystems. Finally, in many organizations, data management and process standards already exist. Apply these same standards to your blockchain solution.
In the future, blockchain solutions from different companies or even industries will be able to communicate and share digital assets with each other seamlessly. For organizations whose use cases turn on blockchain ecosystem diversity and scalability, the potential benefits of integration are clear: Having more partnerships within a blockchain ecosystem can drive greater value and boost blockchain ROI.
Likewise, interoperability can make it possible to customize and enhance blockchain solutions without rendering them obsolete. Unfortunately, many of the technical challenges preventing blockchain integration persist.
Different protocols—for example, Hyperledger Fabric and Ethereum—cannot integrate easily. Think of them as completely different enterprise systems. To share information between these two systems, you would need to create an integration layer laborious and painful or standardize on a single protocol. Even if the technical challenges were solved, connecting two blockchains is much harder than connecting two networks. Because with blockchain integration, you are connecting two value networks that may not necessarily talk to each other.
You must also be able to guarantee that the data packets point to the same places in both blockchains, which helps maintain data integrity and auditability. Right now, the Hyperledger Foundation and others are working to establish technical standards that define what constitutes a blockchain, and to develop the protocols required to exchange assets. These efforts will continue, and as they do, convergence of protocols will likely accelerate and standards emerge. Likewise, interoperable technologies will eventually mature, with new protocols that support communication between different technologies becoming broadly available.
Until then, organizations can enjoy some integration benefits by working within a consortium model in which all participants deploy the same solutions and protocols. When integration challenges are solved, those already sharing common processes and standards within a consortium may enjoy the competitive advantage of momentum.
There are also bridge technologies available that make it possible to move digital assets between blockchains. Think of the process like this: You move digital assets from point A to point B in a car. At point B, you transfer the assets from the car to a train, which takes it to its final destination at point C.
Few technologies today are as misunderstood as blockchain. With this in mind, join us as we correct a few common misconceptions about blockchain and its enterprise potential:.
Misconception: Standards must be in place before my organization can adopt a production solution. Reality check: Currently, there are no overarching technical standards for blockchain, and it is unrealistic to think we will get them soon, if ever, across all use cases. There are, however, some technical and business standards for specific uses, such as cross-border transactions and smart contracts. These use case-based standards are established, if not commonly accepted, which means you may not have to wait for universal standards to emerge before adopting a blockchain production solution.
Misconception: I read about how quantum computing may completely invalidate blockchain as we know it. Reality check: That is a possibility, but it may never happen. Quantum computing provides enormous computing power that could be used to crack current encryption schemes. On the flip side, quantum computing may be able to help cryptologists generate stronger encryption algorithms. Reality check: Not quite.
Blockchain technologies, like the systems and tools that users need to interact with them, require IT maintenance and support.
Finally, because they are still new, for some time blockchain platforms will likely run in parallel with current platforms, which may add short-term costs. So, no, blockchain is not free. That said, understanding its true cost requires identifying the net value you may be able to harvest from blockchain cost savings and revenue generation. In October , global insurance and asset management firm Allianz teamed up with several other insurance and reinsurance organizations to explore opportunities for using blockchain to provide client services more efficiently, streamline reconciliations, and increase the auditability of transactions.
Over the course of the following year, the joint effort—the Blockchain Insurance Industry Initiative B3i —welcomed 23 new members from across the insurance sector and began market-testing a new blockchain reinsurance prototype. In addition to participating in B3i, Allianz is working internally to determine if the same basic mechanism can be deployed across its global operations to facilitate interaction among multiple entities—a possibility that, while promising, presents several technical challenges.
For example, can a blockchain platform be embedded in the architecture of systems that already communicate with each other? How would policy administration system designs for blockchain differ from traditional designs?
And is it even possible to scale existing prototypes sufficiently to meet global enterprise needs? For now, the B3i use case is laying the groundwork for future collaboration and even standardization across the insurance sector.
This is what we are aiming for. The Hong Kong Monetary Authority HKMA is the central banking authority responsible for maintaining the monetary and banking stability and international financial center status of Hong Kong. After researching the value proposition of the technology alongside the Hong Kong Applied Science and Technology Research Institute, the HKMA published a white paper in November 12 that raised more than 20 governance, legal, regulatory, and operational concerns that the financial industry should address when implementing blockchain or DLT.
Leaders then decided to develop a proof of concept PoC to test the value proposition as well as to address those concerns. The proof of concept focused on trade finance for banks, buyers and sellers, and logistics companies. It leveraged DLT to create a platform for automating labor-intensive processes via smart contracts, reducing the risk of fraudulent trade and duplicate financing, and improving the transparency and productivity of the industry as a whole.
DLT provided immutable data integrity, enhanced reliability with built-in disaster recovery mechanisms, enabled near-real-time updates of data across the nodes, and acted as a repository for transactional data.
The trade finance PoC ran on a private blockchain network for a week period from December through March , with five Hong Kong banks participating. In addition to trade finance, HKMA developed two other successful PoCs for mortgage applications and digital identification.
With seven banks now participating in the trade finance blockchain, HKMA intends to launch a production pilot in the second half of It plans to have a full commercialized solution in production by Also, there are a number of other banks waiting in the queue to participate in this platform. Both authorities plan to implement the cross-border infrastructure i. Global Trade Connectivity Network at around the same time that it launches its domestic platform. Then, if other countries want to participate in the network, they would plug their local platform into the integrated distributed ledger technology infrastructure.
We intend to work through those issues over the next year. But so far, so good. In addition, a common standard for digitization of the documentations and trades is a critical success factor for this infrastructure.
Over the last years, The Institutes has supported the evolving professional development needs of the risk management and insurance community with educational, research, networking, and career resource solutions. Now, as the industry faces increasingly fast-moving, innovative, and data-driven challenges, insurers have varying levels of knowledge about the benefits of blockchain. The next step is for The Institutes to help educate them about and prepare them for this technology.
For our industry, blockchain has the capacity to streamline payments, premiums, and claims; reduce fraud through a centralized record of claims; and improve acquisition of new policyholders by validating the accuracy of customer data.
It will bring together risk management and insurance industry experts and blockchain developers to research, develop, and test blockchain applications for industry-specific use cases. Rather than focusing on single blockchain use cases, we believe in the need to communicate to multiple blockchains and enable federated inter-blockchain communication to facilitate reuse of capabilities among 30 organizations from various industry segments. To start, we are tackling four use cases that technology has struggled to tame: proof of insurance, first notice of loss, subrogation, and parametric insurance.
These cases all include multiple parties working together, using shared data and predefined contracts. They are ideal use cases because we can solve a business problem while demonstrating the capabilities of blockchain technology, which in turn will educate the industry on its potential. A big challenge to interoperability is getting organizations to work together. We want to enable secure blockchain interconnectivity across the industry, and we are developing a framework that would support this.
Since all organizations are under constraints to optimize cost structure, we are looking at an API layer to enable shared data and operations. We envision the consortium controlling the end products, with the integration into back-end legacy systems depending on each vendor.
To facilitate adoption, organizations need to advance along the learning curve and focus on the business problems that blockchain could solve. However, organizations should understand that while blockchain may drive efficiency in business processes and mitigate certain existing risks, it poses new risks broadly classified under three categories: common risks, value transfer risks, and smart contract risks. Blockchain technology exposes institutions to similar risks associated with current business processes—such as strategic, regulatory, and supplier risks—but introduces nuances for which entities need to account.
