Blockchain: A tectonic shift in tech space

Praveen Upadhyay

Consulting| Product Management| Banking Business Solutions | Digital Transformation & Growth | Blockchain Enthusiast | Sports Enthusiast

Published Aug 23, 2021

1. Introduction

Any transaction and a record of it are the building blocks of an economic structure. Similarly, when two parties sign a contract, it makes the legal system. What is the use of these records? How can they make any difference if the two parties know each other? Well, the answer is simple- it helps in identifying the people involved and the date on which the transaction was done. Even though we are moving towards digital transformation, these tools to keep a track of things and their governing bodies have somehow struggled to keep up with this transformation. With increasing trust gaps, Blockchain emerged as a technology that can make processes more secured, faster & efficient, and transparent. For many it was revolutionary but what was more concerning is the ballyhoo around it. The recent collapse of bitcoin wiping billions of dollars from the market, increasing energy consumption because of mining techniques, and rise in illegal transactions are a few examples that make us think if this technology is a revolution or not. One important aspect of blockchain is decentralization, this means the collapse of governing bodies like central banks, change in the governance model. Blockchain innovation is certainly a shift from existing technology, but will it sustain without any repercussion? Is this the reason this technology is still being explored and many governing bodies are still reluctant towards it? Despite its breakthrough potential why the growth of blockchain technology is very slow?

History

In 1991, Stuart Haber and Scott Stornetta mentioned the concept of time stamping, which is considered as the stepping stone in blockchain tech. 17 years later, Satoshi Nakamoto, developed bitcoin, a cryptocurrency based on blockchain. What started as a normal cryptocurrency, become the backbone of the blockchain technology revolution. The limitation in the bitcoin blockchain was overcome by the Ethereum blockchain, founded by Vitalik Buterin. Ethereum, not only provided a platform for cryptocurrency but also helped in running business logic based on smart contracts. In 2017, IBM and Linux Foundations introduced Hyper ledger, a blockchain-based business platform to run digital business in a decentralized way.

2. What is blockchain?

In layman terms, blockchain is a distributed peer-to-peer network with no central governance body to keep an eye on. In other words, Blockchain is a kind of ledger that cannot be tempered and the copy of the ledger is available with each peer in the network. In the blockchain, each peer has the latest copy of the chain and any change in the block requires consensus from other peers. In the blockchain, data is secured through encryption and thus cannot be altered. One of the important aspects of blockchain is the consensus mechanism. In consensus, any transaction is considered valid, if only it is being approved by a majority of the peers.

Blockchain platforms are classified into 3 broad categories

Purely currency based - Bitcoin
Currency and Business logic based – Ethereum
Business logic based - IBM and Linux foundations- Hyper ledger

Based on the access rights, blockchain categories are considered as – Public, Private, Consortium.

3. Crossing the chasm- Technology adoption

To understand the shift in blockchain technology, let us try to understand how technology has evolved in the past. Technology adoption is described as the acceptance of a new innovation or product by different segments of customers. Any new product or technology follows a life cycle, starting with the adoption of new technology by innovators, tech experts, the next set of people is known as early adopters, they are visionaries who think aloud on new technology. From this stage onward, many technologies/products/innovations struggle to move to other sets of people known as the early majority. This gap between early adopters and the early majority is known as Chasm, as mentioned by Geoffrey A. Moore in his book Crossing the chasm.

(Source: https://www.ignitionframework.com/crossing-the-chasm-theory-how-to-market-sell-and-improve-your-new-invention/)

When uber was launched in India, it maintained its payment system through credit cards. Users have to link their credit card with their uber account. This was new for everyone in India and many people took it with skepticism. The major factor here was trust. Uber was a major player in the US at that time, but in India, where people count their money after disbursement from ATMs, giving away credit card details was a big risk. With increased digitization and strong banking standards, uber gained the faith of people and emerged as one of the most used cab service platforms in India.

Being in the tech space for so long, blockchain is still thriving for its potential spot in the tech space. Blockchain is a breakthrough technology with the potential to change the economic and social ecosystem. In 2008, when bitcoin was introduced as an application of blockchain technology, it disrupted the traditional transaction system. A peer-to-peer decentralized network completely removed the role of a governing body that tracks and authorizes the transaction. Just like other technology, Bitcoin also got attention from innovator groups. With no central body involved, Blockchain implantations will reduce the cost of transaction and time on authorizing a transaction.

