Never use the word ‘every.’ With very few exceptions. One exception follows….
Every business executive should understand blockchain. It won’t impact every business today. But each executive should make a conscious decision as to whether blockchain technology presents an opportunity or a threat.
Ignoring blockchain technology would be as unwise as ignoring the internet in 1993.
What is blockchain technology? There are endless articles on this as well as videos, animations, and white papers. My view is that too many of these resources complicate the issue. Let’s give up some technical accuracy and explore a simple approach to understanding it. To understand blockchain you have to start with bitcoin.
Think of bitcoin as a form of digital gold. Sure, maybe it is currency, maybe not. I don’t much care what the definition is. The reality is that you can’t use it to buy much, and you would not want to store your kids’ college funds in it – it’s too volatile. So between having limited acceptance and volatility, it feels like digital gold. Like gold you can trade it, invest in it, and easily convert it to currency.
Bitcoin works because of the blockchain. If bitcoin is the train, the blockchain is the railroad track. But these are very flexible tracks in that they enable lots of different ‘train types’ to run on them. No matter what runs on them, the benefits of the ‘track’ passes to the ‘train.’ These benefits include:
- Shared ledger
- Security, because the blockchain is decentralized
Plenty of people love the blockchain and hate bitcoin. That’s possible because bitcoin is just one example of what you can do with blockchain. Blockchain is relevant to any situation that requires trust, and a shared ledger.
Think of blockchain first as a shared ledger. That concept is simple, and endlessly powerful. To understand a shared ledger, imagine you were a plumber and that you were hired by a contractor for a small job. Without blockchain, you would send an invoice to the contractor at the conclusion of the job. He would then enter that invoice into his accounting system. You would then hope that he paid the invoice on time. If there was any question about the invoice you would each have to access your own records. The ledgers are separate.
A major benefit of the shared ledger – it creates trust. All of a transaction’s history is transparent. Everyone works from the same documents with the same set of rules. A speaker at a recent conference referred to Blockchain as ‘the system you use when you can’t trust one another otherwise.’ The Economist referred to it as ‘The Great Chain of Being Sure of Things.’
Now imagine you and the contractor shared a ledger. When you had an invoice to send, that invoice would go to the shared ledger. The contractor could then approve or reject it. Record keeping though is simplified because it is shared and always visible to both parties. Paperwork is decreased and visibility soars. And it is tamper proof.
Next, the blockchain is secure. Typical security relies on storing data on one computer, and building that computer into a fort with impeccable defense. As we have learned from Equifax, Target, etc. – there are countless preaches of these forts.
Blockchain is not centralized, but decentralized. The shared ledger is stored not on just one, or two, but many computers. Every computer on the network maintains a copy of the data and if one computer updates the data, all the other computers have to agree. That means a hacker would have to corrupt not just one system, but many, and do so without any computer detecting this. I am not an expert, but ask an expert – they will tell you this decentralized approach to security is vastly superior.
Now imagine you have an ability to created a trusted, shared ledger. What can you do with it? Endless possibilities. Here are a few examples that will help you to better understand how blockchain might impact your business.
- Establish the provenance of diamonds. Everledger is creating a shared ledger that will show who owns a diamond at each stage. This is a form of title insurance that is hoped will reduce fraud and speed up transactions.
- Allow people to own their own content. Narrative is using blockchain to enable people to control their own content. No more do you have to worry about a large social media company profiting from your content, or altering what you said.
- A vastly improved form of title insurance. Many people are exploring how to use blockchain to provide ongoing title. No more need to search county records every time a house is sold – the record of ownership is stored permanently on the blockchain. Sound crazy? It’s already in the works.
See the article Blockchain 101 for a list of articles and resources that will help you learn further. Then get to work and assess the opportunities and threats presented by blockchain.