Sphere Network’s recent event brought a broad spectrum of experience and industry sectors to the table. The discussion was lively, wide-ranging, and could have gone on for hours as we tackled the innovation and the potential surrounding blockchain technology. Attendees represented industries including legal, software development, manufacture, process industry, fintech and financial services, information management, retail, recruitment and Internet of Things. This underlined the huge scope of applying this new technology in all areas.
We began with a ‘Blockchain 101’ discussion, bringing up to speed those people who were at the start of their blockchain journey. The concept of transactional blocks referencing the previous transactions in an increasingly lengthy chain as applied to established cryptocurrency was clear to most. We moved on to discuss the blockchain approach to strings of non-financial events. A blockchain is only useful in a situation where responsibility is distributed, and we quickly distinguished between fashion and practicality: if the problem doesn’t require a blockchain, why would you use one?
The Bitcoin blockchain is independently verified by special ‘nodes’ – individuals around the world who choose to verify a transaction by processing increasingly complex algorithms. This is the mechanism for the distributed responsibility that the blockchain requires to function. The incentive for people to carry out this ‘mining’ process is payment in Bitcoin for each algorithm solved. How, though, would people be incentivised to carry out such verification, which is costly in terms of processing capacity and electricity, in a blockchain that is not related to a crypto currency?
Experienced heads around the table introduced us to a variant, the ‘permission blockchain’. This takes all the benefits of blockchain as a transparent, immutable record, but eliminates the anonymity of the people involved – the nodes – and does not require miners. This sat well with the group, but the next question to arise was the complexity of transactions.
A traditional blockchain is a single line of blocks building upon eachother. What happens where there are multiple elements to the transaction? One example might be the sale of a house: there are many smaller transactions to be completed and confirmed before the final transfer of ownership. This is where Ethereum comes in. This technology allows for multi-block decentralised apps, and is already making blockchain significantly more accessible as a base for new projects, with smart contracts and the use of tokens to provide evidence of the events that are recorded.
Business process disruption
Blockchain technology has enormous potential to disrupt business processes. In the same way that, when faced with the nascent internet in 1995, we were unable to conceive of something like social media, so the blockchain will take us in directions we cannot yet imagine. The disintermediation of processes will be a challenge for agencies, who will have to prove their worth as intermediaries in any situation. We can imagine immediate benefits in several key areas where projects are already ahppening. Supply chain and information management challenges are at the forefront of a lot of research, as is asset provenance. Credentialing is already underway using blockchain technology in the identification of refugees (ID 2020 project). Smart contracts and tokens have been circulated for some time, with tokens taking on a value of their own as alternative currencies – some legitimate, others less so.
There are of course challenges with applying new technology. Although it’s not particularly risky to implement, and Ethereum’s apps make it accessible, we wondered if its adoption would start at large natonal project level rather than small scale. The jury’s out on this one. However there are real concerns, for instance over the legal and fiscal jurisdiction under which a global blockchain might operate. Recent papers on blockchain for the legal profession and for the insurance industry address the challenges in more detail: other sectors will be tackling similar questions.
Where do we go from here?
We must build a culture that is accepting of innovation in general and of blockchain innovation in particular. We have to embrace transformation, and the philosophy of new ecosystems, not just the solving of old problems with new gadgets.
Attendees are already arranging to share their research and development and build relationships going forward. Sphere Network aims to build on the enthusiasm and interest of this small group in collaboration with the wider North East tech scene. There is a significant opportunity to make the north east a centre of excellence for this emerging technology. Our thanks to all who contributed.
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