Making sense of blockchain

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I remember not so long ago, one of my staff came to me in the middle of the day and asked to leave early as she was very distressed due to her parents being evicted from their family home. She asked to leave immediately and to head home. They had lived in their home for almost forty years and was the proud holder of the title. However as was often the case in the rural areas of the Philippines, the Land Registry had it under another’s name. As a few days passed it transpired the other “owner” had through contacts managed to convince the authorities that they should evict the dear old couple! within a matter of weeks that unlawful “owner” had taken possession.

so what?

So you may ask yourself, what on earth has this to do with bitcoin and blockchain? Respectively, a currency based upon cryptography and blockchain, the cryptographic technology that underlies bitcoin, has uses well beyond cash and currency! 

It brings a way for people who do not know or trust each other to create records of who owns what and therefore is a way to preserve the truth, upon which a reliable world can be built. 

I can only hope the Philippines and many other rapidly emerging economies can start to put together distributed ledgers for land/property registry. For years they have toiled with it and now we are on the cusp of a solution. 

And, of course it won’t stope there with so many domestic and international distributed ledgers required……it’s a huge opportunity!

Blockchain started out in the brain of Satoshi Nakamoto, the brilliant and relatively unknown creator of bitcoin, the P2P E-Cash. For it to work as cash, it had to change hands without diversion to the wrong account or being spent twice. to complete the dream of a de-centralized system had to be without come-back on any trusted 3rd party. And it’s Blockchain that replaces the 3rd party. A database that registers all bitcoin payments and despite its openness, it’s guaranteed trustworthy, care of its consensus mechanism.

how it works

Let’s say I’ve decided to have something done at my home and bring in a contractor to do the work. We both have bitcoin accounts (software accessing the distributed ledger (the blockchain). It starts with my account proposing that the blockchain be changed so as to show my account has less in it while the contractor has a little more. The entire network now whirls into action, checking ledger, amounts available and when everything looks good-to-go, specialized nodes (Miners) will package it all along with other similarly reputable transaction to create a new block for the blockchain. All sounds pretty easy to me!

The trick of it all, is the # (hash) functionality that’s a one way street. Each part creates a unique hash that is generated from the data, however the data can’t be back-generated from the # and thus secures various “Ins & outs” for anyone with an anterior motive! 

That hash is put, along with some other data, into the header of the proposed block. The hash of the header becomes the new block’s identifier, and that block is now part of the ledger. my payment to the contractor, and all the other transactions the block contains, are confirmed.

Blockchain was built as an open platform and therefore does not have to register only bitcoin transactions. The example of such a platform is of course the internet or general operating systems. As a result, there is now a public database!

As of now, Blockchain falls into three main categories:

  1. takes advantage that any kind of asset is able to be transferred, using the blockchain, including commodities

  2. uses the ledger as a truth machine, combining additional information and therefore capable of tracking items that need complex detail and

  3. that can be used as a smart contract that automatically execute in predefined circumstances

who’s getting excited?

The blockchain world is exploding as people look to expand, optimize, make private blockchains etc. Most probably the first industry to adopt to “newest” of the blockchains will be that originally in mind when Mr. Nakamoto devised the concept, namely Finance. 

Over the recent months the bankers have been exploring private ledgers. over recent years, banks have been digitizing their computing, much care of SAP ERP Systems, however they remain slow in making payments, care of centralized clearance and ledger synching can take them days that in so doing ties up capital and increases their risks. 

Blockchain that settle transactions in minutes or seconds could bring the banks much closer to solving these issues.

And, of course these issues are not isolated to the banks, as many companies suffer from cumbersome databases that struggle to talk to each other and therefore involve high transaction costs. 

When we extend this thinking to IoT, the task expands dramatically. refrigerators, door access controls, auto-irrigation etc etc and keeping track of and managing these billions of devices centrally through normal methods would become impossible and extremely liable to cyber-attack. Perhaps Distributed Ledgers are the way forward?

Furthermore, once on the ledge their use could be manipulated creating new sharing economies - a car key owned could become a car rented-out or leased allowing P2P schemes all over the world. 

Despite society’s inexhaustible ability to laugh at accountants, the workings of ledgers really do matter and really can make a difference to us all.

A realization that systems without centralized record-keeping can be just as trustworthy as those that have them may bring radical change. Already Distributed Ledgers are becoming a heated topic of debate at even a political level as many see them as a “common-man” techie’s way of taking away centralized control. At the same time, a world with record-keeping immune to manipulation would have many benefits.

the solution front-runners

Relatively recently the large software houses have been investing and several are including as part of their overall ERPIII offerings:

  • IBM

  • Microsoft

  • SAP

As an example, IBM has gone out under the banner of “Hyperledger” aligning with its cloud business and IoT architectures. While it is early on, already reports are being fed that this is expected to be one of its fastest growing revenue streams this year. 

Microsoft has been a little more tactical, instead looking to leverage its already successful Azure Cloud Platform. Its offering is more Blockchain-As-A-Service (BAAS) extended on from Azure. 

Another offering under the banner of Project Bletchley, allows blockchain to interact with non-blockchain systems and databases. Microsoft however has not built its own blockchain platform like IBM, but does instead provide a framework for implementing enterprise sized blockchain-based applications.

In addition, Microsoft is working with the exciting Ethereum group and solution on a project named Manifest that is to improve supply chain efficiencies across multiple industries. it starts at an IoT End-Point registering locations, temperatures and humidity for general insight into the provenance of goods that for various products is important on many levels.

SAP meanwhile, initially slow to get moving has been working with banks and internally their teams undertaking some innovation, but more recently has joined the “Hyperledger” project as a premier member. furthermore, Blockchain is now a key part of its Leonardo offering that i’ve spoken much about over recent weeks, and combines with IoT, Big Data, Analytics and AI/ML. 

Alongside SAP's corporate blockchain developments, its Ariba unit, which runs a global procurement network, has announced that it plans to leverage blockchain technology to add goods provenance and trade finance functions to its proprietary network. 

SAP Leonardo Blockchain most recent activity

The SAP Leonardo Blockchain Co-Innovation (Capgemini, Deloitte, GrainCorp, HCL Technologies, HERE Technologies, Moog Inc., Natura Cosméticos S.A., NetApp and PeerNova) program gives SAP customers and partners the opportunity to explore applications including registering events to blockchain from product inception and design to manufacturing and logistics phases for product track and trace.

The program also addresses parts serialization and order validation for inventory management and for product providence and authenticity.

SAP is also exploring digital supply chain scenarios where different suppliers submit offers directly to blockchain to improve effectiveness across their business networks.

 Similar to the other software houses, SAP has introduced BAAS on its SAP Cloud Platform that can also sit on AWS, Azure etc. 

And lastly, the aforementioned ARIBA unit together with IBM is looking to deliver cognitive procurement solutions using artificial intelligence (AI) and machine learning. This should combine to bring intelligence from procurement data together with predictive insights from unstructured data, in a bid to aid customers with enterprise-wide procurement.

In conclusion, there is much happening in this distributed ledger space and so much more than that ever imagined by Satoshi Nakamoto. I believe If blockchains have a paradox, it is by offering a way of setting the past and present in cryptographic stone, they could make our futures a very different place.