As Christmas approached last year, the buzz for Santa and the extended break from work was overshadowed by one thing: Crypto-Currency. The get rich quick appeal of Bitcoin and thousands of other ‘cryptos’ provided invaluable fodder for the media and an unhealthy distraction for the hundreds of thousands of people keen to ride on the tails of their meteoric rise.
Following the crash of many major cryptos in January, it seems the hype has well and truly settled down, making this the perfect time to have a frank and honest conversation about the pros and cons of blockchain.
What is Blockchain?
Before getting into the details of blockchain, for the purposes of clarity, it’s worth providing a short definition / description of the technology.
Almost cryptic in nature, blockchain technology was originally associated with the nadirs of the tech world.
Lacking propagation within the public domain, its history explains its enigmatic nature today.
The complexity of blockchain makes it a difficult concept to grasp.
In short, blockchain provides the ability to make transactions and transfers online without the use of an intermediary. Instead of trusting a third party to keep the transaction history correct and secure, blockchain allows you to protect transactions by using cryptographic keys that act as a digital signature.
With that out of the way, let’s get down to brass tacks.
One of the reasons many companies are embracing blockchain technology is efficiency.
Blockchain is primarily utilised to increase security and privacy standards. It’s systematic functionality also allows users to exchange money without the backing of a physical currency – a key attribute of the infamous Bitcoin, but also a highly contentious quality.
The absence of a third party in the blockchain process, enables transactions to occur much faster and simpler.
It also provides a greater sense of security in terms of how information is processed and stored.
In an era where fraud is rife, and where banks often fail to fend off such attempts to invade financial privacy, blockchain is a method to provide an increased level of control over transactions. Be it the management of data, enhancing public key infrastructure (PKI) or reducing an organisation’s exposure to DDoS attacks, disruptive tech companies are utilising blockchain with great success.
Supply Chain Transparency
In an era of globalisation, where even the smallest business can trade with customers and suppliers around the world, supply chain transparency is paramount. Last year Amnesty International brought into question the sourcing practices of some of the world’s leading technology companies, suggesting the cobalt in their products was mined using child labour.
Beyond being a PR nightmare, it demonstrates the importance of clarity in increasingly complex supply chain models. As a decentralised ledger, blockchain is the perfect solution to this problem, providing a of every transaction that goes into the development of a product. Better still, if an attempt is made to tamper with the record, when, who and what was edited is evident for all to see.
Ultimately, companies are beginning to adopt blockchain technology because of its revolutionary and innovative nature. Blockchain addresses existing problems within the transactional process and provides a somewhat, sophisticated alternative which cannot be ignored.
As with any new technology, one of the biggest hurdles blockchain faces is its novelty.
While no forward thinking company wants to be last to the party, very few want to play the role of guinea pig either. This is understandable. The reputational, organisational and economic risks of investing in an unproven technology can be high. What you end up with is a wait and see situation, with perhaps a small project or two to test the water.
Following on this point, another big issue facing the technology is the fragmented nature of the market.
As mentioned, there are myriad of benefits of blockchain to business and there are hundreds, if not thousands, of start-ups keen to prove their solution is the best. On the one hand this is extremely positive. On the other, it makes it extremely difficult for businesses to identify a single application for the technology and that leads to confusion over the true value it offers. Think jack of all trades vs niche expert.
Blockchain, more specifically the crypto-currencies and initial coin offerings associated with it, is yet to be appropriately regulated. Investing heavily in a technology when the future direction of the regulation governing it is so unclear, is generally considered unwise.
- The European Banking Authority (EBA) has started looking at a Europe-wide regulatory regime for virtual currencies
- There is some regulation in the U.S. via the NYDFS BitLicense regulations (but these are only applicable in NY State)
- In the U.K., there are currently no specific regulations of the blockchain, however, it is something the Financial Conduct Authority (FCA) is looking into
Perhaps a direct result of its young, fragmented nature, blockchain is currently not supported by internationally recognised and applied standards. However, as with regulation, work is under way in this area, such as the R3 CEV initiative involving many large banks.
As regulation and governance catch up over the coming months and years, there is a strong possibility that this will become one of the greatest strengths of the technology.
NashTech has extensive experience working with disruptive start-ups and large corporations to develop their blockchain capabilities. Our global team of developers and engineers, along with our reputation for expert testing, has us well placed to partner with blockchain development teams and ensure best practice in their approach.
To find out how we can support your company’s Blockchain exploration and development click here.