Organizations that adopt blockchain should evaluate both the participating entities and the underlying platform; the choice of the latter could pose limitations on the services or products delivered, both now and in the future. Additionally, firms may be exposed to third-party risks, as some of the technology might be sourced from external vendors. For example, the typical risks of cloud implementation apply here for cases in which cloud-based infrastructure is part of the underlying technology for blockchain.
Because blockchain enables peer-to-peer transfer of value, the interacting parties should protect themselves against risks previously managed by central intermediaries. In the case of a blockchain framework, evaluate the choice of the protocol used to achieve consensus among participant nodes in the context of the framework, the use case, and network participant requirements.
While the consensus protocol immutably seals a blockchain ledger, and no corruption of past transactions is possible, it remains susceptible to private key theft and the takeover of assets associated with public addresses. For example, if there is fraud on the value-transfer network, and a malicious actor takes over a noncompliant entity, then that actor can transfer and siphon value off of the network.
Smart contracts can encode complex business, financial, and legal arrangements on the blockchain, so there is risk associated with the one-to-one mapping of these arrangements from the physical to the digital framework.
Smart contracts apply consistently to all participant nodes across the network; they should be capable of exception handling that adheres to business and legal arrangements and complies with regulations. Like other software code, smart contracts require robust testing and adequate controls to mitigate potential risks to blockchain-based business processes. Adding a node and getting it to synchronise to an existing blockchain is very easy. Install software, tell it about the other computers on the blockchain, and let it start downloading blocks and validating new transactions and blocks.
I can imagine that this is easier and cheaper to do than with traditional enterprise database solutions. However I could be wrong. Blockchains replicate data between nodes. If some of your data needs to remain onshore in specific jurisdictions eg client data in Singapore then you will need to find a solution that fits. Something like client data onshore in a regular database, transaction data on an internal blockchain.
Are there Chinese Walls to consider? If so, a blockchain may not be a good solution given that the purpose is to replicate data. Privacy issues can be overcome with encryption where decryption keys are held where they are needed, however there is a dynamic between encrypting data and also allowing nodes to have the necessary visibility to validate it, especially for transactional data. C is also on the blockchain.
By putting the transaction on the blockchain, C can see that A is communicating with B. Is that acceptable from a commercially sensitive perspective?
I sometimes hear this justification for internal blockchains: it is easy to give access to a regulator or auditor — they can just tap into your blockchain and start from there.
Yes, but is it really that much harder to give them read-access to your regular databases? Another, probably better argument is around interoperability — if you have an internal database that is created as a blockchain ie rows are added containing block hashes and there is some server software that can interact with the outside world in a peer-to-peer way then it makes it easier to connect with other parties, should you want them to be able to write to this database.
Net-net it is positive for technology that blockchains are being thrown at internal problems, even if initially there are no clear compelling reasons why a blockchain should be used. Please do comment with good reasons why blockchains should be used over traditional databases for internal use cases!
View all posts by antonylewis Nice overview Antony. Great to see some complex topical discussion simplied for a wider audience. Hope to see more coming out of your blog soon! If you are a large institution you could potentially control processing costs by distributing work normally done in batches, as it comes in on the chain, lowering your average dailey MIPs… processor time on a mainframe is very expensive.
Processors are expensive and the decision on how many to pay for is based largely on peak processing. If you can control the transaction flow then you can lower a major expense by spreading out the work and lowering the peaks.
An internal chain may provide that ability. There is no viable alternative for a large mainframe system to just move to another tech at this time the expense of changing hundreds of thousands of lines of code prevents it… noting that some of this code is twenty years old and still performs reliably and efficiently. If the purpose of the block chain structure is provide the means to securely share a database why not… it works in real time and you can eliminate third parts from being involved. Someone asked me today, why use a chain and not some other structure?
I asked them back what other structure is there that two major corporations would use to share their data? Some definitions: By public permissionless I mean anyone can validate transactions and add blocks, and anyone can read data, eg The Bitcoin Blockchain, or Ethereum.
Thinking about data security Reading data Currently read-access to non-blockchain databases tend to be recorded in log files. Writing adding data Non-blockchain databases commonly use username and password based authentication and user entitlements to determine who can write data, and log files to record writing new data. Amending or deleting data Non-blockchain databases commonly use username and password based authentication and user entitlements to determine who can amend data, and log files to record amend events.
Brian D. Archived from internally original on 7 June It is not possible to manually remove a block. Blocks developed selected for inclusion in the chain are called test blocks. Blockchains termed as PUP Princeton university press.
Online Blockchain Quiz Questions With Answers (Advanced)
The food industry has seen countless outbreaks of e Coli, salmonella, listeria, as well as hazardous materials being accidentally introduced to foods. In the past, it has taken weeks to find the source of these outbreaks or the cause of sickness from what people are eating. If a food is found to be contaminated then it can be traced all the way back through each stop to its origin.
Not only that, but these companies can also now see everything else it may have come in contact with, allowing the identification of the problem to occur far sooner, potentially saving lives.
This is one example of blockchains in practice, but there are many other forms of blockchain implementation. Perhaps no industry stands to benefit from integrating blockchain into its business operations more than banking. Financial institutions only operate during business hours, five days a week. That means if you try to deposit a check on Friday at 6 p. Even if you do make your deposit during business hours, the transaction can still take one to three days to verify due to the sheer volume of transactions that banks need to settle.
Blockchain, on the other hand, never sleeps. By integrating blockchain into banks, consumers can see their transactions processed in as little as 10 minutes, basically the time it takes to add a block to the blockchain, regardless of holidays or the time of day or week. With blockchain, banks also have the opportunity to exchange funds between institutions more quickly and securely.
In the stock trading business, for example, the settlement and clearing process can take up to three days or longer, if trading internationally , meaning that the money and shares are frozen for that period of time. Given the size of the sums involved, even the few days that the money is in transit can carry significant costs and risks for banks.
Blockchain forms the bedrock for cryptocurrencies like Bitcoin. The U. In , some of the banks that ran out of money were bailed out partially using taxpayer money. These are the worries out of which Bitcoin was first conceived and developed. By spreading its operations across a network of computers, blockchain allows Bitcoin and other cryptocurrencies to operate without the need for a central authority. This not only reduces risk but also eliminates many of the processing and transaction fees.
It can also give those in countries with unstable currencies or financial infrastructures a more stable currency with more applications and a wider network of individuals and institutions they can do business with, both domestically and internationally. Using cryptocurrency wallets for savings accounts or as a means of payment is especially profound for those who have no state identification.
Some countries may be war-torn or have governments that lack any real infrastructure to provide identification. Citizens of such countries may not have access to savings or brokerage accounts and therefore, no way to safely store wealth.
When a medical record is generated and signed, it can be written into the blockchain, which provides patients with the proof and confidence that the record cannot be changed. These personal health records could be encoded and stored on the blockchain with a private key, so that they are only accessible by certain individuals, thereby ensuring privacy. In the case of a property dispute, claims to the property must be reconciled with the public index. This process is not just costly and time-consuming—it is also riddled with human error, where each inaccuracy makes tracking property ownership less efficient.
Blockchain has the potential to eliminate the need for scanning documents and tracking down physical files in a local recording office. If property ownership is stored and verified on the blockchain, owners can trust that their deed is accurate and permanently recorded.
If a group of people living in such an area is able to leverage blockchain, transparent and clear timelines of property ownership could be established. A smart contract is a computer code that can be built into the blockchain to facilitate, verify, or negotiate a contract agreement.
