Blockchain as a Re-invention of the Business

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Blockchain as a Re-invention of the Business

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Blockchain is a disruptive technological catalyst for new business models. The technology itself is built upon a complex mathematical foundation and serves both as a data carrier and a policy enforcing engine. To maximize the chance of a successful implementation of blockchain, serious business barriers need to be cleared away. Blockchain, officially known as Distributed Ledger Technology (DLT), is vastly changing the way businesses interact with each other and how modern distributed platforms are being constructed. DLT is a network of nodes based on peer-to-peer (P2P) blueprint rather than on a centralized channel highly reliant on a single authorizing party. Blockchain brings decentralization and a lack of sole ownership. These characteristics enable completely new business models that utilize the Internet as a living organism composed of nodes with an adequate computational power to authorize transactions.

What Problems and Challenges Need to be Solved?

The current transactional systems rely on a third-party, e.g. an administration office, a bank, or an insurance company. What blockchain offers is a P2P network which is, in fact, a dispersed authority. In real life, often there is a party who is the ultimate validator of authenticity. We’ve been taught by the rules that there has to be a well-established institution that guarantees the business reliability of companies and financial flows. Blockchain is the network that plays this crucial role.

Another aspect is that the current model is very much authority-centric, which leaves a narrow space to individuals and small legal entities who are mere spectators or limited contributors. If we take into account the democratization of choice that boosts up the people’s motivation nowadays, we can come up to the conclusion that the current approach stands against the right to self-empowerment. Blockchain, a wonderful combination of mathematics and technology made it possible to distribute the power into the nations where it actually belongs. “With great power comes great responsibility," as the Marvel comics super-heroes use to say. This could be a motto of DLT. Blockchain is a natural service area that hooks up to the Internet as the connectivity layer. Business globalization and economic freedom are two main forces of a paramount significance underpinning the evolution of the distributed transactional platform. The central system played an absolutely vital role in times of corruption and global disorders or wars. In the current reality, people deserve to operate within a planetary technological network.

Another consequence of the current conservative model is that the big market players become even bigger. The world-wide brands like Microsoft, Facebook or Google created a monopoly in which they truly OWN the services and implicitly our own data. Using Facebook, as an example, we can clearly see what happens if a single entity is a provider, the steward, and the beneficiary at the very same time. We are being stamped and sold as products within the FB network. At the same time, Facebook could, if they only wanted, to unplug the network. Thus, it’s a matter of a few people to make such a decision. Blockchain is not only about transactions and data, it’s about the seriousness of choices. Blockchain causes everyone to bring this new platform to life and co-own it.

Blockchain: Digital 2.0

The digital model, that is currently at its rising tide, has moved the businesses from the traditional, paper-centric world run by thousands of human operators into the web and mobile customer journey. However, in reality, the administration is reduced to control and corrective activities. DLT is a natural evolutionary leap, moving services deeper into the Internet and benefiting from its inherent capability which is distribution. With blockchain, we are talking about a decentralized ownership of platforms and services. It’s the Internet that runs and owns it all. It’s us. The transactional ledger is just a side-effect, whereas the philosophy of DLT is a railway enabling us to re-think the businesses.

According to one of the recent Gartner’s reports (John-David Lovelock, Martin Reynolds. Bianca Francesca Granetto, Rajesh Kandaswamy on 02 March 2017, Gartner proprietary research material), the blockchain’s business value will constantly grow to more than $176 billion by 2025 and to more than $3.1 trillion by 2030. It will underpin a vast number of operations on the Internet, not only financial transactions. It’s just moving the decisions away from overpowered centers of authority. Banks will inevitably become service providers, not service owners and law creators. With nations’ capital increase, the better agility of financial instruments, and more Internet-driven crowdsourcing initiatives, the central role of well-established services is just going to be obsolete and counterproductive. It’s the ultimate disruption we’ve been waiting for. We can simply say that blockchain is not just another innovation, it’s re-invention. It’s the next big thing.