4. Blockchain adoption- Turtle race

With so much hype around it, blockchain is being adopted by many enterprises and start-ups. With its potential to transform the traditional way of businesses, blockchain is gaining popularity across multiple industries. A report by APQC (1) (American Productivity & Quality Centre) generated by the survey of 86 supply chain professionals found out that only 12% implementation is blockchain implementation and almost 37% are either not using it or are unsure about it.

(Source: https://searchcio.techtarget.com/tip/5-challenges-with-blockchain-adoption-and-how-to-avoid-them)

The reason for the lack of adoption of blockchain technology are:

Lack of knowledge and awareness

One of the reasons for the low adoption rate is a lack of knowledge and awareness. Many institutes are yet to incorporate this subject into their curriculum. Many business firms and companies are still figuring out the technology and its use cases. The skill gap is very high for blockchain technology and lack of talent is affecting the growth of the technology

High cost of change

Blockchain technology implementation is a graveyard shift from a traditional technology implementation. Firms have to be very sure of their use case and then invest strategically. However, this shift will have high cost and with the current state of blockchain technology- Crypto black hole, government regulations, companies are reluctant and taking cautious steps towards adoption of blockchain technology

Catch 22 situation

Catch 22 is a situation of paradox, explained by Joseph Heller in his book Catch 22. In terms of blockchain technology, this implies a situation in which on one hand the government agencies are boycotting cryptocurrencies based on blockchain, and on the contrary, they have to work towards blockchain adoption.

Environmental impact

The mining of a block in blockchain consumes a lot of energy and thus has a negative impact on the environment. Elon Musk’s EV company Tesla, widely accepted Bitcoin as a currency, that increased the bitcoin transaction, but due to increasing energy consumption, Elon Musk withdrew this process. Many Bit mains in China are illegally consuming electricity in mining which causes a lot of heat and thus impacting global warming.

Chicken and Egg problem

One of the biggest problems any platform faces is the chicken and egg problem, where the adoption of a platform by one side is affected by the adoption by another side. For example, in the supply chain, if an organization is adopting the tech at the same time, the supplier has to adopt it.

Non-interaction of the blockchain platform

Even if most of the firms adopt blockchain, they will develop their own blockchain. This blockchain will not interact or cross operate as each platform will have its own set of rules and logic.

5. Blockchain use cases

Blockchain technology is slowly gaining traction among finance and insurance companies. However, Microsoft along with Accenture have developed a blockchain solution- ID2020, a humanitarian cause to provide banking, education, healthcare to more than 1 billion people in the world

Some other use cases of blockchain:

Blockchain in forensics

Forensics is one domain in which evidence and stakeholder testimony plays a crucial role. In many cases, either physical pieces of evidence are tempered or get destroyed. With the help of blockchain and IOT, in each step of forensics, from identification to the preservation, collection, analysis, and reporting, by ensuring integrity, decentralized control, and evidence security.

Metered asset usage

One of the beautiful use cases of smart contract-based blockchain is metered usage- a new form of sharing economy. With the help of a decentralized protocol, we can decide on consumption access and related charges for Wi-Fi hot spots, storage capacity, processing power, or mobile internet usage. This can be termed as digital renting with the help of IoT on a blockchain platform

Transparency in grain procurement

In India, most of the farmers sell through Mandis, sometimes directly to the government, which in turn sell it at a subsidized rate or distribute it under some scheme like Antyodaya Anna Yojana, Annapurna. However, around 80% of fraud happens as soon as the grain reaches the ration shops. With the help of smart contract-based blockchain implementation, we can check quality and quantity control at each step of the distribution system. In the same platform, we can manage customer complaint services which will be handled directly by the procurement center.

Transparency in healthcare

During the pandemic, people suffered a lot due to poor supply chain management of essential goods and hospital bed availability. Oxygen and other essential drugs were being sold on the black market. This can be controlled and channelized with the help of blockchain implementation in IoT-based applications. By developing peer to peer network of hospitals, we can easily identify the vacant beds in hospitals. Drug suppliers can be a part of this distributed network to ensure just-in-time delivery of essential items.

6. Conclusion

Change is inevitable. It might be delayed but cannot be avoided. The airline industry took 64 years to reach the milestone of 50 million passengers. The transition from the physical world to the internet took almost 20 years. The adoption of the internet helped the world to gather and exploit data, thus it is known as the internet of information and now with the emergence of blockchain, we are moving towards value-focused thinking, an internet of value, or internet of trust. With time companies will shift towards blockchain depending upon the context and investment capability. No doubt, blockchain will bring change in the way businesses are being done, the future is bright. We can sit back and wear our black shades to witness one of the major changes in technology space in near future.