Blockchain Is Eating Commerce

You may not be familiar with blockchain. Many “in-the-know” digital folks aren’t terribly familiar with blockchain; what it is, or how it works. I was surprised by how few were. Blockchain is a technology that has the potential to become a disruptive force in the ever-more digital economy. Its potential value — coupled with friends, clients and business partners asking about it — led me to publish this outline and answers to many of the questions I've been fielding. It’s something every Data Athlete will want to understand. Blockchain Starts With Bitcoin Blockchain is essentially a distributed database, which means it’s like the database you know that lives on your server or in the cloud — except that it’s spread copies of itself around the Internet or network. A distributed database has the benefits of fault tolerance and transparency — more than one “node” on the network has a copy of the data. Blockchain also utilizes strong cryptography that prevents changes to the transactions content — they are permanent. These characteristics were developed to support the exchange of Bitcoin, the now famous crypto-currency that is being used worldwide to facilitate a myriad of transactions. Bitcoin is said to concern banking institutions and governments alike — as its decentralized nature means no one nation owns or controls it. Bitcoin and its underlying Blockchain are like the “MP3 of currency” in the early ’90s. Bitcoin.org summarizes the power of its decentralization: “Sending Bitcoins across borders is as easy as sending them across the street. There are no banks to make you wait three business days, no extra fees for making an international transfer, and no special limitatons on the minimum or maximum amount you can send.” So in order for Bitcoin to be a “free” and universal currency, it could not be centrally managed or controlled; hence, blockchain was created first — Bitcoin actually started the following year. Furthermore, each and every Bitcoin has a copy of every transaction/exchange it was ever involved in. All of the data on that chain is distributed to every blockchain-distributed journal (or database) across the Web. What Is Blockchain Used for Today? Blockchain’s most prevalent usage is in Bitcoin. But remember, it’s an encrypted, distributed database. And so, blockchain technology also securely moves and stores host money, titles, deeds, music, art, scientific discoveries, intellectual property and even votes. As a (distributed) database that is as open, borderless and secure, blockchain continues to find new uses, and has been adopted by every major technology company. IBM, for example, made an early investment in blockchain technology and IBM Blockchain. “Blockchain technology also securely moves and stores host money, titles, deeds, music, art, scientific discoveries, intellectual property and even votes.” Blockchain 2.0 — Triggered, Programmatic Transactions Blockchain 2.0 is the rapid evolution of blockchain, and where blockchain offers the potential for transformation of the way we engage in commerce and business at an Internet scale. Remember, blockchain is a distributed, cryptographically secured database. It makes sense that an evolution would allow programming code, or chain code, to manipulate the transactions in a blockchain — and that’s exactly what has happened. In one example, SAP is using blockchain software to let patients share electronic medical records with doctors or drug makers for a specific time period, such as during medical care or a study. In another example, they designed a system for farmers’ weather insurance. It pulls rainfall data from sensors in the field, then automatically informs insurers if there’s a drought that would trigger a payout. SafeShare Insurance now offers blockchain-based insurance for the sharing economy. And it’s underwritten by Lloyd's of London. The possibilities of blockchain are manifold. So blockchain is allowing parties of all kinds to conduct business, and track each step (or transaction) in a secure and universally accessible ledger. The Internet of Things, AI and Blockchain Blockchain also is being integrated with IoT, or the Internet of Things. This means sensors and devices everywhere can trigger “transactions” to be logged as part of a complex supply chain or workflow. One example is a ship bringing perishables to a market abroad. The container in which the perishables are being transported can have a sensor that monitors the temperature. When it goes below a certain temperature, the transaction can be programmatically voided. Because every blockchain transaction has a time-date stamp, the receivers of those goods will know they were credited for the spoiled goods. They’d also know the location and time, down to the minute they were no longer viable. All parties to the transaction could have their responsibilities laid out in simple logic, formerly locked up in a paper contract. The terms of the contract are automatically executed and the next steps, all the way down to the replacement items being shipped at no charge, could be triggered. Artificial Intelligence can also play a role in determining what the next step or transaction in the chain would be. For example, IBM Watson may soon be able to determine the rate of depletion of a key item in a bill of materials in manufacturing. Predicting when the supply of the required material needed will run out, it can trigger a purchase transaction with a vendor who supplies it. It can even monitor the pace at which the goods travel by ship, rail or truck to the factory. In a more consumer-friendly case, your fridge could make a blockchain entry at Amazon to place an Amazon Fresh order for the eggs that are almost out — and then credit you and re-order replacements when your eggs break in transit. “... your fridge could make a blockchain entry at Amazon to place an Amazon Fresh order for the eggs that are almost out — and then credit you and re-order replacements when your eggs broke in transit.” Blockchain and E-commerce Now imagine shopping online to buy an organic Thanksgiving turkey. With a blockchain of their product catalog, you could see where the turkey was raised, how old it was, and even where it’s moved throughout its entire history, along with dates. Now, if the rest of the supply chain used participated with this blockchain, throughout the life of the turkey, you might see the feed it consumed, where the feed came from, and what ingredients were in it. Each transaction in this fresh turkey blockchain contains the previous state of the turkey, so you’d know the date it was killed and butchered — possibly right through to its delivery to your Thanksgiving table. Not a foodie? What if the toys you buy for your children were integrated on a blockchain to the factory where they were produced in China, and the manufacturing process was integrated, too … such that you can see it contained lead paint? These examples are just the beginning. Many individuals are uncomfortable buying real estate outside of their home country. But what happens if all of the real estate, deeds, and insurance are integrated into a single, secure blockchain implementation? Disputes over land ownership, encumbrances or liens, and taxes past due are all there and irrevocable. They can all be published on the Web, negating the need for countless copies of esoteric forms and documents, and the long slog to complete a transaction. This ushers in a more frictionless age for commerce of all types. Blockchain Is Another Step Toward a More Frictionless Future Blockchain and its integration into the enterprise are happening at a fast pace. Blockchain is said to have already “eaten” Wall Street, banking, insurance and international commerce. Soon, it will find it’s way into applications for your e-tail and retail businesses. When they are raised as a way of facilitating business with your suppliers, distributors or your end-consumers — let them know you know that a blockchain is a crypto-secured, distributed database that can integrate code to log, trigger and track related transactions with a permanent history shared by all parties. Put blockchain to work, and learn how to change and improve your business, and maybe take a small step toward changing the world around you.

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Blockchain Is Eating Commerce

Mike Ferranti

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