Unfortunately, blockchain is often seen as the ultimate salvation, that will solve all the problems, even the not existing ones! Companies are simply enchanted by the concept. We need to admit: blockchain does not fit everyone and should not be overused as an excuse for investment in the informational technology. The quest should not state “please re-write my application to work on the blockchain." It should be “how to ‘platformise’ my business? And, how to become a solid broker empowering my clients and partners to make greater businesses with a high level of transparency and credibility?”.

What’s à la carte of the Blockchain?

With the rise of cryptocurrencies, many people find it appropriate to use blockchain as synonymous to bitcoin. It’s not correct. Bitcoin is a cryptocurrency and a medium of payment transactions. Blockchain is a general-purpose distributed transactional platform that can use tokens as the mean of performing transactions and defines how distributed applications are built and executed. The study of blockchain has greatly expanded thanks to the creation of bitcoin.

A cryptocurrency exchangeable in the global market is the Holy Grail of many entrepreneurs. Generally speaking, the DLT does not require to bring up a new cryptocurrency every time; it uses the network as the foundation for its operations and for keeping up the ledger.

The concept of blockchain is not very fresh, but the technology behind it is relatively new, with all its shines and shadows. It’s evolving rapidly, and it already led us to understand that one size does not fit all. It’s rather a cliché, but it turns out that the concept outgrew the technological abilities of the network.

From the technology evolution standpoint, a public blockchain has been brought to life quite early as an idealistic concept that assumes constructing a global platform to carry out and ultimately undersign all the transactions. An undoubtfully successful implementation of the concept is known as Ethereum. While the Bitcoin network is focused on mining the cryptocurrency and pushing it into circulation and enabling payments and currency exchanges, Ethereum can deal with any sort of Internet-backed transactional ecosystems that is collectively owned. Ethereum is sometimes called the next generation Bitcoin. At the same time, further research of Bitcoin led to its evolution into a more general technology called Coloured Coins (a.k.a. Bitcoin 2.0) which is able to deal with a much wider spectrum of use cases.

Unfortunately, Ethereum is also a limited technology. Performance is its clear weakness. To be more specific, its ability to scale out to the number of transactions per a time unit. Due to this, developers and researchers around the globe have worked on another solution, purposefully limiting the boundaries of the public consensus to a more controlled number of validating nodes and applied shortcuts. We have reached a point of several blockchain offspring technologies that can process a much higher number of operations or that can control the permissions to run and view the transactions.

From the point of view of distribution and authority model, we can distinguish three main blueprints of blockchain: public, permissioned, and private. Depending on a specific customer’s need, a different approach can be adopted. For the global platforms that are not very demanding performance, the public network can be selected by default. For an industry-specific case or for circulation of transactions within a well-defined ecosystem, the permissioned blockchain optimized for performance would potentially be a better choice. Among such technologies, we can find Hyperledger Fabric, R3 Corda, J.P.Morgan Quorum. For limited applications, some latest hybrid technologies are worth considering, e.g. Openchain or Multichain which offer a quick implementation and customization. The public blockchain brings a genuine transparency through the global validation by the network (which may be impacted by the selected consensus algorithm) and a superb scalability when it comes to adding more computing and validation nodes. The permissioned or private blockchains do not scale out well in terms of adding extra nodes, but on the other hand, they are much better for processing a higher volume of transactions per second.

Referring to the aforementioned technological landscape, Quorum is an open source and permissioned implementation of the Ethereum network, capable of achieving a high throughput and at the same time incorporating most of the updates from the main Ethereum implementation. It’s also quite easily implementable e.g. on Microsoft Azure.

As per an analogy to Quorum, Multichain is intended for permissioned enterprise implementations and has been created as a fork from the Bitcoin Core project. It’s definitely worth considering.

As for the other technologies, Corda is specifically architected for the financial industry ledger and provides a better out-of-the-box capability whereas Hyperledger, governed by the Linux Foundation, is more generic and flexible owing to its modularity. It’s likely that Corda will be integrated into Hyperledger in the future.

