Blockchain: is it the answer to everything?
As the saying goes, don’t believe the hype. Yet, blockchain is deserving of the hype it receives. By every measure, the technology is breaking new ground. It actively offers an alternative to centralised trust-mechanisms that are often fraught with problems, bottlenecks, bureaucracy and ambiguity.
Yet the technology not the cure-all as some try to sell it as, and this is creating confusion. Blockchain and its uses sit close to the heart of Andile Solutions, which specialises in digital applications and services for financial service providers and banking authorities. To answer the question of what blockchain can and cannot do, three of Andile’s experts discussed the topic during a recent panel discussion, The shape of Blockchain: Fit to Compete?, hosted by Andile’s Axiom webinars.
To start with, blockchain is much more than its most famous prodigy, cryptocurrencies. Blockchain isn’t just bitcoin, explained Bernard Bussy, software engineer at Andile, but “a way of storing structured information which enables immutability. It makes it possible to prevent changes in information once that information has been stored, or helps us identify when that information has been tampered with in some way.”
Blockchain’s capacity to oversee the integrity of information is a well-explored function. It enables different and independent parties to maintain copies of a collective ledger, and thus any tampering of the ledger would be flagged across the decentralised system. In essence, blockchain ensures the left and right hands always know what’s going on in terms of the information they share. This could be inside an organisation or across multiple independent entities with differing agendas. Blockchain allows these different entities to share information without needing to trust each other.
Blockchain’s emerging use cases
This approach doesn’t need the input of central verification, and several new use cases have emerged from its potential. That includes Mesh, a financial market infrastructure solution developed by Andile. Connie Bloem, head of Mesh at Andile, elaborated on other examples specifically in the financial industry:
“The use cases I’ve seen a lot of recently include foreign currency, trade finance is a very exciting part that is booming, such as supply chain finance. There are also more coming through on the infrastructure side, such as solving payments or providing wallets. So there are many support technologies taking place. And a lot of solutions try to solve the flow of physical assets. Gold bullion is a popular one.”
But blockchain is not always the answer, which begs: how does one know it’s a good fit? To determine that, Bussy offered five questions:
- Is a Business Network Involved? Blockchain can help when some information needs to be available and trusted by different participants in a network. If only a single individual or team needs access, it may be more trouble than it is worth.
- Is Consensus Required to Validate New Entries or Transactions? It adds value when separate parties, with potentially differing agendas, need to interact without fear that one side is tampering with information. If it is not important that all involved agree on a single version of the truth then blockchain may not be a necessary addition.
- Is an Audit Trail or Provenance Required? Blockchain can offer a secure and trustworthy way to record the change or movement of information over time. If this sort of historical information does not need to be maintained then recording things in this way may not be worth it.
- Is Immutability a Requirement? It ensures that information, once stored, can never be changed. If your information is likely to change over time, and keeping precise records of that change is not required, then blockchain may not be the correct solution.
- Should Dispute Resolution be Final/Absolute? Blockchain requires that there is always only one answer to the question of what the true state of a piece of data is — or should be. If it is required, or acceptable, that different parties involved in a dispute will accept different results to the same question, then it is likely that this solution will not be able to provide the answer.
Not trust, but trust verification
An example of blockchain being used to meet these requirements is Tracr, a blockchain platform from De Beers that tracks diamonds across their value chain. The key is to look at blockchain not as a trust tool, but a means of verification that different parties can participate in. For example, one webinar attendee asked if blockchain could stop fake news. No, it cannot, because blockchain doesn’t verify authenticity. But it can verify origin. News agencies can use blockchain to prove that all the stories they publish are, in fact, published by them and you can thus trust those stories.
If there is a struggle to separate good blockchain use cases from bad ones, it often comes down to a lack of knowledge and education around the technology. Said Erick van der Linde, Andile’s technical blockchain expert: “One of the biggest problems right now is identifying the correct use cases. It’s very easy to use it for the wrong thing.”
Bloem agreed, adding that there “should be a very real reason to use blockchain. Try to solve the business value and then see what technology enables that.”
Is blockchain the answer to everything? Definitely not, and the maxim: ‘Blockchain is the answer. What is the question?’ is not accurate at all. Instead, Bussy pointed to a quote from Nick Szabo – computer scientist, legal scholar, cryptographer, and one of the most prominent figures in the bitcoin world:
“Blockchains don’t guarantee truth. They just preserve truth and lies from later alteration, allowing one to later securely analyse them, and thus be more confident in uncovering the lies.”
The shape of Blockchain: Fit to Compete? webinar and panel discussion was an eye-opening event both for what blockchain is and isn’t. Don’t miss the next Axiom webinar, a continuing series covering a broad base of business and technology confluence topics, speaks to the experts and probes the leading minds in South Africa. For more information on the next webinars, visit the Andile News & Events page or contact the Axiom team.