Smart contracts operate under a set of conditions that users agree to. When those conditions are met, the terms of the agreement are automatically carried out. Say, for example, a potential tenant would like to lease an apartment using a smart contract. The landlord agrees to give the tenant the door code to the apartment as soon as the tenant pays the security deposit.
Both the tenant and the landlord would send their respective portions of the deal to the smart contract, which would hold onto and automatically exchange the door code for the security deposit on the date the lease begins. This would eliminate the fees and processes typically associated with the use of a notary, third-party mediator, or attornies. As in the IBM Food Trust example, suppliers can use blockchain to record the origins of materials that they have purchased.
As reported by Forbes, the food industry is increasingly adopting the use of blockchain to track the path and safety of food throughout the farm-to-user journey. As mentioned, blockchain could be used to facilitate a modern voting system. Voting with blockchain carries the potential to eliminate election fraud and boost voter turnout, as was tested in the November midterm elections in West Virginia.
Using blockchain in this way would make votes nearly impossible to tamper with. The blockchain protocol would also maintain transparency in the electoral process, reducing the personnel needed to conduct an election and providing officials with nearly instant results.
This would eliminate the need for recounts or any real concern that fraud might threaten the election. From greater user privacy and heightened security to lower processing fees and fewer errors, blockchain technology may very well see applications beyond those outlined above.
But there are also some disadvantages. Provides a banking alternative and way to secure personal information for citizens of countries with unstable or underdeveloped governments. Here are the selling points of blockchain for businesses on the market today in more detail. Transactions on the blockchain network are approved by a network of thousands of computers.
This removes almost all human involvement in the verification process, resulting in less human error and an accurate record of information. Even if a computer on the network were to make a computational mistake, the error would only be made to one copy of the blockchain.
Typically, consumers pay a bank to verify a transaction, a notary to sign a document, or a minister to perform a marriage. Blockchain eliminates the need for third-party verification and, with it, their associated costs. Bitcoin, on the other hand, does not have a central authority and has limited transaction fees. Blockchain does not store any of its information in a central location.
Instead, the blockchain is copied and spread across a network of computers. Whenever a new block is added to the blockchain, every computer on the network updates its blockchain to reflect the change. By spreading that information across a network, rather than storing it in one central database, blockchain becomes more difficult to tamper with. If a copy of the blockchain fell into the hands of a hacker, only a single copy of the information, rather than the entire network, would be compromised.
Transactions placed through a central authority can take up to a few days to settle. If you attempt to deposit a check on Friday evening, for example, you may not actually see funds in your account until Monday morning. Whereas financial institutions operate during business hours, five days a week, blockchain is working 24 hours a day, seven days a week, and days a year.
Transactions can be completed in as little as ten minutes and can be considered secure after just a few hours. This is particularly useful for cross-border trades, which usually take much longer because of time-zone issues and the fact that all parties must confirm payment processing.
Although users can access details about transactions, they cannot access identifying information about the users making those transactions.
It is a common misperception that blockchain networks like bitcoin are anonymous, when in fact they are only confidential. That is, when a user makes public transactions, their unique code called a public key , is recorded on the blockchain, rather than their personal information.
Once a transaction is recorded, its authenticity must be verified by the blockchain network. Thousands of computers on the blockchain rush to confirm that the details of the purchase are correct.
After a computer has validated the transaction, it is added to the blockchain block. Each block on the blockchain contains its own unique hash, along with the unique hash of the block before it.
This discrepancy makes it extremely difficult for information on the blockchain to be changed without notice. Most blockchains are entirely open-source software. This means that anyone and everyone can view its code. This gives auditors the ability to review cryptocurrencies like Bitcoin for security. Because of this, anyone can suggest changes or upgrades to the system. If a majority of the network users agree that the new version of the code with the upgrade is sound and worthwhile then Bitcoin can be updated.
Perhaps the most profound facet of blockchain and Bitcoin is the ability for anyone, regardless of ethnicity, gender, or cultural background, to use it. According to the world bank there are nearly 2 billion adults that do not have bank accounts or any means of storing their money or wealth. These people often earn little money that is paid in physical cash. They then need to store this physical cash in hidden locations in their homes or places of living leaving them subject to robbery or unnecessary violence.
Keys to a bitcoin wallet can be stored on a piece of paper, a cheap cell phone, or even memorized if necessary. For most people, it is likely that these options are more easily hidden than a small pile of cash under a mattress.
Blockchains of the future are also looking for solutions to not only be a unit of account for wealth storage, but also to store medical records, property rights, and a variety of other legal contracts. While there are significant upsides to the blockchain, there are also significant challenges to its adoption.
The roadblocks to the application of blockchain technology today are not just technical. The real challenges are political and regulatory, for the most part, to say nothing of the thousands of hours read: money of custom software design and back-end programming required to integrate blockchain to current business networks.
Here are some of the challenges standing in the way of widespread blockchain adoption. Although blockchain can save users money on transaction fees, the technology is far from free. In the real world, the power from the millions of computers on the bitcoin network is close to what Denmark consumes annually. Despite the costs of mining bitcoin, users continue to drive up their electricity bills in order to validate transactions on the blockchain. When it comes to blockchains that do not use cryptocurrency, however, miners will need to be paid or otherwise incentivized to validate transactions.
Some solutions to these issues are beginning to arise. For example, bitcoin mining farms have been set up to use solar power, excess natural gas from fracking sites, or power from wind farms. Bitcoin is a perfect case study for the possible inefficiencies of blockchain. Although other cryptocurrencies such as Ethereum perform better than bitcoin, they are still limited by blockchain. Legacy brand Visa, for context, can process 24, TPS. Solutions to this issue have been in development for years.
There are currently blockchains that are boasting over 30, transactions per second. While confidentiality on the blockchain network protects users from hacks and preserves privacy, it also allows for illegal trading and activity on the blockchain network. The website allowed users to browse the website without being tracked using the Tor browser and make illegal purchases in Bitcoin or other cryptocurrencies. Current U. This system can be seen as both a pro and a con. It gives anyone access to financial accounts but also allows criminals to more easily transact.
Many have argued that the good uses of crypto, like banking the unbanked world, outweigh the bad uses of cryptocurrency, especially when most illegal activity is still accomplished through untraceable cash. Many in the crypto space have expressed concerns about government regulation over cryptocurrencies. While it is getting increasingly difficult and near impossible to end something like Bitcoin as its decentralized network grows, governments could theoretically make it illegal to own cryptocurrencies or participate in their networks.
Over time this concern has grown smaller as large companies like PayPal begin to allow the ownership and use of cryptocurrencies on its platform. First proposed as a research project in , blockchain is comfortably settling into its late twenties. With many practical applications for the technology already being implemented and explored, blockchain is finally making a name for itself at age twenty-seven, in no small part because of bitcoin and cryptocurrency.
As a buzzword on the tongue of every investor in the nation, blockchain stands to make business and government operations more accurate, efficient, secure, and cheap with fewer middlemen.
Blockchain Technology. Your Money. I can imagine that this is easier and cheaper to do than with traditional enterprise database solutions. However I could be wrong. Blockchains replicate data between nodes. If some of your data needs to remain onshore in specific jurisdictions eg client data in Singapore then you will need to find a solution that fits. Something like client data onshore in a regular database, transaction data on an internal blockchain.