Open-chain, contrary to the previously mentioned solutions, is using a client-server architecture. A new Openchain node can be rapidly started and included in the network consisting of a number of validators and observers. Open-chain inherits many advantages of a private blockchain like scalability, immutability, privacy, decentralization within an organization or adaptability of smart contracts. It can be an attractive choice for organizations that require some of the benefits of blockchain but cannot afford (e.g. from the performance or internal security policy perspective) to implement ‘pure’ blockchain solutions.

What Is the Next Step of Evolution?

The blockchain is a philosophy backed up with a large number of technological implementations. There is no universal solution. The blockchain technology and the mathematical foundations are evolving, but, at the same time, they are boosting up other directions of research. We would like to walk you through some latest trends.

  • Blockchain as a Service — Some major companies, including IBM, Microsoft, and Oracle, have been developing solutions to help democratize the choice and facilitate the implementation of blockchain in the enterprises. The facilitation is focused around a quick construction of a blockchain network topology, creation of network nodes in a consortium environment, and provision of pre-packaged security. For instance, Microsoft is offering an Azure service to create an Ethereum network in such a model. Oracle’s offer focuses on a rapid onboarding and scaling and it also speeds up the business process integration by providing data sharing with existing Oracle solutions, e.g. ERP, SCM, and Netsuite. IBM’s plan for enterprise comes with an end-to-end toolset for accelerating the development and operations with the blockchain network.
  • Web 3.0 — The current Internet technology is commonly advertised as Web 2.0 with a lightweight, ultra-modern, and responsive user interface that uses flexible, highly manageable APIs (Application Programming Interfaces) and loosely coupled, encapsulated business micro-services running in the back-end. The Lego bricks invaded the business world. Still, no matter if we speak of a client system, client-server application, or a network of well-designed micro-services, it’s still a single party that runs the show, inheriting all the downsides including unreliability of service, fraudulent elements, and downgrading the use of the Internet to the network layer only. With blockchain, the users get a new form of the business-oriented Internet within the Internet. Web 3.0 is like a connective intelligence in which people (and applications or data) are connected without third- party mediation or brokerage. Based on this approach, developers create a new sort of application, so-called decentralized apps (dApps), that don’t run in a particular data center but as peer-to-peer Internet services. It opens great capabilities like interoperability, transparency, and data safety, but it also pushes companies to re-think their operating models and portfolios of services. Practically speaking, the area of coverage is endless. The types of Web 3.0 applications are operating systems, financial gateways, legal platforms, supply chain, energy market, digital identity, next-generation social networks, etc.
  • DAOs — Decentralized autonomous organizations. DAO is a business or a virtual organization in which the decision-making is majorly done by the smart code that sets out all the regulations and conditions for certain events to happen. Decisions can be taken by voting of the members of the given organization (with or without enforced authority of token holders) which supersedes the need for a formal hierarchical management. It’s said that evolution of DAOs will lead to the creation of e-Democracy, i.e. a technology-backed system of government with Digital enforcement of laws and regulations where each and every citizen will become a voter and an active participant of society. A current downside of the DAOs is a relatively low ability to change the code which is especially troublesome in case of identified exploits. The work is still in progress.
  • AI to empower blockchain — Blockchain and AI are two opposite facets of the technological prism. However, we can observe an amplification effect when putting them together into action. While DAO is an autonomous computational process that runs within a decentralized infrastructure, an AI-powered DAO involves the adoption of Artificial Intelligence to support the Smart Contract of DAO (through a so-called oracle interface) or is the core of the Smart Contract itself. The ingredients can be deep nets, genetic programming, knowledge bases, or other AI solutions. While classical DAOs are based upon pre-programmed algorithms, i.e. mathematics and plenty of wisely coded if-then-else conditions, the AI DAOs go beyond a common predictability and include machine learning and advanced data analysis to improve the quality and realism of decisions. As the opposite synergy, the decentralization brought by blockchain can also be used as a driving mechanism in AI solutions, e.g. distributed intelligence, prediction platforms, data provenance software, and trading systems.
blockchain, dao, distributed ledger, initial coin offering software, web 3.0

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