Blockchain: Is it More than Hype?
Tags: Digital Transformation, Bitcoin, Financial, Blockchain

Think you know what blockchain is? Think again, because the truth is, there’s no one universal definition that everybody agrees on.

In fact blockchain technology has inspired so much hype and interest (some people seriously predict that blockchain has the potential to remake the internet) that everybody’s claiming to be developing blockchain platforms or piloting new blockchain use cases.

The term “blockchain” has turned into the latest catch phrase rather than the latest technology.

Let’s clear one thing up right off the bat. Blockchain is not the same thing as bitcoin. Bitcoin is the most famous example of blockchain technology, but the two are not interchangeable. Bitcoin is known as a “cryptocurrency,” and yes, it was built using blockchain technology. (OK, and to be even more confusing, Bitcoin is the platform developed to track bitcoin, which is the currency.)

But there are loads of other cryptocurrencies, as well, all with their own rules, logic, and value. Some of the most famous examples include Ethereum, Litecoin, Dash, and Monero. As of November 2017, these had market capitalization of $120, $30, $3, and $2 billion, respectively.

So what is blockchain? At its core, blockchain is a technology that enables digital transactions to be conducted securely in a decentralized peer-to-peer network of records duplicated across a web of participants. Because the records are replicated across all nodes on the blockchain and need to be validated before they can be added in a “block,” blockchain is thought to be highly resistant to fraud and abuse.

After that, there’s a lot of variation. Blockchain networks can be public or private. The rules that govern how transactions are validated vary. Modern general purpose blockchains, like Ethereum and Hyperledger, have rules attached to each action, so the platform can execute a smart contract.

The potential of blockchain is a big deal, and it holds a lot of promise, for sure. The ability to get rid of centralized systems and facilitate peer-to-peer payment systems or to handle land title, currency exchange or energy markets in an accurate, secure, unalterable digital environment is truly remarkable. The potential to save billions down the entire supply chain or manage patient health data holds incredible promise.

That’s undoubtedly why there were no fewer than 134 blockchain startups with initial coin offerings of at least $500K between 2014 and 2017. And that’s undoubtedly why Gartner predicts that blockchain tech spending will reach $9.7B over the next three years (up from $945M spent in 2017).

But the truth is blockchain technology is fairly new. It was actually a 1976 paper called “New Directions in Cryptography” that marked the initial discovery that led to the creation of Bitcoin in 2009. So far, most of the uses of blockchain outside of cryptocurrency exchanges have been tests or pilots. Granted pilots made by major companies and organizations around the globe, including Mastercard, Walmart, IBM, and the U.S. Food and Drug Administration. But pilots nonetheless.

Analysts predict that 2018 will be the year that large-scale uses of blockchain will put the technology through its paces. And in fact, IBM and Maersk just launched an open blockchain shipping platform that they hope the entire ocean-going market will adopt, from ports to transit companies to customs authorities to shippers.

But until we have a few more years under our belt, it’s safe to say that blockchain holds tremendous promise, but it is complex and needs to be deployed in smart ways to meet specific business needs.

That’s where Valence comes in. We’ve been living and breathing blockchain since its inception, studying both its strengths and its pitfalls. We know what works and what doesn’t. We are experts at adapting existing platforms (like Ethereum and Hyperledger). Plus we have deep expertise in creating new use cases across different industries. Want to know more about how blockchain can help your business? Contact us, and we’ll help you separate the hype from the reality.

www.valencelevel.com

@ValenceLevel