Touted as the next big tech disrupter in the world of business, blockchain technology could make transactions, from finance to food chain logistics, faster and more secure.
Bitcoin may have dominated headlines last year, but the future belongs to blockchain, the transformative technology supporting cryptocurrencies.
It’s the distributed ledger technology or blockchain that sets cryptocurrencies apart from traditional money. And the same characteristics that make blockchain ideal for financial transactions — secure, immutable, fast — make it an ideal tool for businesses.
“In the next five years, you’ll see businesses taking advantage of blockchain in ways that consumers might not even know about,” said Michael Reed, director of Intel’s Blockchain Program Office.
“It allows two untrusted parties to exchange information or assets without intermediaries, and the value of that is tremendous, particularly in the world of business.”
According to Reed, experts predict blockchain will have a value-add for businesses of $176 billion by 2025. By 2030, that value will soar above $3.1 trillion, leading the World Economic Forum to compare blockchain to the internet in its potential to upend business models.
So, how exactly does blockchain work?
As Reed explained, blockchain is a decentralized distributed ledger. While a bank is responsible for maintaining and storing its own ledger, a blockchain spreads that responsibility out across a network of computers called nodes.
Each of these nodes has a copy of the ledger that it updates as transactions are processed. When one party wants to make a transaction using a cryptocurrency, all of the nodes on that crypto’s blockchain are notified. They verify the transaction, and then they group a number of these verified transactions into a block.
The first node to solve a computational problem gets to add their block to the end of the blockchain and receive a small monetary reward for doing so. All of the nodes update their ledger with the new block and the process continues. Each block is linked to the block before it, so altering one would affect the rest of the blockchain.
“Once the network agrees that a transaction is valid, that transaction can never be changed,” said Reed. “It’s immutable.”
How does this compare to traditional transactions?
For starters, it’s more secure. To hack a blockchain, someone would need to gain control over the majority of the nodes, which are spread out across the world, said Reed. To break into a centralized ledger, like those used by banks, hackers just need to breach the specific bank’s security protocols.
It’s also faster. A bank may take days to process a transaction. International transactions add even more time to the process. Though the time it takes to add a block varies depending on the blockchain, 10 minutes is standard for bitcoin.
Finally, it’s cheaper. Sending a wire transfer through a bank, for example, can involve an outgoing fee and an incoming fee, and if the transfer is across borders, it could also incur international and currency exchange fees. With bitcoin, the sender pays a one-time fee that covers the entire transaction, regardless of the sender’s location, said Reed.
The New Supply Chain
The first blockchain was invented in 2008 specifically to support the bitcoin cryptocurrency. Today, bitcoin owners can use the cryptocoin to purchase everything from plane tickets to electronics. While it may be a better alternative to fiat currency in many ways, the applications extend far beyond shopping.
Businesses are using blockchain in ways that benefit both their bottom line and their customers. Hyperledger, an open-source collaborative effort the Linux Foundation created to advance blockchain technologies, can streamline financial transactions and even track the food supply chain.
In 2017, Intel demonstrated how Hyperledger’s Sawtooth blockchain platform could be combined with the Internet of Things (IoT) to improve the seafood supply chain from ocean to table.
“Previously, the information available to any one company in the supply chain was fairly narrow,” said Reed.
For example, a restaurant owner might know the date fish was ordered, when it’s due to arrive and the price paid, but they may have a difficult time tracking the fish en route from sea to table.
To improve the process, IoT sensors were affixed to the harvested fish to gauge its shipping location, temperature during transport, movement and more. Using Hyperledger Sawtooth, anyone along the supply chain has the ability to keep better track of the fish.
“Blockchain implementation allowed us to know for certain when the fisherman caught the fish, when they stored it, its temperature at any time, when it was inspected and exactly when it arrived at a restaurant,” said Reed.
Eventually, restaurants and grocers could use a similar blockchain implementation to track meat and produce. Using traditional supply chain protocols, contaminated food is very difficult to track. However, with blockchain a grocery store could know within minutes instead of days exactly which products to pull from shelves, potentially stopping contaminated food from ever reaching shelves in the first place.
Consumers can be privy to a product’s entire history on a blockchain, perhaps through a simple scan of a QR code on a package, said Reed. The consumer would know more about what they were eating, and the price they paid would be more likely to accurately reflect the quality of the product.
The Business of Blockchain
While blockchain’s public ledger is useful for bitcoin, other business transactions may need to remain confidential.
The Coco Framework by Microsoft provides blockchain developers with accelerated transaction throughput and confidential transactions. Microsoft uses Intel Software Guard Extensions (Intel SGX) to protect the Coco Framework. Reed said the trusted execution environment of Intel SGX enables Coco to deliver a novel consensus mechanism that can deliver up to 1600 transactions per second and also helps Coco transactions remain confidential among blockchain participants.
These secure enclaves also solve the issue of scalability, which is one of the biggest hurdles to a future powered by blockchain. Public cryptocurrency blockchains require huge amounts of energy to verify transactions through node consensus. Analysts have estimated a single bitcoin transaction can require as much energy as the average American home uses in a week.
However, Intel SGX’s proof of elapsed time consensus requires almost no energy. Instead of requiring nodes to solve a computational problem to add a block, a secure timer ensures blocks get produced in a random lottery, but without the required work.
“PoET runs a secure timer in each node. The node that times out first puts the next block onto the blockchain,” said Reed. “It’s almost like energy-less mining.”
Blockchain’s applications keep growing, said Reed. Companies are developing ways to use it to improve healthcare, protect intellectual property, build a smarter energy grid, power renewable energy and more.
Regardless of whether today’s cryptocurrencies eventually replace their traditional counterparts, the blockchain technology supporting them may transform the world.