What’s behind the technology that is redefining frontiers in the area of information storage and sharing

The new technologies that have emerged over recent years promise to promote unprecedented economic dynamism on a global level. Big data, artificial intelligence, machine learning, the Internet of Things, cryptocurrency, blockchain, and 3D printing combined have the potential to break the production chain and reorganise it in a more efficient, responsible, precise, customisable, and above all, decentralised way. All of these characteristics reinforce the tendency to cut intermediaries and take advantage of some of the biggest original reasons the Internet came to be: independence and direct communication at a global level.

Over recent months, the term blockchain has earned increased attention in the media, primarily due to the hyper valuation of cryptocurrency. Despite this fact, the application of this technology extends beyond the frontiers of the financial market and can revolutionise several different aspects of the public and private sectors. In a not so distant future, we may see a true restructuring of how the interactions will occur, whether between people, between people and machines, or even between machines.

So, what is Blockchain?

Blockchain can be defined as an incremental, unchanging, transparent record distributed based on consensus.

This system allows the user to add data – a new block –, but does not modify or delete previous data, forming instead a type of data currency.

To achieve this, it uses a mechanism that creates consensus between actors, which are distributed and do not require mutual trust, but rather must simply trust the mechanism used to reach the consensus. Accordingly, no actor could consistently act alone to control the network and force it to accept something that the others reject. Basically, blockchain is a technology capable of maintaining records and their updates in a way that makes fraud or changes after creation of the record practically impossible.

The activity validation rules in blockchain vary based on the blockchain, but the basic concept is that any transaction needs to be validated by most of the network, impeding fraud and attacks from hackers. The strength and reliability of the system increases with the amount of processing power from the computers connected to the network. With this security, agreements that before were entrusted to third parties and agents can be replaced by this “digital truth validation.”

Technological Expansion and Extrapolation

Expanding the scenario slightly more as a whole, the synergy created between blockchain and certain other previously cited technologies is essential for ensuring the more competitive use of all these innovations. For example, to ensure that 3D printing reaches a global level of customisable production, it must be backed by a type of automated, secure and reliable transaction and record control for any and every party involved. Currently, only blockchain guarantees that what was agreed upon by both parties will continue to be recorded and will be fulfilled, with users able to record everything from the project parameters and product specifications to payments and production controls, guaranteeing the number of printed copies (the latter specifically has been the focus of some delicate discussions about the control of the reproduction of programs and virtual codes).

Learn More: Blockchain and Information Privacy

There is relevant discussion about blockchain and information security due to the storage and sharing of historical data that cannot be deleted. After all, it is natural for companies and people to be hesitant about exposing their confidential information to competitors, partners, or any person connected to the network.

For people, the main impact is related to the impossibility of secrecy and the “violation of the right to disappear.” The “infinite” storage and supply of sensitive information to third parties – such as background checks and standardised test grades, among others – can lead to the marginalisation of people without giving them the chance to reverse these perceptions.

In the case of companies, even when using advanced encryption, once the information is recorded, it is vulnerable to decryption attempts. Especially with the development of quantum computing, which can test combinations in a significantly faster way, companies have increasingly invested in specialists in sophisticated encryptions to protect their information.

When we think from a government and activity regulation perspective, one important point about technology is its level of automated and democratic control. With the exposure and integrated connection proposed by blockchain, regulatory agencies would have an easier time charging taxes and regulating individuals and companies. At the same time, this type of visibility makes it easy for the population to gain access to public accounts, creating an even bigger obstacle for the governments themselves to misappropriate resources and favour certain suppliers.

On the other hand, there is concern about information security due to the fact that all information is associated with a single key, meaning that by stealing it, all information related to it can be accessed. The solution to this problem would be the storage of the actual keys in another blockchain. For example, there is the case of the U.S. government, which is studying the implementation of blockchain in the election system, recording whether or not the person voted in a system, yet maintaining the vote itself in another restricted access blockchain.

On the topic of Supply Chain, the interaction with the Internet of Things becomes something crucial. With the addition of sensors and tags, the control and visibility of transport conditions and product quantities and qualities can become complete or very close to it. There are already cases in which fish can be purchased in Japan, guaranteed by the historical data of the fishing site and transport conditions.

It may even revolutionise commerce. Blockchain allows for the closure of contracts in minutes without the need for any physical meeting, expanding the idea of a free market organised by everyone. Certain companies are studying the feasibility of using blockchain, with the wait to purchase and receive a previously manufactured car cut from three days down to a few seconds.

Going beyond this concept, the idea of smart contracts has emerged. These are basically computer programs that run orders automatically as the time passes or the actions occur. And precisely because they use blockchain, they allow sceptical individuals to interact directly after agreeing on the contract terms. For example, the payment to suppliers proportional to the quality and quantity of the delivered products, with everything automatically evaluated and controlled. Or even a change in salary payments, which instead of happening monthly, can be done per minute or project phase.

The set of different smart contracts allows for the formation of Decentralised Autonomous Organizations (DAOs). DAOs are companies governed by computer programs recorded in blockchain, which run entire processes and provide complete services. This type of company breaks the work structure, identity and organisation in an unprecedented way. The work can be done by people from different countries that have never met personally or who don’t even know each other’s names, or even at different times. Precisely because they do not belong to a specific country, one of the obstacles – if not the greatest one – of the DAOs is the Legal area. How to tax and regulate a company that is not physically present anywhere is a challenge that many governments are attempting to solve. Currently, the main DAOs are related to financial and investment services, and primarily use the same blockchain as the Ethereum currency.

It is important to emphasize that smart contracts and DAOs can interact with each other. Therefore, we would have a way of arbitrating interactions between people, between people and machines, and between machines. This applicability can be fundamental for new advances in the development of artificial intelligence and machine learning.

Blockchain technology promotes a true revolution on the Internet and in the economy. With major applications already occurring in the financial market, in processes, and in supply chain, different companies and governments are already studying the new technology to check the potential transformation in their business and gains that they can bring over the short, medium, and long term.

However, what many call the liberation and democratisation of the Internet is certainly still not mature enough for the features and applicability that everyone desires. There are still plenty of sceptics who distrust the, so highly dreamed of and promised, security, hesitant to blindly trust in something that others consider the Internet 2.0.

Those that are more realist, study and model the technology and its applications to develop it in the most useful way possible. This is true primarily for that related to other new technologies like machine learning, artificial intelligence, and 3D printing. Overcoming challenges and tailoring to needs, blockchain has all the means to revolutionise the world.

External References

[1] Supply Chain 24|7 _ Why Blockchain is a Game Changer for Supply Chain Management Transparency

[2] Supply Chain 24|7 _ Is Blockchain in the Supply Chain Coming of Age?

[3] Coindesk _ A (Short) Guide to Blockchain Consensus Protocols

[4] Coindesk _ No One Should Control the Blockchain Supply Chain

[5] Coindesk _ How Blockchains Will Turn Supply Chains Into Demand Chains

About the Author

Gabriel Yin is a consultant at Visagio who works on projects focused on logistics. He also has experience in the Energy sector.