What Blockchain Means (Part 2)

Our first post covered the morning sessions on blockchain at the #CityChain17 event organized by MBN Solutions and held at IBM’s spacious SouthBank offices. Our next speakers focused more on applying the technology in your business. So, here are some more reflections from listening to those speakers, together with blockchain resources that I hope you’ll find useful. How to get from concept to implementation First up was Peter Bidewell (CMO of Applied Blockchain). Complementing the earlier technology detail, he unashamedly emphasized engaging the wider business, especially senior leaders (a popular topic for this blog). He emphasized that his firm was finding real business uses for the technology and that it specialized in the "smart contracts" capability of blockchain. The benefits of blockchain that he is seeing as more relevant for business clients are:

• Tamper-proof actions/events
• Peer-to-peer (avoiding cost of intermediaries)
• Innately secure (built-in encryption and consensus)
• Pre-reconciled data (automatically synchronized)
• Smart contracts

But to apply this technology in business he has found the company needed to develop a number of other augmentations/supporting capabilities. This includes a blockchain "mantle" with:

• Platform-agnostic implementation of blockchain
• Data-privacy "capsule" used within the chain
• Identity management service
• System performance improvements

See also: What Blockchain Means for Insurance   In addition to that "enhanced blockchain" capability, real world business applications have required a “full stack" of technologies:

1. Blockchain (of choice)
2. Mantle (the above enhancements)
3. Integration with other key business systems
4. Front-end (user experience, or UX)

Bidewell explained that a smart contract has nothing to do with replacing lawyers. Rather, it is a container of data and code (a block that can be placed on the chain/shared-ledger/network. It can contain:

1. Data
2. Permissions
3. Workflow logic
4. Token (if simulating passing of funds)

He finished by sharing some interesting applications. His company is working with Bank of America. Appii, Nuggets and SITA. The first of those is perhaps the most relevant for readers. BABB is to be the first blockchain-based bank, “an app store for banking.” The Appii pilot is also interesting, as it enables a sort of verified LinkedIn or CV (with qualifications/experience validated by providers). But the example that sticks in the memory best is real-time drone regulation for SITA; the world’s first blockchain-based registry of what all drones are: What’s the path to mainstream adoption? Acknowledging the emerging reality at this event (that commercial blockchain case studies are still in pilot stage), our next speaker shared his experience and thoughts on making greater progress. Brian McNulty is a founder of the R3 Consortium (mentioned in part one). This is the world’s largest blockchain alliance, with more than 70 major financial services firms and more than 200 software firms and regulators already members. R3 – Consortium Approach from R3 on Vimeo. What does R3 do? Well, apparently it collaborates on commercial pilots. It also provides labs and a research center to support organizations during their innovation. R3 has its own technology (R3 Corda implementation) and own "path to production" methodology. So, perhaps some resources worth checking out. Akin to what we have learned for customer insight and data science pilots, McNulty confirmed that the path to mainstream adoption will be a "burning platform." What story will make the case for such an unacceptable status quo that organizations must make the leap to blockchain (to avoid the flames)? He suggests a few pointers:

• Collaboration is increasing, adding complexity;
• The appetite of regulators in increasing, as they grasp the benefits of pushing for distributed ledgers as market solutions;
• More work is needed on standards (but the dust is settling, and competition is reducing)
• Will we get to cash on the blockchain? (probably more a move to digital assets on ledger being counted as monetary assets)
• The real burning platform will probably be increased operating costs (currently $2.6 trillion annually, with blockchain promising 20% savings)

Despite all that, McNulty confirmed that most businesses are still only at pilot stage. But, apparently, some FS firms are having IT developers trained en masse (so that blockchain can be considered as just another technology option to meet business requirements). Bursting the blockchain hype bubble Next was a man who should seriously consider a second career in stand-up comedy. Dave Birch is innovation director for Consult Hyperion. He gave a hilarious comedy session on the hype around blockchain. Using just genuine newspaper headlines, he revealed how blockchain is apparently the answer for every industry, transforming everything from banking to burgers and healthcare and ending global poverty. As an aside, he shared the amusing story of how Amex was conned during the “Great Salad Oil swindle” of 1963. He used that as analogy to the crucial issue of how not to get swindled by hyped blockchain claims. The key, it appears, is to always ask: What’s in the blocks? Birch also shared his four-layered model of a shared ledger:

1. Contract (smart contract built upon)
2. Consensus
3. Content
4. Communications (robust)

He described the lower three as a "consensus computer." He also introduced a taxonomy of blockchain implementations. This was divided into a simple binary tree built on two layers of questions:

• Is it a public or private ledger?
• Is it permissioned or double-permissioned?

If you think about it, a shared ledger is really a practical example of the much talked about RegTech. Dave pointed out that a shared-ledger solution would have uncovered the Great Salad Oil Swindle, because the macro production numbers would have been unbelievable. A lot of the hype is misguided, because blockchain can’t fix individual problems, but it can spot systemic errors. An interesting analogy he shared was an old idea of best way to avoid bank branch robberies. At the time when lots of architects were suggesting military-like protections for staff and vaults, one radical turn of the century designers suggested the opposite: a bank built mainly of glass. If everyone can see what is going on, the bank robber has nowhere to hide. That is the principle of blockchain, the power of radical transparency. So, businesses may get more value thinking how to radically redesign, rather than just reengineer, existing database solutions into a blockchain app. See also: Blockchain: What Role in Insurance?   Getting back to the customer benefit of blockchain Our final speaker brought us back to that emphasis during panel session – what is in it for the customer? (A topic that is preaching to the choir on this blog.) Peter Ferry, commercial director at Wallet Services, suggested that blockchain is gradually becoming an invisible technology option. The focus will return to customer needs and business requirements, with IT departments worrying about when blockchain is the right technology solution for needs. But when would it be relevant? How can blockchain make our lives simpler? As Ferry rightly pointed out, the development of the internet and today’s digital applications should be a warning. Mostly, digital technology has not made our lives simpler; if anything, they are more complex and demanding. The internet has developed differently than was originally dreamed (distributed and robust network for military purposes). Blockchain can potentially do a lot for customers, including: security by default, sovereignty of their own data and no single point of failure. Customer-focused design principles have to be applied to this enabling technology to deliver real value. So, there is a strong case for customer insight teams to partner with blockchain development teams to help enable this. For its part, Wallet Services used this event to launch its enabling technology. SICCAR can be thought of as Blockchain as a Service, including APIs, services and pre-fabricated business use cases. Might be worth checking out: How will you approach the potential of blockchain for your business? I hope this post was also useful, giving you food for thought and some useful resources/contacts. Where are you on this journey? Are you still learning about blockchain? Do you have plans to partner with blockchain development team? Are you already using customer insight to guide blockchain pilots? If so, please let us know what’s working for you or any pitfalls to avoid (using the comments section below).