Models Of Trust – How Blockchain Will Transform Industries

“Writing a description for this thing for general audiences is bloody hard. There’s nothing to relate it to.”

— Satoshi Nakamoto

We have all heard it before in tech, and it is a foregone conclusion that change is coming. Any industry that we can name will not look the same in a few decades. What technologies will be responsible for most the change in the upcoming decades is still up for debate, but there seems to be general agreement on three technologies that will revolutionize everything: quantum computing, artificial intelligence, and blockchain.

While the impact of these technologies is already being felt, the most revolutionary technology is blockchain. Even though I am much more excited by the technical nature of quantum computing and AI, blockchain will be revolutionary because of its simplicity and broad applicability.

In my previous post, I went into some detail about third-party trust and establishing trust between two transacting parties. Here, I will explain how blockchain can and will revolutionize almost every industry by introducing new models of trust.

Before we can discuss the impact of blockchain, we must first understand its three fundamental characteristics that make it so revolutionary. Blockchain is:

  • Immutable
  • Distributed
  • Open

While anonymity is a desired characteristic for some applications of blockchain (no, cryptocurrency is not the only application of blockchain), the applications of blockchain I will be discussing involve the three characteristics listed above.

Why all this fuss about blockchain? Well, if you want to remain relevant in the coming age, you have to learn how to use blockchain and how to develop it or risk being left behind.

The Immutable Blockchain

“The only constant in life is change”

— Heraclitus

Change is inevitable, change is frequent, and if you fear change, feel free to leave it in my donation box (wink wink). However, change and changeability cause a fundamental problem when it comes to code, as there are certain records that we don’t want changed.

For example, if I buy a house, I don’t want the titling and recordation to be changeable. Even if I end up selling the house, I would still want there to be a record that I once owned the house. Imagine if you purchased a $300k house and the only thing required for someone to take that house from you is to change the recordation database.

In the first world, we are used to being able to trust institutions such as county and state governments as well as corporations. While that trust has been consistently eroding for quite some time, we still trust our governments with fundamental records such as property records, drivers licenses, and birth certificates.

However, not every government in the world is so trustworthy. So either we trust compromisable governments and corrupt government officials to maintain property rights, or we have no property rights.

Now imagine if your record of ownership of land or physical property was not recorded in a government central database but a distributed database that is immutable. By immutable, we mean that it cannot be changed.

Sure, you can sell your property and new records of sales could be added to the database, but the retroactive record that you purchased said property can never be changed. Would you feel secure in your purchase?

Also, can you think of positive and negatives of a system of record that can never be changed? What if it is used as a record of criminal activity? Crimes could never be expunged, which would be bad, but if it is used as a record of ownership of land or physical property, what do we stand to gain? What do governments stand to lose? How will this revolutionize titling and recordation?

What makes a blockchain (for all practical purposes) immutable would require some rigorous mathematical papers to prove—and is therefore outside the scope of this post—but the key takeaway is this: The immutability of the blockchain naturally lends itself to being the solution for storing all sorts of records that must be unchangeable.

The Distributed Blockchain

“The future is already here—it’s just not evenly distributed.”

― William Gibson

Another property of the blockchain that is closely related to its immutability is its distributed nature. Since blockchain is distributed over many nodes in a peer-to-peer network, each node acts as a system of record and a check against corruption of records.

If an errant node were to enter the system and claim a different set of records, the other nodes in the system would reject that node. Furthermore, anyone who wishes to participate and make the system more secure can become a node. This means that parties interested in the well-being of the system can make it more secure by joining the system and making another distributed copy of the ledger.

What does the distribution property provide as a benefit? This makes it so that as more people join the system, the more secure it becomes and the more trust is established in the system. Can thousands of distributed ledgers that hold the exact same record go out of sync? What if one node went out of sync or was compromised?

We have seen the consequence of a single central database being compromised and changed, but even if someone could somehow change one node, it would be near impossible to change them all (especially if they are cryptographically secure). The fact that the blockchain is distributed also makes it open.

The Open Blockchain

“The trouble with having an open mind, of course, is that people will insist on coming along and trying to put things in it.”

— Terry Pratchett

This property of the blockchain is probably the one that makes people most nervous. The genius of the Bitcoin blockchain is that it is open and anonymous. Everyone at all times knows how much Bitcoin is in any given wallet but nobody knows who owns that wallet.

One property of the blockchain that will be revolutionary is that blockchain is open. Every single node on the network has the same copy of the ledger, which also means that every single node can see everything.

This transparency in the information being recorded in the blockchain has advantages and disadvantages. The advantage is that everyone can see everything (transparency), which builds trust, but the disadvantage is that EVERYONE CAN SEE EVERYTHING (gasp).

This means that, in order for there to be a private blockchain, it must be secure and no nodes be allowed to join the network that are not explicitly known to be an interested party in the network.

Where openness can engender trust, it can also breed suspicion. So, when implementing private blockchains, developers will have to be extra careful with their architectures.

The Private Blockchain

“And I like large parties. They’re so intimate. At small parties there isn’t any privacy.”

— F. Scott Fitzgerald (The Great Gatsby)

Where the Bitcoin blockchain is an example of a public blockchain, private blockchains are already being implemented in a variety of industries to support a multitude of solutions. A private blockchain is an invitation-only blockchain that is usually governed by a single entity.

A single entity? Dare I say a trusted single entity? Well that is a problem. Notice that the term is “governed”—not owned, but governed. A single entity can be governing a blockchain and guarding the door to entry in the blockchain, but as long as the blockchain itself is immutable, open, and distributed, all the benefits of the blockchain can be realized by the participants in the blockchain.

