We have reviewed the blockchain principles and opportunities, its applications, advantages and concerns around it to understand the business potential of this technology.
Blockchain is a digital ledger that is used to maintain an ever growing list of records, called blocks. This database includes all transactions that have ever been executed inside the blockchain.
Blockchain was initially built to solve the mathematical problem of secure communication between mutually unknown parties without credibility. Then the technology became a base of the digital currency, BitCoin. Every bitcoin is issued in exchange for “mining”. The algorithmic self-regulation rejects any attempt to break or defraud transactions; the system will also reward the honest parties of the transaction automatically.
Blockchain allows members to exchange data without a trusted intermediary: to make deals, to pay for services with digital cash, etc.
Blockchain is always referred to as a distributed decentralized public ledger. What is the meaning behind this?
The same database is installed on each member's computer. Think of it like of a Google doc. Instead of sharing a single doc between all the members, you get your own online copy which is constantly being updated in sync with other’s copies. So if one copy were to brake, the remaining copies would save the information.
There’s no main owner of a ledger. So, no one can alter the data in all the copies on their own. To add a new block with some new data, one must gain permission from all members of the chain. This is called a consensus protocol.
The transaction history is accessible to all members and cannot be rewritten. Everyone connected to the blockchain[BD1]has access to any and all data. Any change or censorship is impossible.
Basically, transactions in the chain are policed by smart contract logic. Smart-contracts are software programs that integrate the database with solid business logic.
- The smart-contract is a special user-defined program that creates business-rules. It defines “what” will happen and “why”. The sequence of actions is transmitted across the network and recorded
For example, a pre-established smart contract could automatically transfer the ownership of a vehicle from the vendor to a person when all the loan payments have been made. There are dozens of different smart contracts that can cover any sophisticated business logic in health, insurance, and other industries. Dozens more can be developed from scratch.
Some smart-contracts get new information from “oracles”, because blockchain itself doesn’t recognize any “if” conditions. It needs a command from the outside.
- An oracle is a source of information outside the blockchain. It provides the database with some data that will have an effect on a system’s behavior. Oracles gather exchange summaries, weather forecasts and other information
Say two people make a bet on tomorrow’s weather. Tomorrow, the contract will automatically be completed by a program checking the weather from an oracle (in this example, perhaps Weather.com), and the specified amount of money will be transferred from the loser to the winner’s account.
By integrating the oracles with machine learning, it becomes possible to train them and to gather data from such complex sources as photo and video archives, or even public speeches.
Blockchains enable parties to conduct transactions securely without a trusted intermediary, and avoiding high legal and transactional cost. Smart contract logic can even penalize fraudulent members by redistributing their deposits to honest parties. This makes the blockchain model of cryptography more powerful than the traditional models in which any member is able to corrupt the rules.
However, the power of blockchain and smart contracts is questioned.
Working with the concerns
While implementing blockchain in our customer’s business processes, our team was faced with several disadvantages of the technology. We tried different platforms and tested them to ensure that the chosen platform will be able to handle the load of more than a million queries from clients.
We started from Ethereum, then used Eris (Monax). The both failed: they crashed after every two weeks of active data exchanging. Later we developed tools to overcome this problem.
However, the following are staples to the majority of blockchain platforms:
- Data exchange rate. Blockchain isn’t suitable for sending big files, like graphics or videos. The advantage of this technology lies in its security, but not in its rate.
- Database recording rate. The recording process is relatively slow. It counts seconds and even minutes, which is not always suitable for all business processes.
- Network access path length. You cannot control the length of the network access path; however, in the popular blockchains this path is short and fast.
- Requirement of resources. The database requires increased resources and memory to keep track of all the data. Every new block downloads the existing database so the requirements become more and more extensive.
- Isolation. Blockchain requires the flexibility and smartness of oracles to do something that relies on outside data.
- Unofficial state. The laws of the most countries don't recognize resolutions of blockchain platforms. Some countries have even banned BitCoin (like Bangladesh, Bolivia, and Russia).
Probably the least suitable business for blockchain technology is stock exchange trading, where exchange rates can change several times in a second. However, it can be useful for SWIFT Interbank Financial communications where the messages are sent rarely, but have increased value. The technology rewards business for spent resources:
- 24/7 availability. This is a decentralized digital data repository, so you will never face a problem like unavailable servers and so on. The data is, and always will be, there.
- Security. Data will never be lost: there will always be a copy on some server of the chain. No data leak is possible due to powerful cryptography in the registry.
- Data control. One can withdraw data (such as private data) and it will disappear from every server in a chain.
- Transparency. One can review the full transaction history starting from day one.
These advantages make this technology the most suitable tool for all fintech needs.
The most appealing feature of this new idea is the opportunity to gain new markets with completely new solutions, these markets and industries are free of any competition.
Our client - the international healthcare company - asked us to develop and implement a distributed ledger optimized for a business process that was absolutely new to them. In many states, gathering patient’s private data subjects them to legal action. No specialist can learn anything about their patient without his consent or without his sponsor’s consent, thus the help cannot be provided. But what if the patient isn't able to provide a clinic with this consent immediately (for example, an underage person)?
In the emergency situation, doctors are allowed to help immediately - i.e. by gathering any private data without needing consent. However, in less critical situations, the paperwork is huge and takes lots of time and resources. A blockchain ledger with client’s IDs and electronic signatures will resolve the legal problem and will save time and effort. Moreover, the paperwork will be more fully controlled and better organized than it is now in most clinics.
