Tag Archives: Blockchain

How to Explore Blockchain

How to Explore Blockchain

Written by Arno Laeven (@alaeven) for Coindesk.   Arno Laeven is a strategy and innovation consultant at Laeven Consult, and the former blockchain lead for global healthcare giant Philips.

 

In this CoinDesk opinion piece, Laeven offers his advice for organisations setting out to explore blockchain with a view to adoption, arguing that expectations need to be managed at this early stage of the tech.

 

 

Even though motivational speaker and author Simon Sinek has over 300,000 followers on Twitter, 80,000 on LinkedIn and his Ted Talk was viewed 30 million times and counting, most people still don’t do what he advises and start with 'Why?'.

So, when looking at blockchain tech for your organisation, why would you want to get involved in a technology which is immature, where the legal framework is unclear and where business models are still hard to come by?

 

Immature technology

To start with the technology, sure bitcoin has been around for eight years now, and works extremely well for what it was intended: managing electronic cash without a central administrator. Yet, demanding anything beyond that on the bitcoin blockchain is complex, if not impossible, due to limitations such as scalability, throughput and privacy.

So along comes ethereum which aims to be a decentralised virtual machine or a 'world computer' in the words of Gavin Wood, one of the project's founders. The absence of a central authority is the essence of a blockchain, but also a challenge when you want to ensure users that the machine is working properly.

Vlad Zamfir, one of ethereum's core developers, wrote a great post about the state of ethereum and why he thinks that we all should talk care when handling such a powerful but immature technology.

I believe that blockchain exploration projects should keep as much 'off-chain' as possible, and only use a blockchain for whatever core functionality it may provide for your use case.

From a technology point of view, what you are going to explore will likely: a) be obsolete by the time you've built it (given the speed of development of the technology), and b) not have the full functionality of a blockchain, since you want to keep as much off-chain as possible.

 

Unclear legal framework

Legal concerns are twofold.

First of all, current law and legislation does not fit the technology, as such.

Take, for example, the concept of controller and processor: who is what with regard to data on a blockchain?

The second issue concerns blockchains replacing and/or altering the concept of law – a subject about which Alan Cunningham of the University of Manchester School of Law wrote an interesting piece. In the article, Cunningham singles out for criticism the concept of absence of governance, which has proven not to hold up in crisis situations (as with failed ethereum project The DAO).

He argues further that the roots of blockchain are to be found in anarchistic and libertarian movements. My take is that one cannot embrace blockchains without embracing these world views too.

So, then the question becomes broader than law, it is a question of world view. Is a world without government and without central governance one in which you see your organisation functioning?

In other words, a choice for blockchain is implicitly also a choice for new forms of governance.

 

New strategy required

That brings me to the third point, that of strategy.  Blockchains will alter the value chain and even the organisation itself. This has all to do with the organisation of trust which will shift when introducing a trustless system like blockchain as a foundational layer.

Take a look at your own organisation and identify the positions and departments created just to make sure that transactions can be trusted. Auditors, compliance professionals, in-house lawyers and managers are in most cases ‘just’ there for the reason of trust. What if they are no longer needed and what if the cost of transacting goes down and the ease of collaboration goes up?

Before addressing those fundamental questions, it's rather silly to be asking, 'What's the business model of the blockchain?', or 'What's its killer app?'.

 

Exerting influence

So why, for crying out loud, would you be interested in blockchain?

One reason – and it’s not the worst reason – is that your competitors are investigating the tech. FOMO, or fear of missing out, is very real, and the basis for many innovation projects and blockchain consortia.

A more intelligent answer, though, is that blockchain could be a technology, legal construct and strategy that profoundly impacts your industry and your company in the mid to long term.

So, why should you start exploring now? Because have the chance to influence the course the technology is taking, rather than being confronted by it in a couple of years' time.

Further, blockchain could possibly enable new revenue streams and lower operational costs. A blockchain exploration project therefore should be aimed at moving to deeply understand the consequences of blockchain on a technical, legal and strategic level.

Yet, carefully choosing the right use cases for blockchain will be paramount to the success of the project.

Navigating maze image via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

 

Judy Curtis,  
Contributor

What’s in a Name? From Bitcoin to Blockchain to Distributed Ledgers

What’s in a Name? From Bitcoin to Blockchain to Distributed Ledgers

(@nelsonmrosario) | Published on February 11, 2017 at 15:42 GMT

Opinion
 

Nelson M Rosario is an intellectual property attorney working as an associate at Marshall, Gerstein & Borun in Chicago. He has years of experience working on patent prosecution matters in bitcoin/blockchain and fintech, as well as other areas.

In this CoinDesk opinion piece, Rosario ponders why we have developed so many terms for what is effectively the same technology – bitcoin.

“What’s in a name? That which we call an electronic payment system based on cryptographic proof instead of trust by any other name would smell as sweet.”

– William 'Satoshi' Shakespeare (probably)

In the beginning, there was 'bitcoin', and it was good. But, bitcoin would end up bearing a nomenclature fruit salad that tests mortal comprehension. Perhaps, that is the natural way of things.

As a new technology develops, the number of people exposed to that new technology increases, and the language used to describe the new technology evolves.

Initially, the language was limited to bitcoin. Now a person is liable to see any of the following words or phrases that theoretically all mean different things: bitcoin, Bitcoin, block chain, blockchain, Blockchain, private blockchain, public blockchain, distributed ledger technology, distributed asset ledgers, decentralized ledger technology, shared ledgers, et al.

