The Blockchain and AI
By: Ivy Data Science
Tags: Machine Learning, Deep Learning, Bitcoin, Towards Data Science, Blockchain

Blockchain is a new technology development that is garnering a lot of press of late. In fact, it is being reported that while 2016 was the proof of concept year for blockchain, 2017 will be the year we see blockchain technology being implemented in production. So, what is blockchain, why all the attention and why now?

Blockchain is the technology infamously underlying bitcoin, a digital cryptocurrency that most have heard of. It was invented in 2008 by a person, or a team of people, named Satoshi Nakamoto — to this day no one really knows who he, or they, are. But blockchain can do a whole lot more than manage bitcoin. In fact, as a distributed digital ledger, it can manage almost any type of transaction imaginable, and therein lies its power.

Its design goal is to speed up and simplify how transactions are recorded. Any type of asset can be transacted using the blockchain in an entirely decentralized system. On the blockchain, trust is established, not by powerful intermediaries like banks, governments and technology companies, but through mass collaboration and clever code. Settlement and clearing time is reduced to seconds. The distributed ledger is replicated on thousands of computers around the world and is kept secure by powerful encryption algorithms. The technology is so disruptive that it may in time spur new changes in how companies and even governments work.

Blockchain provides the opportunity to Introduce new products and services, reduce costs of existing services and significantly reduce transaction times, from days to seconds.

Some are going so far as to say that it may be the technology that launches the next Google or Facebook!

The risks and challenges include security, environmental impact, equipment being expensive, and interoperability. The Bitcoin & Ethereum cryptocurrencies have both been hacked, although new safeguards were put in place each time to close their vulnerabilities.

There is an impact on the environment due to the energy required to run these large networks. Expensive equipment is required to run the blockchain networks — think in terms of data centers. And there are likely to be many blockchains so interoperability becomes a central issue and the ability to work with other banks’ and partners’ blockchain technology paramount.

Examples of blockchain applications include, but are not limited to:

• Legal agreements (contracts)

• Finance

Cryptocurrency — peer-to-peer version of electronic cash

Other asset classes (bonds, commodities, etc.)

Credit Suisse has conducted 10 proofs of concept with blockchain startups to achieve cost reductions

• Autonomous vehicles

Transportation infrastructure

• Accommodation

Hotels, apartments, smart locks

• Energy grid

• Internet of Things

The Internet of Everything needs a Ledger of Everything

• Supply chain management

• Things that haven’t been thought of yet

• Blockchain as a Service

Further evidence that blockchain is here to stay, is Blockchain as a Service (BaaS) offerings from both IBM and Microsoft, along with the creation of the open source standards organizations Hyperledger, R3 and EEA with many corporate members having signed up.

What happens when we start to merge artificial intelligence and the blockchain into a single, powerful prototype?

We have blockchain tech’s promise of near-frictionless value exchange and artificial intelligence’s ability to accelerate the analysis of massive amounts of data. The joining of the two could mark the beginning of an entirely new paradigm. We can maximize security while remaining immutable by employing artificial intelligent agents that govern the chain. With more companies and institutions adopting blockchain-based solutions, and more complex, potentially critical data stored in distributed ledgers, there’s a growing need for sophisticated analysis methods, which AI technology can provide.

State Street is doing just this by issuing blockchain-based indices. Data is stored and made secure using Blockchain and they use AI to analyze the data while it remains secure. State Street reports that 64% of wealth and asset managers polled expected their firms to adopt blockchain in the next five years. Further, 49% of firms said they expect to employ artificial intelligence. As of January, State Street had 10 blockchain POC’s in the works.

IBM Watson is also merging blockchain with AI via the Watson IoT group. In this, an artificially intelligent blockchain lets joint parties collectively agree on the state of the device and make decisions on what to do based on language coded into a smart contract. Using blockchain tech, artificially intelligent software solutions are implemented autonomously. Risk management and self-diagnosis are other use cases being explored.

In conclusion, AI is being coupled with blockchain technologies to analyze data securely and to make predictions. Both startups and corporations are running POC’s at the moment. Blockchain with AI is already being offered as a service by major cloud providers including IBM and Microsoft. In the future, almost every transaction could be running on blockchain technology.

A host of economic, legal, regulatory, and technological hurdles must be scaled before we see widespread adoption of blockchain technology, but first movers are making incredible strides. Within the next handful of years, large swaths of your digital life may begin to run atop a blockchain foundation — and you may not even realize it, PC Mag, Feb 2017.

Ivy Data Science offer Immersive Bootcamps (8 weeks, $15k) as well as evening courses (eight weeks, $5k) for AI in FinTech. The next Bootcamp starts April 27th in Wall Street, NYC. Accelerate your career transition into the AI space — contact us now at info@ivydatascience.com or visit our website www.ivydatscience.com to apply!

References:

State of Blockchain and Artificial Intelligence in Fintech http://news.crowdvalley.com/news/state-of-blockchain-and-artificial-intelligence-ai-in-fintech

State Street is Betting AI Can Help Monetize Blockchain http://www.coindesk.com/street-street-is-betting-ai-can-help-monetize-blockchain-tech/

IBM’s New Watson Centre Merges Blockchain with AI http://www.coindesk.com/ibms-asia-watson-blockchain-ai/

Blockchain: The Invisible Technology That’s Changing the World http://www.pcmag.com/article/351486/blockchain-the-invisible-technology-thats-changing-the-wor

Microsoft and IBM Set Sights on the Next Cloud Frontier: Blockchain-as-a-Service http://www.pcmag.com/article/345899/microsoft-and-ibm-set-sights-on-the-next-cloud-frontier-blo

The Impact of the Blockchain Goes Beyond Financial Services — HBR https://hbr.org/2016/05/the-impact-of-the-blockchain-goes-beyond-financial-services