The client’s ID will be entered into the database, which will inform the doctor about who has the right to provide the patient’s data. This person then gets an SMS-inquiry, and, with the electronic signature, he can agree to the data gathering in just minutes (therefore, help will be provided faster).
This system requires collaboration between major hospitals, to provide the chain with servers that keep the data, and then to incentive the patients. In the exchange of this huge effort, our customer will get into a completely new market of gathering and organizing patients private data.
For businesses, blockchain usage can be really advantageous and helps to:
- Build credibility. The built-in protocol will ensure that all transactions will be completed.
- Become transparent. In public blockchains, every transaction is transparent. This will help to convince your prospects to trust you more.
- Promote security. Blockchain net is a better place to save your valuable data. Data will be distributed, making it harder to break in to, while consensus protocols will prevent frauds.
- Create personal offers. You can create smart contracts for different cases, and fine tune them for client groups or single clients.
- Reduce effort for verifying data. Data can then be involved in financial operations, making of contracts, insurance etc.
According toGoldman Sachs, blockchain has the potential to change the way we buy and sell, interact with government and verify the authenticity of everything from property titles to organic vegetables. This new technology is redefining the way we transact.
A prime goal for blockchain implementation is integrating cryptocurrencies into traditional banking and financial systems. For instance, to establish a payment network to let banks transfer funds directly between themselves without a trusted intermediary. But there's more interesting use cases for the technology.
One of the examples isCoinffeine, a Bitcoin technology startup that aims to make it possible for end users to buy and sell Bitcoin directly without an exchange. Some startups are building an API for financial institutions to offer traditional brokerage investors and bank customers access to Bitcoin (Vaurum). Others are establishing environments to trade cryptocurrencies (Buttercoin).
Collecting bonus points is one of the popular options for loyalty programs. The disadvantage of this program is the inconvenience of keeping and exchanging points. For example, the prospect needs to pass some steps on the company's website or even to call the manager in order to spend them.
In Japan, this program is offered to credit card owners. To engage more customers,Digital Garagecompany offered a more innovative exchange scheme: the points are collected online in the form of a digital currency. The result is both more comfortable and more rewarding, because the cryptocurrency can be exchange for more products and services than just the bonus points.
Fraudulent diplomas are on the rise worldwide. According to NAFSA, fake diplomas have become a problem even for the big colleges. In the USA,more than 200,000 fake degrees were sold on the black marketin 2015. Companies and schools are looking for solutions for years, and bitcoin technology is the one of them.
In Kenya, the government started to implement the technology to improve their educational system. ICT (the Information, Communication and Technologies) Ministry is planning to create a cloud solution together with IBM Co to enable colleges to keep the data about their graduates in a public ledger. This will eliminate the usage of fake documents.
Blockchain technology can improve services traditionally provided by nation-states in a cheaper, secure and more efficient manner.
In Britain, the blockchain is regarded as a basic technology for keeping the state's cadastral information. For real estate registers, there are distributed ledgers in Switzerland, Brasilia, USA. Australia is researching blockchain technology for various public service opportunities.
In Australia, there’s an even wider plan of implementing the technology in public security, logistics, cyber safety and state communications. Any public records can be migrated to the blockchain: not only land and property titles, but vehicle registrations, business licenses and certificates.
Proof of Concept
Today, there are several blockchain-based attestation services, such as Proof of Existence, Virtual Notary, Bitnotar, Chronobit, and Pavilion.io. One of the first services to offer blockchain attestation was Proof of Existence. People can use this web-based service for things such as art or software to prove authorship of the work.
With this tool, blockchains can be used to prove the origin of diamonds, watches and wine. The Kimberly Process uses the technology to prevent the sale of blood diamonds that are mined in a war zone and sold to finance terrorists in Africa.
In Britain, the blockchain based technology is offered so that people can watch the path of the fruit de mer from the sea to the shop, preventing illegal fishing.
What we can offer
WaveAccess has proven experience in developing blockchain services for health and insurance worldwide. We offer to develop blockchain-based services from scratch, or based on a platform of your choice:
- Develop solutions based on BitCoin, Ethereum, Monax, etc.
- Implement the logic for existing platforms
- Integrations with BitCoin wallets
- Implement the business algorithms for Ethereum
We create both private and public solutions. However, we strongly recommend that our clients choose the public type of the platform to benefit from the opening and to build credibility.
Blockchain is a private or a public ledger with potential as a worldwide, decentralized record for the registration, keeping, and transferring of all assets — not just finances, but property and intangible assets such as votes, private data, etc. It provides the ability to conduct secure transactions without a trusted third party, while avoiding high legal costs.
Blockchain is growing as members add new blocks to it to record their most recent transactions. Don’t expect the blockchain to be fast: for example, in the BitCoin net, blocks are created every ten minutes.
Blockchain technology is more advantageous when you need both security and credibility. It can bring both value and new concepts into government, fintech, logistics, proofs of concept, health care, insurance and other industries.
We are sure that the problems of performance, computation speed and resources can be overcome. There are already experiments creating platforms that save only some of the last operations in the base, without the requirement of saving the whole database.
Blockchain technology can lead companies into new markets, and these markets, financial services, and even economics can be reinvented. The new market will be based on clear and trusted relations even between unbeknownst parties. This will definitely be appreciated by the end customers, who will reap the benefits. Therefore, we believe, blockchain technology will become one of the most interesting competitive advantages in the next 5 years.
If you have any questions about blockchain platforms, their development and implementations, — feel free to contact us!
Let us tell you more about our projects!