Further confusing the matter, the term bitcoin may not always mean the same thing to different people. What happened? Why the change in language?

First, bitcoin has the word 'coin' right in it. This naturally makes people think of currency. Not surprisingly, bitcoin use as a currency is far and away the most successful iteration of bitcoin. The applications for bitcoin are not, however, limited to currency.

This is where much of the confusion arises. Intuitively, the currency implementation for bitcoin (with the word coin in it) makes sense. Trying to convince someone that bitcoin can also be used for purposes as diverse as asset transfers, escrow services, or logistics management is not so straightforward.

Bitcoin also suffers from an image problem. The early publicity surrounding bitcoin included scandals, thefts, a euphoria akin to the Tulip bubble, and in general, bad press. 'Fake internet money', as some people called bitcoin, did not inspire confidence amongst the masses.

Additionally, the main advocates for the new technology were unpolished and unproven. Often if someone had heard of bitcoin they had heard of the failed Mt Gox exchange, or they assumed bitcoin was something a person used to buy illicit drugs or hire a hitman. The reality was not that far off.

How do you get people to forget about the failed exchanges, drugs, and hitmen? Get them to focus on 'the technology underlying bitcoin', and get them to think about the other potential implementations. Once the conversation moved beyond currency, people started searching for a new word. That search led them to the blockchain.

The rise of the blockchain

Negative publicity and conceptual confusion laid the groundwork for people to begin to refer to the blockchain as the real innovation to come out of the bitcoin phenomenon.

The blockchain is a chain of transactions that makes bitcoin possible. The term refers to a collection of bitcoin transactions grouped together into blocks and linked through cryptography. This linkage is part of what makes it virtually impossible to fake bitcoin transactions.

In a sense, the blockchain provides true decentralized trust and distributed consensus, but the rebranding, or reorienting of people’s attention, to the blockchain and away from bitcoin may be just a clever marketing trick.

Many people argue that you cannot separate the blockchain from bitcoin. The thinking is that you cannot break up bitcoin into its component parts because the parts by themselves will not work the same way independent of each other. In other words, the whole is greater than the sum of its parts. Regardless of whether this is correct, that is precisely what people have done.

Once the power of bitcoin became apparent, we started to see article after article touting the 'real innovation' behind bitcoin. Respectable and well-established firms began developing blockchain solutions to their problems.

People consistently discredited bitcoin as boring, while extolling the virtues of the multifaceted blockchain. Large banks, financial exchanges, and the 'Big Four' consultancies all rushed to publish reports on blockchain technology. The hype train that left the station heading to Bitcoinland was diverted to Blockchainville.

There are now hundreds of blockchain startups. Problems related to back end services for large institutions, digital identity, asset transfer, escrow, and logistics, are all being tackled by blockchain solutions. Even tracking pork along a blockchain has been proposed. These companies are doing truly innovative work.

However, to many observers the term 'blockchain' is still conceptually associated with bitcoin. So, if a company describes an innovation that leverages a type of blockchain they have to distinguish it from bitcoin and the bitcoin blockchain. How do blockchain companies talk about what they are doing without referencing bitcoin, or other blockchains? The solution is to talk about ledgers.

The arrival of distributed ledger technology

A ledger can record transactions between multiple parties. The ledger concept is a main building block of bitcoin and any blockchain. Ledgers also benefit from the fact that they are commonly thought of as boring, safe, and dependable tools in an accountant’s toolbox, as opposed to the technological innovation that makes bitcoin possible.

What better way to put thoughts of bitcoin and blockchain out of people’s minds than insisting that you are only talking about ledger technology? Thus, the conceptual chain to bitcoin was broken.

However, there remains considerable debate over whether this is feasible or even desirable. To early adopters, bitcoin is a monolith that cannot exist without distributed trust, consensus, and immutability, but many new industry entrants view the technology as an a la carte buffet. They are free to decide between many concepts including: permissioned vs permissionless, public vs private, tokenized vs no token, etc.

Today any institution or organization that refers to ledgers is free to discuss bitcoin or blockchain related concepts, without the supposed taint of bitcoin. Even the Federal Reserve Board (of Federal Reserve Bank fame), has touted ledgers in their recent report on “Distributed Ledger Technology.”

Over the past two years, hundreds of new blockchains and ledgers have been created. They all draw on the root concepts of bitcoin, but their purposes and the lingo used to describe them have diverged widely. This conceptual repackaging, and public relations approved language replacement, is likely to continue for some time.

What does it all mean?

This story has gone from bitcoin to blockchain to distributed ledger technology. There are companies that operate in all of these spaces, or only one of them.

Outside observers are forgiven if they struggle to keep up with all the different terms. Yet, through all of this evolution and upheaval, bitcoin has remained central to the discussion. Whether bitcoin, the blockchain, and distributed ledgers will be adopted and thrive or consigned to the ash heap of history remains to be seen.

The fact that bitcoin has undergone repeated repackaging is a testament to the strength of the technology. Other blockchains or related technologies may rise and fall, but bitcoin’s inertia and first-mover advantage will continue to make it the most relevant cryptocurrency, blockchain, and ledger.

Evolution image via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

 

Credit is given to Nelson M Rosario for this informative article.

 

Judy Curtis,
Contributor