Are there Chinese Walls to consider? If so, a blockchain may not be a good solution given that the purpose is to replicate data. Privacy issues can be overcome with encryption where decryption keys are held where they are needed, however there is a dynamic between encrypting data and also allowing nodes to have the necessary visibility to validate it, especially for transactional data.
C is also on the blockchain. By putting the transaction on the blockchain, C can see that A is communicating with B. Is that acceptable from a commercially sensitive perspective? I sometimes hear this justification for internal blockchains: it is easy to give access to a regulator or auditor — they can just tap into your blockchain and start from there. Yes, but is it really that much harder to give them read-access to your regular databases? Another, probably better argument is around interoperability — if you have an internal database that is created as a blockchain ie rows are added containing block hashes and there is some server software that can interact with the outside world in a peer-to-peer way then it makes it easier to connect with other parties, should you want them to be able to write to this database.
Net-net it is positive for technology that blockchains are being thrown at internal problems, even if initially there are no clear compelling reasons why a blockchain should be used.
Please do comment with good reasons why blockchains should be used over traditional databases for internal use cases! View all posts by antonylewis Nice overview Antony. Great to see some complex topical discussion simplied for a wider audience. Hope to see more coming out of your blog soon!
If you are a large institution you could potentially control processing costs by distributing work normally done in batches, as it comes in on the chain, lowering your average dailey MIPs… processor time on a mainframe is very expensive.
Processors are expensive and the decision on how many to pay for is based largely on peak processing. If you can control the transaction flow then you can lower a major expense by spreading out the work and lowering the peaks. An internal chain may provide that ability. There is no viable alternative for a large mainframe system to just move to another tech at this time the expense of changing hundreds of thousands of lines of code prevents it… noting that some of this code is twenty years old and still performs reliably and efficiently.
If the purpose of the block chain structure is provide the means to securely share a database why not… it works in real time and you can eliminate third parts from being involved. Someone asked me today, why use a chain and not some other structure?
I asked them back what other structure is there that two major corporations would use to share their data? Some definitions: By public permissionless I mean anyone can validate transactions and add blocks, and anyone can read data, eg The Bitcoin Blockchain, or Ethereum.
Thinking about data security Reading data Currently read-access to non-blockchain databases tend to be recorded in log files. Writing adding data Non-blockchain databases commonly use username and password based authentication and user entitlements to determine who can write data, and log files to record writing new data.
Amending or deleting data Non-blockchain databases commonly use username and password based authentication and user entitlements to determine who can amend data, and log files to record amend events. Archiving and backups The above notwithstanding, I can imagine in the future a blockchain could be used as an alternative to archiving. Resilience Adding a node and getting it to synchronise to an existing blockchain is very easy.
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Instead, the blockchain is copied and spread across a network of computers. Whenever a new block is added to the blockchain, every computer on the network updates its blockchain to reflect the change. By spreading that information across a network, rather than storing it in one central database, blockchain becomes more difficult to tamper with. If a copy of the blockchain fell into the hands of a hacker, only a single copy of the information, rather than the entire network, would be compromised.
Transactions placed through a central authority can take up to a few days to settle. If you attempt to deposit a check on Friday evening, for example, you may not actually see funds in your account until Monday morning. Whereas financial institutions operate during business hours, five days a week, blockchain is working 24 hours a day, seven days a week, and days a year.
Transactions can be completed in as little as ten minutes and can be considered secure after just a few hours. This is particularly useful for cross-border trades, which usually take much longer because of time-zone issues and the fact that all parties must confirm payment processing.
Although users can access details about transactions, they cannot access identifying information about the users making those transactions. It is a common misperception that blockchain networks like bitcoin are anonymous, when in fact they are only confidential. That is, when a user makes public transactions, their unique code called a public key , is recorded on the blockchain, rather than their personal information.
Once a transaction is recorded, its authenticity must be verified by the blockchain network. Thousands of computers on the blockchain rush to confirm that the details of the purchase are correct. After a computer has validated the transaction, it is added to the blockchain block.
Each block on the blockchain contains its own unique hash, along with the unique hash of the block before it. This discrepancy makes it extremely difficult for information on the blockchain to be changed without notice. Most blockchains are entirely open-source software. This means that anyone and everyone can view its code. This gives auditors the ability to review cryptocurrencies like Bitcoin for security.
Because of this, anyone can suggest changes or upgrades to the system. If a majority of the network users agree that the new version of the code with the upgrade is sound and worthwhile then Bitcoin can be updated. Perhaps the most profound facet of blockchain and Bitcoin is the ability for anyone, regardless of ethnicity, gender, or cultural background, to use it.
According to the world bank there are nearly 2 billion adults that do not have bank accounts or any means of storing their money or wealth.
These people often earn little money that is paid in physical cash. They then need to store this physical cash in hidden locations in their homes or places of living leaving them subject to robbery or unnecessary violence.
Keys to a bitcoin wallet can be stored on a piece of paper, a cheap cell phone, or even memorized if necessary. For most people, it is likely that these options are more easily hidden than a small pile of cash under a mattress. Blockchains of the future are also looking for solutions to not only be a unit of account for wealth storage, but also to store medical records, property rights, and a variety of other legal contracts.
While there are significant upsides to the blockchain, there are also significant challenges to its adoption. The roadblocks to the application of blockchain technology today are not just technical. The real challenges are political and regulatory, for the most part, to say nothing of the thousands of hours read: money of custom software design and back-end programming required to integrate blockchain to current business networks.
Here are some of the challenges standing in the way of widespread blockchain adoption. Although blockchain can save users money on transaction fees, the technology is far from free.
In the real world, the power from the millions of computers on the bitcoin network is close to what Denmark consumes annually. Despite the costs of mining bitcoin, users continue to drive up their electricity bills in order to validate transactions on the blockchain. When it comes to blockchains that do not use cryptocurrency, however, miners will need to be paid or otherwise incentivized to validate transactions. Some solutions to these issues are beginning to arise.
For example, bitcoin mining farms have been set up to use solar power, excess natural gas from fracking sites, or power from wind farms. Bitcoin is a perfect case study for the possible inefficiencies of blockchain. Although other cryptocurrencies such as Ethereum perform better than bitcoin, they are still limited by blockchain. Legacy brand Visa, for context, can process 24, TPS.
Solutions to this issue have been in development for years. There are currently blockchains that are boasting over 30, transactions per second. While confidentiality on the blockchain network protects users from hacks and preserves privacy, it also allows for illegal trading and activity on the blockchain network. The website allowed users to browse the website without being tracked using the Tor browser and make illegal purchases in Bitcoin or other cryptocurrencies.
Current U. This system can be seen as both a pro and a con. It gives anyone access to financial accounts but also allows criminals to more easily transact. Many have argued that the good uses of crypto, like banking the unbanked world, outweigh the bad uses of cryptocurrency, especially when most illegal activity is still accomplished through untraceable cash.
Many in the crypto space have expressed concerns about government regulation over cryptocurrencies. While it is getting increasingly difficult and near impossible to end something like Bitcoin as its decentralized network grows, governments could theoretically make it illegal to own cryptocurrencies or participate in their networks. Over time this concern has grown smaller as large companies like PayPal begin to allow the ownership and use of cryptocurrencies on its platform.
First proposed as a research project in , blockchain is comfortably settling into its late twenties. With many practical applications for the technology already being implemented and explored, blockchain is finally making a name for itself at age twenty-seven, in no small part because of bitcoin and cryptocurrency.
