The question of what exactly is blockchain has come to the fore this week with the publication of the eBook ‘Blockchain Meets Supply Chain: Rewiring Business Operations for the Digital Age’ which acknowledged ‘blockchain is difficult to pin down … it is
a class of software composed of other technologies’.
The blockchain is a secure, transparent, layered container. The container is distributed available across the internet or cloud, with any changes reported back to all parties in the group. This process is referred to as distributed ledger technology (DLT).
The DLT is either in available to a public or private group. Financial services activities will be in predominately private groups, for example ‘syndicated Loans’.
The key layers features in of the transparent container include:
- Consensus – algorithms that confirm and accept the information as it arrives and makes sure that information is distributed.
- A Shared Ledger – the record of information that is available to all parties.
- Immutability – cryptographic technology that ensures that records cannot be tampered with.
Who says blockchain is hip and modern? The Byzantine Army from 330 AD needed to manage the diversity of loyalty in its generals through coded, distributed, hand delivered messages. Today we use mathematicians and technology to ensure the shared ledger is
as robust and staying true to the course, as did the Byzantine generals.
It is the right choreographing of the different technologies, that the eBook spells out well, that is most important. Given the correct combination, blockchain/DLT should appear sooner than currently anticipated.
Gone are the days banks when banks ‘build it themselves’. Most banks now only want the technology to work with the caveat that the supplier is approved by the bank. Bank technology suppliers, to meet regulatory requirements, must be low risk, which is not
the profile of most Fintech companies!
The eBook’s suggestion that ‘more caution’ was needed in implementing blockchain is probably correct but the banks’ situation is urgent. The long and ongoing low interest rate environment has made it very difficult for banks to generate revenue growth. The
Swiss Central Bank now charges fees for money on deposit – so times really are getting harder!. Banks also have also very high internal cost infrastructures. Banks need to start charging for their services, or cut costs, or both. Blockchain/DLT offers efficiency,
better security and one source of the truth. As the eBook points out, the digital supply chain reduces procurement costs by 20% and halves supply chain costs, so how about controlled activity instead of caution.
The eBook’s focused on the digitalisation of assets and the provenance of them, rather than crypto currency is refreshing. I did notice on CoinDesk that one of the crypto currencies dropped 31% in 24 hours. That’s a Zimbabwean dollar- like fall. Maybe, like
the Zim dollar, the crypto currency will be officially abandoned and the US Dollar used instead.
What should we call the stack of technology which that forms the blockchain and DLT?. Every stack could be different. How about Rose? After all, the USA hurricanes carry female names!. Blockchain/DLT/Rose will bring the force of the hurricane and the eBook
(you can find it on Amazon) is the calm before the storm.