Smart Industry 1/2017

Smart Business Title Story: Blockchain
For example, many IoT applications
involve quickly setting up relationships
between multiple business
entities involving legal and financial
factors as well as performance.
Service level agreements (SLAs) are
a good example of where blockchain
can provide oversight and assurance.
By using so-called 'smart'
contracts across a blockchain, participants
in a business relationship can
be confident SLAs are continuously
monitored and that rewards and penalties
are applied immediately and
fairly.
But there is much more than just IoT
to blockchain. The market is currently
in an “advanced pilot state,” according
to Eric Krause, a consultant for
global IT service company Infosys. At
present there are many prototypes
and parallel developments, often
based on different standards. This
is necessary in the early stages of
innovation as ideas surface and grow,
he explained.
The top five initiatives are Bitcoin,
Ethereum, R3, Hyperledger and Ripple.
“With regard to Hyperledger and
R3, we already see collaboration –
donation of code – between R3 and
Ethereum; so we might see a stand ard
developing in the next years,” he says,
We are looking
at technologies
at an early
stage of maturity
and most
people don’t
want to
accept that
Martha Bennett
Principal analyst, Forrester
Research
adding: “In my opinion, this is one of
the pillars for mass adoption.”
Are early movers in this field likely to
benefit, or are they simply going to
absorb a lot of costs that others will
then benefit from? “No one wants
to be first or third – fast follower is
the most wanted position,” Krause
says. “After all, it’s always the second
mouse that gets the cheese.”
“Blockchain is no magic potion for
everything,” He admits. “Although the
distributed ledger technology has the
potential to change and improve the
current financial services industry, it
does not constitute a one-size-fitsall
solution. Potential business cases
need to fit to the technology’s specific
characteristics for interactions including
factors such as security, decentralization,
complexity and the number
of participants in a transaction.”
It can change the nature of interactions,
but at this state of maturity it
is difficult to predict how exactly it will
do that. And that’s exactly the right
perspective, agrees Martha Bennett,
principal analyst at Forrester Research
in the UK. “It depends who you are
and what you do but the challenge
with blockchain is that we are looking
at technologies at an early stage of
maturity and most people don’t want
to accept that,” she says.
When people look at blockchain “they
tend to want the best of both worlds,”
she adds. They want all of the aspects
related to replacing trust between
humans with something carried out
by machine, based on incorruptible
mathematical concepts. But they also
want none of the downsides that are
present in the only blockchain network
that currently delivers, namely
Bitcoin. Those downsides, Bennett
says, are the reasons why Bitcoin isn’t
generally suitable for most enterprise
use cases – it is too expensive to run:
How the blockchain works
A wants to send money to B
1
Those in the network
approve the transaction
is valid
4
2
The transaction
is represented as
a ‘block’
5
The block then can be added
to the chain, which
provides an indelible and transparent
record of transactions
3
The block is
broadcast to every party
in the network
6
The money moves from A to B
The blockchain is a distributed database, a kind of giant, global
spreadsheet that runs on millions of computers. It’s open source, so
anyone can change the underlying code and can see what’s going
on. It’s peer to peer, so it doesn’t require powerful intermediaries
like banks, merchants or governments to authenticate or to settle
transactions. The blockchain uses state-of-the-art cryptography,
so within a global, distributed database the fact that we’ve done
a transaction can be recorded. But what else could it record?
Theoretically (and, increasingly, practically) it records any structured
information, not just who paid whom but also who married whom
or who owns what land, or what light bulb bought power from
what power source. Experts agree that IoT will need a blockchain
settlement system, because banks will be overwhelmed having to
settle trillions of real-time transactions between machines and other
objects. Most blockchains – and Bitcoin is the biggest – are what
is known as permission-less systems. Anyone can do transactions
without knowing who the other party is and without any middleman
or central authority involved. Blockchains all have a digital currency
of some kind associated with them. There are a number of them
already, but the Bitcoin blockchain just happens to be the biggest.
12