As a buzzword on the tongue of every investor in the nation, blockchain stands to make business and government operations more accurate, efficient, secure, and cheap with fewer middlemen. Blockchain Technology. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Blockchain Basics. Blockchain History. Blockchain and Industry. Blockchain and the Economy.
Blockchain and Banking. Blockchain ETFs. Table of Contents Expand. What is Blockchain? Storage Structure. Is Blockchain Secure? Bitcoin vs. Blockchain vs. How is Blockchain Used? Advantages and Disadvantages of Blockchain. This way, they allow access to the blockchain only to selected users. It is not accessible to everyone, which makes it ideal for banks and other centralized organizations. For example, Hyperledger. Federated blockchain is a blockchain that is run by a group.
This makes them faster and scalable as the group dedicates the validation of the transactions. To get started, pre-selected nodes are made by leaders. These nodes that dictate both the transactions and also the persons that can participate in the blockchain. Examples include EWF, R3, etc. Learn more about the different features of blockchain technology now! There are six key principles that can ensure proper safety and allow organizations to create appropriate transactional records.
And all of these ensure proper safety to all of the data. A block is part of the bitcoin network. Transactional data is permanently stored in a block. Also, the blocks are always sequential, and new data is added to the latest block. In simple words, it is a record book with a fixed size to it.
Once a block is completed, a new block is generated, which is then attached to the chain of blocks. All the information in the block is encrypted and can only be accessed by the receiver and sender. Blocks are created automatically by blockchain when the block size is reached. As the block is a file, the transactions are kept on the file until it becomes full. They are listed linearly and are connected so that the latest block is connected with the previous one. To identify a block, a hash value is generated using a mathematical function.
It also indicates any changes that are made to a block. The removal of blocks from a blockchain entirely depends on how it is handled. It is not possible to manually remove a block. However, if it is lost, the blockchain generally tries to rebuild the database using other peers. Once they are verified, they can be deleted to lower the blockchain size as it does not require anyone to do normal operations.
It can be re-downloaded again when needed. This process is known as pruning. Want to know more about the working of blockchain? Read our previous article to understand How blockchain works. A hash value assigned to a block is used to chain them together. If the hash value is changed, this means someone is trying to spoof the data stored in the hash. The link between blocks is done by storing the hash value of the previous block.
For example, block 3 will store the hash value of block 2, and so on. The data stored on the blockchain is protected with proper encryption using a digital signature. This makes the data written in a block as a one-time process only. It cannot be altered by any means. Blockchain acts as a data structure, which means that it can be used to store any form of data. Industries can make proper use of blockchain record types as they can completely take advantage of what it has to offer.
Traditional databases work in the form of a client-server relationship. The client can modify data and uses a centralized server to store all the information. Authentication is required to gain access to the data, which makes the database administrator a powerful entity in the whole setup. The blockchain database is completely decentralized and consists of several nodes.
The nodes take part in the consensus when new data is added. It provides a complete decentralized solution. Blockchain database offers better transparency and integrity.
One more difference between these two types of databases is how they read and write data. The traditional database uses CRUD, whereas blockchain uses sequential data writing.
If you want to learn more about the difference, we recommend reading the Blockchain vs. Database article. Every block on a blockchain has a unique identifier. It is the hash value that acts as a unique identifier. This means that no two block identifiers will be identical.
The security of the blocks is kept by connecting each block to the previous one using hash identifiers. This means that the block data cannot be changed or altered as the hash value will change.
Moreover, each data stored in a block is also protected using cryptography. The data can be unlocked by the network participant who created it in the first place. A private key is required to access the data. The transactions stored in a block are digitally signed and, hence, cannot be altered, giving the block the required integrity and transparency when needed. Double spending is the process of spending the same digital currency twice without network security, noticing it. Double spending is one of the biggest problems in the market, and the financial institution takes extra caution to ensure that they prevent double-spending at any cost.
It is mainly done by duping the network to think that the original amount is never spent, making it available to be used for other transactions.
Double spending is prevented by blockchain with the help of the consensus algorithm. The consensus algorithm ensures that the transaction is genuine and records it in the block. It is thus verified by multiple nodes making double-spending possible.
Check out the top 50 companies using blockchain technology to learn more about it. The consensus algorithm is the method of gaining consensus on a change of data over the system or distributed network.
Consensus algorithms are heavily used in blockchains as they enable the network of unknown nodes to reach consensus on the data that is being stored or shared through the blockchain. There are many types of consensus algorithms or techniques out there. The most popular consensus algorithm includes. Learn more about these algorithms now from our guide on consensus algorithms. Proof-of-Work PoW works by asking nodes to provide proof of their work by providing the necessary computation power to solve tough mathematical puzzles.
The transactions are stored in blocks where block difficulty determines the difficulty of mining for miners. The miners are the special nodes that take part in providing the computational power to the blockchain. Apply these same standards to your blockchain solution.
In the future, blockchain solutions from different companies or even industries will be able to communicate and share digital assets with each other seamlessly. For organizations whose use cases turn on blockchain ecosystem diversity and scalability, the potential benefits of integration are clear: Having more partnerships within a blockchain ecosystem can drive greater value and boost blockchain ROI.
Likewise, interoperability can make it possible to customize and enhance blockchain solutions without rendering them obsolete. Unfortunately, many of the technical challenges preventing blockchain integration persist. Different protocols—for example, Hyperledger Fabric and Ethereum—cannot integrate easily. Think of them as completely different enterprise systems.
To share information between these two systems, you would need to create an integration layer laborious and painful or standardize on a single protocol. Even if the technical challenges were solved, connecting two blockchains is much harder than connecting two networks.
Because with blockchain integration, you are connecting two value networks that may not necessarily talk to each other. You must also be able to guarantee that the data packets point to the same places in both blockchains, which helps maintain data integrity and auditability. Right now, the Hyperledger Foundation and others are working to establish technical standards that define what constitutes a blockchain, and to develop the protocols required to exchange assets.
These efforts will continue, and as they do, convergence of protocols will likely accelerate and standards emerge. Likewise, interoperable technologies will eventually mature, with new protocols that support communication between different technologies becoming broadly available. Until then, organizations can enjoy some integration benefits by working within a consortium model in which all participants deploy the same solutions and protocols.
When integration challenges are solved, those already sharing common processes and standards within a consortium may enjoy the competitive advantage of momentum. There are also bridge technologies available that make it possible to move digital assets between blockchains. Think of the process like this: You move digital assets from point A to point B in a car. At point B, you transfer the assets from the car to a train, which takes it to its final destination at point C.
Few technologies today are as misunderstood as blockchain. With this in mind, join us as we correct a few common misconceptions about blockchain and its enterprise potential:. Misconception: Standards must be in place before my organization can adopt a production solution.
Reality check: Currently, there are no overarching technical standards for blockchain, and it is unrealistic to think we will get them soon, if ever, across all use cases. There are, however, some technical and business standards for specific uses, such as cross-border transactions and smart contracts.
These use case-based standards are established, if not commonly accepted, which means you may not have to wait for universal standards to emerge before adopting a blockchain production solution. Misconception: I read about how quantum computing may completely invalidate blockchain as we know it.
Reality check: That is a possibility, but it may never happen. Quantum computing provides enormous computing power that could be used to crack current encryption schemes.
On the flip side, quantum computing may be able to help cryptologists generate stronger encryption algorithms. Reality check: Not quite. Blockchain technologies, like the systems and tools that users need to interact with them, require IT maintenance and support. Finally, because they are still new, for some time blockchain platforms will likely run in parallel with current platforms, which may add short-term costs.
