What is a blockchain and why does it matter?
If you can answer either question without hesitation, congratulations and go straight to the top of the class. If not then don’t feel too bad, there is a great deal of confusion out there.
In addition to the blockchain knowledge gap, there is also a wide discrepancy in assessment of the significance of the technology and its expected impact on enterprise computing.
Internet pioneer Marc Andreessen believes it will be as important to the world as the Web itself while others try to hose down the hype by pointing out that blockchain is just another kind of database that can enable different kinds of applications.
The best way to approach the topic is to go back to its initial development 2008 to enable the Bitcoin digital currency. Bitcoin’s blockchain architecture provides the ultimate in distributed database technology, with no centralised data repository, query and administration, instead all records are stored by all participants without the use of a central server.
In the 2016 book Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World, authors Don and Alex Tapscott explain the bitcoin model thus:
"Bitcoin or other digital currency isn't saved in a file somewhere; it's represented by transactions recorded in a blockchain—kind of like a global spreadsheet or ledger, which leverages the resources of a large P2P network to verify and approve each bitcoin transaction. Each blockchain, like the [bitcoin blockchain] is distributed: it runs on computers provided by volunteers around the world. There is no central database to hack. The blockchain is public: anyone can view it at any time because it resides on the network… and the blockchain is encrypted… it uses public and private keys (rather like a two-key system to access a safety deposit box) to maintain virtual security."
Blockchains are simply a new type of database. That is, a database which can be directly shared, in a write sense, by a group of non-trusting parties, without requiring a central administrator. This contrasts with traditional (SQL or NoSQL) databases that are controlled by a single entity, even if some kind of distributed architecture is used within its walls.
So is it time to reengineer every single enterprise application used by your organisation that uses a database? Perhaps not.
HPE Technologist Luther Martin
points out that “…. as the requirements for the database that supports the operation of Bitcoin are probably very different from the requirements for a database that supports a typical business process, a solution that works well for Bitcoin may not be the best solution in other cases.
“If high performance is necessary for your application, a relational database, not blockchain, may be the better choice.
In fact, it's difficult to think of realistic examples where the performance of a system that uses a blockchain would have better performance than one based on a relational database. A Bitcoin-like blockchain might also end up being significant obstacle to scaling the performance of your application beyond small test cases.
“A Bitcoin-like blockchain is viewable by absolutely anyone, which means that the confidentiality of any data stored in one is essentially zero. In the business world, however, there are lots of good reasons to not make data public. Regulated data certainly can't be public. And many businesses do not want to expose data that could be valuable to their competitors, including many transactions in which they are involved.”
A Deloitte survey released in December 2016 polled blockchain-knowledgeable senior executives at organisations with $US500 million or more in annual revenue. Of the 308 respondents, 28 percent reported that their companies have already invested $US5 million or more in blockchain technology, with 10 percent investing $US10 million or more. Although the fintech industry was early to show interest in blockchain and accounts for a significant amount of investment and activity, the survey revealed other industries aggressively pursuing blockchain.
Within the consumer products and manufacturing industry, 42 percent of respondents said they're planning to invest $US5 million or more in 2017, compared to 27 percent in the media and telecoms industry, and 23 percent in financial services. Put together, 30 percent of consumer manufacturing and media/telco industry respondents said their companies have already deployed blockchain into production
Blockchain is likely to get a boost from the recent move
by a group of more than 70 of the world's largest financial institutions to make their co-developed blockchain platform freely available under an open source license. The banks hope the move will unleash a gusher of innovation around new products and services based upon this technology
Gartner analyst David Furlonger warns that, “Many blockchain technologies are not fully developed, are untested, and will require early adopters to accept significantly increased levels of operational risk over the next five to seven years.
“The vendor ecosystem is neither cohesive, nor fully formed, and consortia are jockeying for attention with professional services firms and startups requiring careful, multilayered evaluation of the market.”
by David Furlonger, Gartner
In fact, the competitive arena of blockchain technology platforms already consists of more than 70 different contenders - either announced or emerging.
As yet, there is no industry consensus on product definition, feature set or target solution requirements. Some products overlap, others complement, while others are subsystems that fit in a larger whole. All are deficient in at least one key criterion, Gartner has found.
“It is critical at this stage in blockchain's evolution that hype is recognised, and the emergent nature of the technology and its capabilities are clearly understood. Moreover, much of the discussion about blockchain focuses on the technology itself, and diverts attention away from the radical societal and business shifts it could enable. Examples of these could include “the facilitation of thing-to-thing, thing-to-person and thing-to-business relationships, or changing the nature of commercial identification and transaction authentication,” concludes Furlonger.