Blockchain is borderless
In the first of a new series, Beyond Bax, Bax & Company’s Judith Schuermans sat down with Marc Rocas, co-founder and president of Associació Blockchain Catalunya to talk about blockchain. Where are we now? Where are we headed?
Let’s start by getting back to basics. What is blockchain?
MR. Blockchain is difficult to explain in one definition. It’s a polysemic word, we are using the same term to mean several different things. For me, blockchain is a general-purpose technology that will have as much of a transformative impact on multiple sectors as the internet is still having. But blockchain can also refer to a unique distributed ledger. We also use the simplest definition of blockchain when we’re referring to a chain of individual blocks to explain the technology. It’s difficult to know which definition to give without context!
This distributed ledger is the result of looking for a way to record transactions. For a long time, this has been impossible to do without having a centralised database.
When you decentralise the data, what kind of impact does that have on the intermediaries?
MR. Blockchain optimises and automates processes, not only in terms of cost efficiency but also in the number of intermediaries in any given value changes. Fewer intermediaries translate to greater efficiency because you save time and money. With blockchain optimisations such as smart contracts, you no longer need many of these intermediaries.
All the potential uses of blockchain are tied to the properties of the technology. Blockchain is borderless – it doesn’t matter where you are, so long as you’re connected. A basic application of blockchain would bypass the intermediary, say for example a bank, in financial transactions.
Another defining feature of blockchain is the immutability of data. Everything recorded in the blockchain will be there forever. When it comes to a patient’s history, any doctor anywhere could access your personal medical records using blockchain regardless of where or when they were made. The same could apply for tracking the provenance of the food we eat.
People trust intermediaries – that is a crucial part of the role they play in these transactions. Should that trust now shift from intermediaries to the technology itself?
MR. Trust is embedded into the core of blockchain technology. In fact, you could even say that blockchain bypasses the need for trust between players. In a decentralised environment, you don’t even always know who else is connected to the system. You don’t need to trust the other parties so long as you can trust the system. As you cannot delete or alter the information once it is uploaded in the system, it makes it more comfortable.
This is a new environment and it will probably take some getting used to. We rely so much on intermediaries from your bank to AirBnB. With blockchain, the trust is in the technology.
The benefits of blockchain are clear, but would you say that it’s in danger of being overhyped?
MR. The hype stems from how attractive the blockchain sector, particularly certain cryptocurrencies, are for speculation. A clear example would be the volatile price of Bitcoin. The prospect attracts people who are interested in turning a profit, not necessarily in further developing the technology.
As a new technology, it also suffers from expectations. Similar to what happened with the internet at the end of the nineties, as so much of blockchain’s potential remains unmined, unrealistic expectations are rife. There is an idea that this should all happen quickly, but it will be a slower process to implement than most people imagine.
What does a “bad” implementation of blockchain technology look like? And a good one? What characteristics should a problem have for blockchain to be a viable solution?
MR. The simplest way to determine whether or not blockchain should be implemented is to ask whether or not it would be possible to do the same thing without the technology and the answer is yes. For successful implementation, it is vital to integrate the technical aspects of blockchain with all the other existing parts of a value chain. Otherwise, you may well end up developing a tool that is useless. As it stands, good implementation usually involves solutions only blockchain can provide – from reducing the number of intermediaries to boosting efficiency.
In terms of actual implementation, what’s happening with blockchain in the private sector?
MR. There are two main reasons for the private sector to invest in blockchain. The first is implementing blockchain in the value chain to cut costs. Secondly, stakeholders are interested in blockchain as a means to protect themselves against disruption. Right now, we’re seeing companies with similar needs, not necessarily from the same sectors, come together in consortia to develop a blockchain. They are not turning to public blockchains, because the performance is lower. They prefer to rely on their own private blockchains.
Looking ahead, it’s quite difficult to predict how private companies would react to permissionless public blockchains performing to the same standard. I personally don’t see them trusting a permissionless blockchain. But that has nothing to do with the technology – it’s in these companies’ nature.
It is worth remembering that as far as the end-user is concerned, the only real point of interest is what added value blockchain can deliver. Private companies would really only turn to a public blockchain if it could deliver something that private models couldn’t.
And in what sectors do you see blockchain having the most potential?
MR. In the long term, all of them will be affected! As a general-purpose technology, blockchain will affect every sector. Looking at the shorter term, I would have to agree with the open blockchain expert, Andreas Antonopoulos, who recommends starting with the basics – here meaning financial transactions. Fintech would be the sector where blockchain has the most potential. From there, you could progress to the supply chain or other sectors.
Ultimately, when we are talking about blockchain adding value to any sector, we’re really talking about a new value proposition for the end-user. The final user may not even know that blockchain is embedded into the internal systems or along a distant supply chain. If it saves them money or time, the end-user will not usually be concerned with how a service was optimised.
What role do organisations have to play in further developing the technology?
MR. For any emerging technology from blockchain to IoT to AI, organisations have to develop strategies that make the most of these new technologies. This includes training staff, updating products and processes. This helps further the technology but it also ensures that the organisation remains current.
It will be a long process and we will all have to be patient, but this gives us time to really analyse and prepare for how blockchain will transform the work we do and the processes we follow.
At Bax & Company, we’re lucky enough to work with experts in emerging and existing fields from around the world. Beyond Bax is an opportunity for us to share some of their knowledge with you.
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