So, no, blockchain is not free. That said, understanding its true cost requires identifying the net value you may be able to harvest from blockchain cost savings and revenue generation. In October , global insurance and asset management firm Allianz teamed up with several other insurance and reinsurance organizations to explore opportunities for using blockchain to provide client services more efficiently, streamline reconciliations, and increase the auditability of transactions.
Over the course of the following year, the joint effort—the Blockchain Insurance Industry Initiative B3i —welcomed 23 new members from across the insurance sector and began market-testing a new blockchain reinsurance prototype. In addition to participating in B3i, Allianz is working internally to determine if the same basic mechanism can be deployed across its global operations to facilitate interaction among multiple entities—a possibility that, while promising, presents several technical challenges.
For example, can a blockchain platform be embedded in the architecture of systems that already communicate with each other? How would policy administration system designs for blockchain differ from traditional designs? And is it even possible to scale existing prototypes sufficiently to meet global enterprise needs? For now, the B3i use case is laying the groundwork for future collaboration and even standardization across the insurance sector. This is what we are aiming for.
The Hong Kong Monetary Authority HKMA is the central banking authority responsible for maintaining the monetary and banking stability and international financial center status of Hong Kong. After researching the value proposition of the technology alongside the Hong Kong Applied Science and Technology Research Institute, the HKMA published a white paper in November 12 that raised more than 20 governance, legal, regulatory, and operational concerns that the financial industry should address when implementing blockchain or DLT.
Leaders then decided to develop a proof of concept PoC to test the value proposition as well as to address those concerns. The proof of concept focused on trade finance for banks, buyers and sellers, and logistics companies. It leveraged DLT to create a platform for automating labor-intensive processes via smart contracts, reducing the risk of fraudulent trade and duplicate financing, and improving the transparency and productivity of the industry as a whole.
DLT provided immutable data integrity, enhanced reliability with built-in disaster recovery mechanisms, enabled near-real-time updates of data across the nodes, and acted as a repository for transactional data.
The trade finance PoC ran on a private blockchain network for a week period from December through March , with five Hong Kong banks participating. In addition to trade finance, HKMA developed two other successful PoCs for mortgage applications and digital identification. With seven banks now participating in the trade finance blockchain, HKMA intends to launch a production pilot in the second half of It plans to have a full commercialized solution in production by Also, there are a number of other banks waiting in the queue to participate in this platform.
Both authorities plan to implement the cross-border infrastructure i. Global Trade Connectivity Network at around the same time that it launches its domestic platform. Then, if other countries want to participate in the network, they would plug their local platform into the integrated distributed ledger technology infrastructure.
We intend to work through those issues over the next year. But so far, so good. In addition, a common standard for digitization of the documentations and trades is a critical success factor for this infrastructure.
Blockchain to blockchains: Broad adoption and integration enter the realm of the possible
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Ethereum Ethereum Classic. So, make sure to take a blockchain quiz when you can. These blockchain interview questions will help you prepare and clear the interview with confidence. As a candidate, you need to go through a heap of questions about blockchain.
This is where we come in as we are going to discuss 50 blockchain questions and answers. All of these questions have a different level of difficulty attached to it. To ensure that you can go through them without any issue, we will group similar questions. These questions will help you engage with the answers thoroughly and prepare in the best form possible. Blockchain is a peer-to-peer network that has its consensus algorithm. The main reason behind its trustworthiness is how it stores and deal with data.
It uses cryptographic algorithms to ensure that the data is protected against any third-party malicious actor. This means only the entity that owns the data will be able to access it. Also, the data stores in the blockchain can be traced anytime, which brings in transparency.
One more thing that makes blockchain trustworthy is the data integrity feature. With this feature, data cannot be changed after it is written. Note: This is one of the most common questions about blockchain. Ethereum is a decentralized system, just like bitcoin.
It is completely decentralized, which means that there is no centralized authority controlling it. It is developed by Vitalik Buterin and uses a different approach when compared to bitcoin.
Just like bitcoin, digital payments can be made on the platform. It uses smart contracts to automate legal contracts within two peers. This is really one of the important interview questions on Ethereum. A blockchain is a distributed peer-to-peer network. It offers peers to record immutable data and transparency. The difference between bitcoin and Ethereum is their approach.
Ethereum, being the 2nd generation blockchain solution, improves on bitcoin in almost every possible way. The main difference is how they are trying to solve the industry problem. Conceptually, bitcoin is a digital currency, whereas Ethereum is about smart contracts. This also makes Ethereum more scalable compared to bitcoin. This is another one of the important interview questions on Ethereum.
A public key is used in the cryptographic algorithm that allows peers in a blockchain to receive funds in his wallet. The public key is attached to a private key, creating a pair of keys. Both the private-public key pair is used to ensure that the security of the blockchain is ensured.
A public key is an alphanumeric string that is unique to a particular node or address. A private key is an alphanumeric phrase that is used in pair with a public key to provide encryption and decryption.
It is part of cryptographic algorithms that are used in blockchain security. The key is assigned to the key generator and should stay with him only. If he fails to do so, anyone can access the details or data located within the wallet or the address for which the private key is assigned. You will face this type of interview question for a blockchain architect position. Want to learn about the difference between a public key and a private key?
Check out our guide on the public key vs. Note: This is one of the most important questions on blockchain technology. We suggest reading more about the blockchain ecosystem, as the interview can easily ask follow-up questions depending on the answer you give.
There are many different types of blockchain technology ledger. The first type of a ledger that we know from bitcoin is the public blockchain. They are truly decentralized in nature. Banking ledgers are used to ensure that the transactions can take place correctly. The significant difference between a banking ledger and a blockchain is how they are governed.
The blockchain is decentralized in nature; however, banking ledgers are completely centralized as banks govern them. The blockchain is completely transparent and trustworthy when compared to bank ledgers.
Banks are keen on blockchain technology to automate most of their banking functionalities and provide a trustworthy approach. However, they are more likely to use federated blockchain or private blockchain to ensure that they still control their operations. Note: This question is also common in blockchain exam questions if you are appearing in a written format.
A public blockchain is public in nature. They are entirely decentralized, where anyone can read, write, and join. No central authority controls the blockchain. Also, all the data can be validated as data once are written cannot be altered. Key examples of public blockchains include Bitcoin and Ethereum.
A private blockchain is private in nature. They operate with a central authority in control. This way, they allow access to the blockchain only to selected users. It is not accessible to everyone, which makes it ideal for banks and other centralized organizations. For example, Hyperledger.
Federated blockchain is a blockchain that is run by a group. This makes them faster and scalable as the group dedicates the validation of the transactions. To get started, pre-selected nodes are made by leaders. These nodes that dictate both the transactions and also the persons that can participate in the blockchain. Examples include EWF, R3, etc. Learn more about the different features of blockchain technology now! There are six key principles that can ensure proper safety and allow organizations to create appropriate transactional records.
And all of these ensure proper safety to all of the data. A block is part of the bitcoin network. Transactional data is permanently stored in a block. Also, the blocks are always sequential, and new data is added to the latest block.