As private blockchains become more and more mainstream, they will revolutionize many industries. I want you to try this exercise. Google “[fill in your industry or area of interest] blockchain” and see how blockchain can and will impact it.

Some really exciting developments are happening in supply chain, real estate, power distribution, health care, intellectual property, voter fraud and election accountability, and insurance. Did I miss anything?

The (Anything) Blockchain

I hope that you have Googled your particular industry and you’ve seen how blockchain is likely to change it in the coming years. If you have not, I would recommend you do so. Here is how a few industries are likely to be affected and disrupted by blockchain technology.

The Supply Chain Blockchain

If you have worked in supply chain or written software for supply chain management, you know that modern supply chains are pretty incredible. Legendary supply chains such as those of Amazon and Walmart have almost no data loss and their velocity of execution is dizzying. So how can blockchain improve something that is already so great?

As supply chain is a process, it always stands to be improved—even if it’s already the best. The “Star Trek” transporter is the supply chain that would result in the fastest achievable velocity. However, until the day we invent transporters, supply chains that have manual production and delivery processes can be improved.

The change that blockchain can and will bring is the automation and efficiency of manual production and delivery processes, guaranteeing delivery of items and funds using self-executing contracts. So if you are working in supply chain or are developing code for it, start learning about supply chain automation using self-executing contracts written on a blockchain.

Moreover, blockchain can provide the transparency that modern consumers demand in the production process. Are you really sure that the diamond you bought your fiance is responsibly sourced and not a “blood” diamond?

Well, a blockchain can provide complete and utter transparency, as well as a guarantee that goods delivered in a supply chain are responsibly sourced, without any intrusive disruptions to the supply chain such as audits.

The Power Distribution Blockchain

Do you have solar panels on top of your house? If you do, then you are already participating in the modern electric distribution grid in which consumers of electricity are also producers of electricity. The production from my own panels has at times exceeded the consumption of my house, and I got a negative bill from my power company.

You might ask, so what? Well, using internet of things (IOT) devices and modern electricity distribution networks, it is now possible for there to be peer-to-peer energy selling. The excess electricity you generate, you can sell to your neighbors, and since you don’t have a large grid to maintain and you are literally producing the electricity next door, you can sell your electricity to your neighbor for much cheaper than a power company can.

Using blockchain, all units of electricity you produce and how many of those units your neighbors consume can be recorded and only made available to peer-to-peer electricity providers, and using self-executing contracts, you can collect your payment as soon as the electricity is consumed.

Also with blockchain it is now possible to cut out the middleman in electricity distribution. We may soon have no need for electricity wholesalers and will be able to buy electricity directly from the producer.

So if you are in the power sector, learn about self-executing contracts, how to code them, and how blockchain can provide transparency in the distribution process. You will thank me later!

The Intellectual Property Blockchain

Imagine this scenario: You thought to yourself, “You know, if we created X like this and that, it would make our lives so much easier.” Perhaps you maybe wrote down your idea, told a friend about it, or even expressed it on the internet. Then you forgot about it, only to discover later on that someone created X and is now making bank. You were then beating yourself up thinking, why didn’t I patent that?

Now let’s imagine a different scenario. Instead of posting your idea on the internet, you post it on the blockchain. The blockchain will become a permanent record that you were the first one to propose the idea, and the more concrete information you can put in the blockchain, the more easily you can now defend your great idea from IP thieves in the future.

Well, those days are closer than you think. Blockchain is very likely to become the de facto method of storing all sorts of records that need to be unchangeable and evidentiary in nature.

Imagine if someone hacked into a government database and changed the patent application for your invention to themselves. The burden will then fall on you to somehow prove that you were the first to file the patent, and have you seen how many times the government has been hacked lately?

This improvement in the intellectual property protection process will not impact just one industry but all industries.

The Real Estate Blockchain

Do you know about real estate contracts, escrows, and payment collection and recordation, financing, and titling and registries? All of these are about to be impacted by blockchain.

Imagine a world in which you don’t have to go to a bank to apply for a loan. You can maintain your own credit worthiness and monitor it and make sure it’s immutable and not hackable (unlike Equifax), and if you are careful to maintain your credit posture on the blockchain, any private institution or even an individual could lend to you on the blockchain.

The details of how this could work would require entire books, but alternative financing is becoming a real option with the blockchain using self-executing contracts, and traditional lenders are taking notice.

Another application of blockchain is in real estate and the land and property registries all governments maintain.

We in the first world are used to having stable and functional local governments, but there have been countless instances of corrupt governments taking private property without due compensation or outright changing land and title registries of private ownership. With blockchain, all such risks will become things of the past.

The Chain of Chains

It becomes tough to explain the impact of blockchain on all industries. The only remedy is for you to start doing the research yourself.

If you have not done so, go ahead and type into Google “[your industry] blockchain” and see what comes up. Don’t take my word for it. You are working in your own industry, perhaps developing code and solutions for that industry, so I can’t possibly understand the impact as well as you could if you learned about it for yourself. After all, you know your industry best.

It is very difficult to accurately predict all the impact blockchain will have on any given industry, but one thing is for sure: If you want to remain relevant, if you want to ride the next wave of technological innovation to future prosperity, learning blockchain and blockchain development is a must.

Perhaps in the future there will be a blockchain that consolidates all other blockchains together. Perhaps there will be a chain of chains—the only blockchain we will have to learn. But until that day, all developers would do well to learn blockchain development.

One technology of tomorrow that is here today and is here to stay is blockchain, so what are you waiting for? Get to it!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s