“What internet did to information, Blockchain will do to transactions” – Ginni Rometty, Chairwoman, President and CEO of IBM
“Suspected 600 million USD fraud in Global trade. Billions of dollars of working capital is stuck in the flow of goods and transactions. Disputes takes thousands of hours to settle …” – Blockchain is here to solve this.
Blockchain – the name sounds bit technical and bizarre to most at present. But it’s a technology that we should definitely get to know very soon or the world around us will definitely make us learn it from the future ecosystem. It is being compared to the way how Internet revolutionized and became a part of our lives over the past decades. Yes, it’s that important an innovation, which you’ll understand as you read this blog. I have been following this technology for quite sometime and have been fascinated by the way it could change things around us, hence this blog for all of us to understand it. While it essentially is a technology innovation, this blog doesn’t go into the technical nitty-gritties of Blockchain, but will aim to give you a conceptual understanding of its future potential. For those if you more interested on the technical aspects and it’s evolution, please start reading here. Many financial institutions, Banks and technology giants are placing big bets on the potential of Blockchain – so its already on the way to our lives and the results can be seen in the coming years.
Now coming to how Blockchain will revolutionize the future world and the way we deal with others, we need to refresh some basics on how things work around us. Most things around us, in a civilized society, work based on certain contracts and rules, be it implicit or explicit. When you take a demand draft from a bank, the bank and you have entered into an explicit contract to pay money to someone on presenting it for a certain fees which you need to pay upfront. Similarly when you purchase some grocery from a merchant, there is an implicit understanding on the quality of the item and an explicit mentioning of the quantity. Below figure illustrates how different parties interact to get things done in the current world.
For all these scenarios to work, the most important aspect is the TRUST between the parties and in cases where the stake involved is high, we can see intermediaries or institutions (banks, government, police etc.) stepping in to ensure trustworthy behavior from the other party.
Coming to the Blockchain era, Blockchain system can take over the role of the intermediaries by way of implementing ‘smart contracts’ between the parties involved. Smart contracts are very similar to the traditional contracts but are completely digital in nature and are automatically driven based on rules in the online ecosystem. Blockchain will provide distributed record books (or ledgers) for all the parties involved, in accordance with the acknowledgement from the concerned parties and will execute predefined events based on the rules agreed upon in the smart contract. As you can see in the figure below, while the central book holds the data in complete (actually the central book is just for conceptual understanding; only the shared, replicated ledgers at each of the parties’ computers exist in reality) , the books of each party will show only what is relevant to them. Transaction between parties will be updated in books only with the acknowledgement (probably digital signatures are going to be handy here) of all parties involved. This distributed architecture with each party interacting with the Blockchain is made secure and private using cyptographic techniques. For this same reason you will hear the term crypto-currency for the virtual currencies implemented on Blockchain; Bitcoin being one such popular crypto-currency at present.
As you see the TRUST aspect in this scenario is taken care by the Blockchain technology. For such scenarios to work in real world, all parties/entities involved in the event must be present in our digital ecosystem. The digital identity for citizens is being implemented in most countries by way of government schemes like SSN in United States, Aadhar UID in India and so on. These countries which are front runners in digitization will be the first to reap benefits of the technology.
Now let’s see a practical implementation scenario possible in our real lives by using Blockchain. Following diagram illustrates the process of registering and implementing a WILL agreement both before and after Blockchain era
As you can see, in the current scenario there are numerous interactions, paper works and transactions happening between the parties which makes it difficult for all to complete the WILL in reasonable time frame. Moreover initiation from the concerned party is key in getting the process completed on time, otherwise it might sleep in the cabin of one of the parties for ever. These all point to the manual inefficiencies which ultimately lead to higher turnaround time, higher cost for completing the event and more pain for all parties involved. Coming to the Blockchain era, the process is made simpler by everyone interacting with the database in the centre (actually the central book is just for conceptual understanding; only the shared, replicated ledgers at each of the parties’ computers exist in reality). The database is distributed across all with only relevant information shown to each of the parties using cryptography technology. Blockchain will also take care of initiating the process with each stakeholder, via its smart contracts, to make sure that everything happens in least time and with maximum efficiency. So in the above scenario, the transfer of ownership of property is done by Blockchain and the same is reflected in Government records and the books of the parties automatically. So all the clutter involved in the traditional scenario is eliminated by Blockchain and that makes it convenient for all parties. As a digital citizen, you will entrust your tasks with Blockchain.
For the above digital enabled ecosystem to be a reality, we need more advancements in all aspects of the economy like digitizing all our documents, certificates, deeds and so on. This could be a scenario in 2040 or so, as seen in the Hollywood movies. Many countries have started reaching there or have started following the leading countries in this journey. A digital vision from the government and regulators is must for all these to happen. Trusted partnerships in future world will be driven by Blockchain and new business models are set to emerge. Cloud computing and Blockchain together will be a winning combination for tomorrow. Many mundane, time consuming tasks in today’s world is definitely set to disappear and we probably are on track to a more efficient world, where we can spend time on more valuable activities. While this blog details the positives – there could be dangers like cyber hacking, resource constraints, systemic issues and so on – which will definitely be tackled by the next generation brains to make sure that Blockchain will be the Trusted Partner for all of us.