In simple words, it is a record book with a fixed size to it. If some of your data needs to remain onshore in specific jurisdictions eg client data in Singapore then you will need to find a solution that fits. Something like client data onshore in a regular database, transaction data on an internal blockchain. Are there Chinese Walls to consider? If so, a blockchain may not be a good solution given that the purpose is to replicate data. Privacy issues can be overcome with encryption where decryption keys are held where they are needed, however there is a dynamic between encrypting data and also allowing nodes to have the necessary visibility to validate it, especially for transactional data.
C is also on the blockchain. By putting the transaction on the blockchain, C can see that A is communicating with B. Is that acceptable from a commercially sensitive perspective? I sometimes hear this justification for internal blockchains: it is easy to give access to a regulator or auditor — they can just tap into your blockchain and start from there.
Yes, but is it really that much harder to give them read-access to your regular databases? Another, probably better argument is around interoperability — if you have an internal database that is created as a blockchain ie rows are added containing block hashes and there is some server software that can interact with the outside world in a peer-to-peer way then it makes it easier to connect with other parties, should you want them to be able to write to this database. Net-net it is positive for technology that blockchains are being thrown at internal problems, even if initially there are no clear compelling reasons why a blockchain should be used.
Please do comment with good reasons why blockchains should be used over traditional databases for internal use cases! View all posts by antonylewis Nice overview Antony. Great to see some complex topical discussion simplied for a wider audience. Hope to see more coming out of your blog soon!
If you are a large institution you could potentially control processing costs by distributing work normally done in batches, as it comes in on the chain, lowering your average dailey MIPs… processor time on a mainframe is very expensive. Processors are expensive and the decision on how many to pay for is based largely on peak processing. If you can control the transaction flow then you can lower a major expense by spreading out the work and lowering the peaks. An internal chain may provide that ability.
There is no viable alternative for a large mainframe system to just move to another tech at this time the expense of changing hundreds of thousands of lines of code prevents it… noting that some of this code is twenty years old and still performs reliably and efficiently.
How deep the rabbit hole will you go? You choose what you want to be tested on. Study smarter not harder. Demo Quick Check. Give it a try. Sandbox See Where You Stand. Exam Ultimate Knowledge Assessment.
Legal - Regulatory. Visual Aid. Decision Path. What others say. I feel more confident every time the topic comes up with my peers. Lola Sanchez. Questions are well thought-out, and help me gain confidence ahead of my certifications. Ali Z. My colleagues and I found the Blockchain Knowledge exam to be very useful. Everyone in the office wants to take the exam now. Max Hennessy. Natalie Burgess. The exam I took was well worth it, together with the glossary it prepared me more than expected for my course exam.
I nailed it on the final! In contrast, a database is designed to house significantly larger amounts of information that can be accessed, filtered, and manipulated quickly and easily by any number of users at once.
Large databases achieve this by housing data on servers that are made of powerful computers. These servers can sometimes be built using hundreds or thousands of computers in order to have the computational power and storage capacity necessary for many users to access the database simultaneously. While a spreadsheet or database may be accessible to any number of people, it is often owned by a business and managed by an appointed individual that has complete control over how it works and the data within it.
So how does a blockchain differ from a database? One key difference between a typical database and a blockchain is the way the data is structured.
A blockchain collects information together in groups, also known as blocks, that hold sets of information. A database structures its data into tables whereas a blockchain, like its name implies, structures its data into chunks blocks that are chained together.
This makes it so that all blockchains are databases but not all databases are blockchains. This system also inherently makes an irreversible timeline of data when implemented in a decentralized nature. When a block is filled it is set in stone and becomes a part of this timeline.
Each block in the chain is given an exact timestamp when it is added to the chain. For the purpose of understanding blockchain, it is instructive to view it in the context of how it has been implemented by Bitcoin. Like a database, Bitcoin needs a collection of computers to store its blockchain. For Bitcoin, this blockchain is just a specific type of database that stores every Bitcoin transaction ever made. Imagine that a company owns a server comprised of 10, computers with a database holding all of its client's account information.
This company has a warehouse containing all of these computers under one roof and has full control of each of these computers and all the information contained within them. Similarly, Bitcoin consists of thousands of computers, but each computer or group of computers that hold its blockchain is in a different geographic location and they are all operated by separate individuals or groups of people.
However, private, centralized blockchains, where the computers that make up its network are owned and operated by a single entity, do exist. In a blockchain, each node has a full record of the data that has been stored on the blockchain since its inception. For Bitcoin, the data is the entire history of all Bitcoin transactions. If one node has an error in its data it can use the thousands of other nodes as a reference point to correct itself.
This way, no one node within the network can alter information held within it. This system helps to establish an exact and transparent order of events. This ensures that whatever changes do occur are in the best interests of the majority. Each node has its own copy of the chain that gets updated as fresh blocks are confirmed and added.
This means that if you wanted to, you could track Bitcoin wherever it goes. For example, exchanges have been hacked in the past where those who held Bitcoin on the exchange lost everything. While the hacker may be entirely anonymous, the Bitcoins that they extracted are easily traceable. If the Bitcoins that were stolen in some of these hacks were to be moved or spent somewhere, it would be known. Blockchain technology accounts for the issues of security and trust in several ways.
First, new blocks are always stored linearly and chronologically. After a block has been added to the end of the blockchain, it is very difficult to go back and alter the contents of the block unless the majority reached a consensus to do so.
Hash codes are created by a math function that turns digital information into a string of numbers and letters. If that information is edited in any way, the hash code changes as well. If they were to alter their own single copy, it would no longer align with everyone else's copy. When everyone else cross-references their copies against each other, they would see this one copy stand out and that hacker's version of the chain would be cast away as illegitimate.
Such an attack would also require an immense amount of money and resources as they would need to redo all of the blocks because they would now have different timestamps and hash codes. Not only would this be extremely expensive, but it would also likely be fruitless. Doing such a thing would not go unnoticed, as network members would see such drastic alterations to the blockchain. The network members would then fork off to a new version of the chain that has not been affected.
This would cause the attacked version of Bitcoin to plummet in value, making the attack ultimately pointless as the bad actor has control of a worthless asset. The same would occur if the bad actor were to attack the new fork of Bitcoin. It is built this way so that taking part in the network is far more economically incentivized than attacking it. The goal of blockchain is to allow digital information to be recorded and distributed, but not edited.
Blockchain technology was first outlined in by Stuart Haber and W. Scott Stornetta, two researchers who wanted to implement a system where document timestamps could not be tampered with. The Bitcoin protocol is built on a blockchain. The key thing to understand here is that Bitcoin merely uses blockchain as a means to transparently record a ledger of payments, but blockchain can, in theory, be used to immutably record any number of data points. As discussed above, this could be in the form of transactions, votes in an election, product inventories, state identifications, deeds to homes, and much more.
Currently, there is a vast variety of blockchain-based projects looking to implement blockchain in ways to help society other than just recording transactions.
One good example is that of blockchain being used as a way to vote in democratic elections. For example, a voting system could work such that each citizen of a country would be issued a single cryptocurrency or token. Each candidate would then be given a specific wallet address, and the voters would send their token or crypto to whichever candidate's address they wish to vote for. The transparent and traceable nature of blockchain would eliminate the need for human vote counting as well as the ability of bad actors to tamper with physical ballots.
Banks and decentralized blockchains are vastly different. But it turns out that blockchain is actually a reliable way of storing data about other types of transactions, as well. For example, IBM has created its Food Trust blockchain to trace the journey that food products take to get to its locations. Why do this? The food industry has seen countless outbreaks of e Coli, salmonella, listeria, as well as hazardous materials being accidentally introduced to foods.
