Beyond the buzz: Blockchain’s real world applications
With so many think pieces and LinkedIn posts heralding the new era of blockchain without actually explaining what blockchain is, Lucy von Sturmer decided it was time to set the record straight. Here, she lists several real world applications for the technology, some of which are already happening.
Until recently, my interest and understanding of blockchain was limited. I’m not a developer and I have little interest in cryptocurrency. But, over the past few weeks, some pretty interesting things have started to happen. These events have sparked my interest and expanded the promise, and potential, of blockchain beyond the world of finance.
The solution to our (digital) problems?
The concept of uniqueness provided by blockchain is pretty amazing. Imagine what this could mean for digital content creators who, for the first time ever, could protect their ideas or limit their work. (Spoiler alert: there’s already a market for this within the art industry).
Nice piece Lucy. I’m a bit like you on this, I get it in the broadest of principles and can see how it might be applied across many sectors. My main question is the one of scalability, would the proliferation of blockchaining lead inevitably lead to massive farms such as the bitcoin ones written up here?
https://www.politico.com/magazine/story/2018/03/09/bitcoin-mining-energy-prices-smalltown-feature-217230
Or would block chaining for other purposes not need such enormous processing capacity?
Hi Antony,
To answer your question we need to consider the protocol and consensus mechanism used in the proposed solution.
For context, there are broadly 3 generations of blockchain protocols which is constantly evolving: 1. Stores of value and money transfer (ie. Bitcoin) 2. Smart contracts and dApps (e.g. Ethereum, Neo) 3. Scaleability and inter-operability (e.g. EOS, Icon, Wanchain, Aion).
Each of the above has its own consensus mechanism (CM) which form the rules around how decisions are made in the protocol, including how transactions or blocks are verified. The CM is often forgotten by the media/observers, but it is really what holds the whole thing together.
The Bitcoin protocol (not to be mistaken with the bitcoin asset) uses Proof of work. This CM validates transactions through the process of ‘mining’, where ‘miners’ compete to solve a complex computational problem. The miner who solves it first and verifies the transaction in a block, is rewarded with some bitcoin (or whatever the base-token/currency happens to be of that protocol).
The nature of how the protocol is structured means solving the computational problem gets increasingly more difficult over time. As it becomes more difficult to solve, the more GPU (or computational grunt) you need, thus leading to ridiculous energy bills.
However, not all CMs work that way (such as proof of stake), and in fact, many different versions are being created that don’t rely on horsepower. Like with all things, there are trade-offs and design principles one needs to optimise for.
As you can see from the above, the solutions to industry problems mentioned are unlikely to be solved with the Bitcoin protocol. More likely it will be something that uses smart contracts.
When you spend some time to understand how blockchain works, it really is fascinating. Just remember to delineate crypto-currencies from blockchain as they are not the same thing.
Hope that helps!
Hugo, that is a superb and very helpful answer. Delineating proof of work with proof of stake has opened the doors of perception for me on this issue. Much appreciated. Cheers.
A great topic and some fantastic comments too. A refreshing change! I ran a workshop last week for some clients on this. They came up with 12 different ideas to test. One of the key issues we found, was to understand whether blockchain helps solve an existing problem, creates a new way to do business or is needed at all but could be solved with existing technologies and business processes.
Just some blue-sky thinking here, Andy or Hugo or anyone else. Would it be theoretically possible to use blockchain to encrypt social media data? I’m thinking of a potential ‘freeware’ social network along the lines of FB that could prevent unwanted data harvesting/scraping. Something built of individual modules rather than a centralised structure. Taking into account anything along these lines would need a critical mass of participant take-up to succeed, I’m also mindful of the success (at the time) of Linux.
Hi Antony,
While I am by no means a technical expert on blockchain, I would say that you can.
One of the fundamental elements of blockchain is cryptography (which is the original intended meaning for ‘crypto’, although has now morphed into ‘cryptocurrencies’), which is used both as a way to secure and verify transactions on the blockchain. This occurs through the process of hashing, where any input can be converted into a random, fixed size output.
For example, data or content can be hashed into a 256 bit output. This output is unique, light-weight and extremely difficult to backwards-engineer due to the possible combinations of 2^256. Any slight change in the input will result in a completely different output. Technologies such as IPFS could further enable distributed file/content storage which would be protected by cryptography.
Re the issue of data, there already exist several ICOs that purport to ‘give the data back to the user’, enabling them to actively choose how their data is used and/or monetised by various platforms, including social media.
I think the real challenges, at least in the medium-to-long term are:
1. How these blockchain solutions scale at a developer, user and business level (particularly onboarding where the current UX is terrible) (nb> scaling throughput is a separate and immediate challenge)
2. How the blockchain solutions will integrate with each other and non-blockchain models.
I believe 2018 will continue to see a raft of new protocols and dApps, all which will further fragment an already confusing ecosystem. Without change, this will constrain the value of each individual network and could lead to the ‘winner takes all’ scenario we see in the current tech space (e.g. FB, Google etc).
When inter-operability between protocols and traditional solutions becomes fully functional (it is in development but early days), we will see a new wave of value unlocked that truly leverages the power of a distributed network.
Thank you again, Hugo. This exchange has been most informative.