In the past, it has taken weeks to find the source of these outbreaks or the cause of sickness from what people are eating. If a food is found to be contaminated then it can be traced all the way back through each stop to its origin. Not only that, but these companies can also now see everything else it may have come in contact with, allowing the identification of the problem to occur far sooner, potentially saving lives.
This is one example of blockchains in practice, but there are many other forms of blockchain implementation. Perhaps no industry stands to benefit from integrating blockchain into its business operations more than banking. Financial institutions only operate during business hours, five days a week. That means if you try to deposit a check on Friday at 6 p. Even if you do make your deposit during business hours, the transaction can still take one to three days to verify due to the sheer volume of transactions that banks need to settle.
Blockchain, on the other hand, never sleeps. By integrating blockchain into banks, consumers can see their transactions processed in as little as 10 minutes, basically the time it takes to add a block to the blockchain, regardless of holidays or the time of day or week. With blockchain, banks also have the opportunity to exchange funds between institutions more quickly and securely.
In the stock trading business, for example, the settlement and clearing process can take up to three days or longer, if trading internationally , meaning that the money and shares are frozen for that period of time. Given the size of the sums involved, even the few days that the money is in transit can carry significant costs and risks for banks.
Blockchain forms the bedrock for cryptocurrencies like Bitcoin. The U. In , some of the banks that ran out of money were bailed out partially using taxpayer money.
Likewise, operational siloes keep some companies from either developing clear business plans around blockchain or collaborating with ecosystem partners for mass adoption. In the latest blockchain trend that will unfold over the next 18 to 24 months, expect to see more organizations push beyond these obstacles and turn initial use cases and PoCs into fully deployed production solutions. Though the tactics they use to achieve this goal may differ by sector and unique need, many will likely embrace three approaches that, together, comprise the latest blockchain trend:.
Because we are only now coming to the end of a hot blockchain hype cycle, many people assume that enterprise blockchain adoption is further along than it actually is. In reality, it will take time and dedication to get to large-scale adoption.
But when it does arrive, it will be anchored in the strategies, unique skillsets, and pioneering use cases currently emerging in areas such as trade, finance, cross-border payments, and reinsurance. Regardless of industry bias, blockchain use cases that feature a clear path to commercialization often stand a better chance of reaching production.
By focusing available resources exclusively on those use cases and PoCs offering a path to commercialization, CIOs are offering clear incentives for stakeholders and partners, driving ROI in individual blockchain solutions, and potentially creating additional revenue or cost savings opportunities. In a way, they are also formalizing and legitimizing blockchain development strategies, both prerequisites for further refining project goals, setting timelines, and recruiting specialized talent.
By answering the following questions, CIOs can assess the commercial potential of their blockchain use cases:. One final point to keep in mind: Blockchain use cases do not necessarily need to be industry-specific or broadly scoped to have commercial potential. In the coming months, as the trend toward mass adoption progresses, expect to see more use cases emerge that focus on enterprise-specific applications that meet unique value chain issues across organizations.
If these use cases offer potential revenue opportunities down the road—think licensing, for example—all the better. As blockchain use cases grow in scope, scale, and complexity, the need for standardized technologies, platforms, and skillsets becomes more pressing each day.
Unfortunately, there are currently no overarching technical standards for blockchain, and it is unrealistic to think we will get them soon, if ever, across all use cases. For CIOs, this presents a pressing question: Do you want to wait for standards to be defined by your competitors, or should you and your team work to define the standards yourselves? For financial services giant JP Morgan Chase, sitting on the sidelines while others in the financial sector developed blockchain standards was not an option.
In , the firm launched Quorum, an open-source, enterprise-ready distributed ledger and smart contracts platform created specifically to meet the needs of the financial services industry. Not all IT shops are in a position to emulate this strategy for influencing the development of blockchain standards. But there are steps that CIOs can take to promote standardization within their companies and industries rather than waiting passively for universal standards to emerge.
For example, by plugging into external developer ecosystems, IT shops can begin influencing standardization discussions and exchanging best practices with like-minded organizations. Internally, CIOs can empower their teams to make decisions that drive standards within company ecosystems. Finally, in many organizations, data management and process standards already exist. Apply these same standards to your blockchain solution. In the future, blockchain solutions from different companies or even industries will be able to communicate and share digital assets with each other seamlessly.
For organizations whose use cases turn on blockchain ecosystem diversity and scalability, the potential benefits of integration are clear: Having more partnerships within a blockchain ecosystem can drive greater value and boost blockchain ROI.
Likewise, interoperability can make it possible to customize and enhance blockchain solutions without rendering them obsolete. Unfortunately, many of the technical challenges preventing blockchain integration persist.
Different protocols—for example, Hyperledger Fabric and Ethereum—cannot integrate easily. Think of them as completely different enterprise systems. To share information between these two systems, you would need to create an integration layer laborious and painful or standardize on a single protocol. Even if the technical challenges were solved, connecting two blockchains is much harder than connecting two networks.
Because with blockchain integration, you are connecting two value networks that may not necessarily talk to each other. You must also be able to guarantee that the data packets point to the same places in both blockchains, which helps maintain data integrity and auditability. Right now, the Hyperledger Foundation and others are working to establish technical standards that define what constitutes a blockchain, and to develop the protocols required to exchange assets.
These efforts will continue, and as they do, convergence of protocols will likely accelerate and standards emerge. Likewise, interoperable technologies will eventually mature, with new protocols that support communication between different technologies becoming broadly available.
Until then, organizations can enjoy some integration benefits by working within a consortium model in which all participants deploy the same solutions and protocols. When integration challenges are solved, those already sharing common processes and standards within a consortium may enjoy the competitive advantage of momentum. There are also bridge technologies available that make it possible to move digital assets between blockchains.
Think of the process like this: You move digital assets from point A to point B in a car. At point B, you transfer the assets from the car to a train, which takes it to its final destination at point C. Few technologies today are as misunderstood as blockchain.
With this in mind, join us as we correct a few common misconceptions about blockchain and its enterprise potential:. Misconception: Standards must be in place before my organization can adopt a production solution.
Reality check: Currently, there are no overarching technical standards for blockchain, and it is unrealistic to think we will get them soon, if ever, across all use cases.
There are, however, some technical and business standards for specific uses, such as cross-border transactions and smart contracts. These use case-based standards are established, if not commonly accepted, which means you may not have to wait for universal standards to emerge before adopting a blockchain production solution.
Misconception: I read about how quantum computing may completely invalidate blockchain as we know it. Reality check: That is a possibility, but it may never happen. Quantum computing provides enormous computing power that could be used to crack current encryption schemes. On the flip side, quantum computing may be able to help cryptologists generate stronger encryption algorithms. Reality check: Not quite. Blockchain technologies, like the systems and tools that users need to interact with them, require IT maintenance and support.
Finally, because they are still new, for some time blockchain platforms will likely run in parallel with current platforms, which may add short-term costs. So, no, blockchain is not free. That said, understanding its true cost requires identifying the net value you may be able to harvest from blockchain cost savings and revenue generation.
In October , global insurance and asset management firm Allianz teamed up with several other insurance and reinsurance organizations to explore opportunities for using blockchain to provide client services more efficiently, streamline reconciliations, and increase the auditability of transactions.
Over the course of the following year, the joint effort—the Blockchain Insurance Industry Initiative B3i —welcomed 23 new members from across the insurance sector and began market-testing a new blockchain reinsurance prototype.