Everyone’s obsessed with blockchain – and for good reason. Blockchain is a technology that can solve some of the most vexing technological, professional and personal problems we face. But despite the elegance, complexity and security of the technology, the transactions blockchain will enable, and the aggressive blockchain adoption curve, there’s not nearly enough discussion about how blockchain will impact transaction processing across multiple vertical industries. In fact, blockchain will rewire whole industries.
Blockchain Basics
Initial discussions about blockchain occurred in the context of cryptocurrency, but the real power of blockchain lies in its transactional versatility. While blockchain enables cryptocurrency transactions, it’s by no means limited to currency exchanges. Blockchain is transaction agnostic. Remember that the world today works with lots of hands in every soup, process and transaction. If you’ve ever purchased a home or signed a contract (see below) you know just how many hands there are. Everyone takes a little piece. Whole industries – like banking, real estate and mortgage lending – are built upon millions of little pieces of transactions. It’s a small tax, fee or charge that just appears – that no one questions. But these little pieces can disappear with the widespread use of blockchain, which eliminates people, cost and delays from many of the transactions we pursue. We call these value extractors “intermediaries,” which validate and verify transactions. But are intermediaries always necessary?
Blockchains are transparent ledgers that validate and verify transactions (which only sometimes involve cryptocurrency). As described by François Zaninotto: “A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called nodes. All communication inside the network takes advantage of cryptography to securely identify the sender and the receiver. When a node wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should appear in the ledger; this consensus is called a block.”
The technology – while complex – is perhaps conceptually best understood as a secure distributed network of verified strangers.
The Underestimated Extensibility of Blockchain
The application range of blockchain technology is broader than suspected. There are already compelling indicators of extensibility. One is the prototype platforms and applications already deployed. Another is the continuing investments by VCs. Yet another is the development of applications platforms, and, finally, the formation of consortia and partnerships is well underway. IBM is working with seven European banks to develop a blockchain platform, and the R3CEV consortium was formed to advance blockchain technology (primarily in the financial domain).
All this interest is the result of conceptual and actual applications, and the possibilities around transaction seamlessness. As Kate Mougey explains, “Think of buying a house. Data or assets necessary for the transaction – the deed, for instance – are securely stored in the blockchain and are accessible to buyer and seller. The property’s transaction history is recorded on the blockchain, eliminating middlemen or painstaking and expensive due diligence required in a real estate deal. Title searches are eliminated. Trips to city hall are no longer required. Legal wrangling is reduced. Using blockchain technology, companies can make and verify transactions instantaneously – and without the intervention of banks, financial institutions or other trusted third parties. Cryptography – secret code and ciphers – ensures secure transactions.”
What’s the range of applications beyond real estate that blockchain enables? Can we vote with blockchain? Can we store personal health data with blockchain? Can we apply for passports with blockchain? Can we buy a building with blockchain. Yes.
The applicable domains include at least the following:
Financial Services
- Asset Management: Trade Processing and Settlement
- Insurance: Claims Processing
- Payments: Cross-Border Payments
Smart Property
- Unconventional Money Lenders/ Hard Money Lending
- Car/Smartphone
- Blockchain Internet-of-Things (Smart Appliances, Supply Chain Sensors)
Smart Contracts
- Blockchain Healthcare
- Blockchain Music
- Blockchain Government
- Public Value/Community
- Vested Responsibility
- Blockchain Identity (Passports, Birth/Wedding/Death Certificates, Personal Identification)
These domains are ready; others are in the queue.
Uber Impact From the AI/Blockchain Partnership
In addition to the growing number of blockchain application domains, we can expect acceleration fueled by AI and machine learning which will enhance blockchain’s basic architecture. Intelligent transaction validation is also well underway. In an excellent overview, Karin Flieswasser helps us think about the natural and growing relationship between AI and blockchain: “The combination of AI and blockchain is fueling the onset of the ‘Fourth Industrial Revolution’ by reinventing economics and information exchange. From healthcare to government, the potent combination of both AI and blockchain is slowly but surely transforming industries.” Flieswasser provides 10 examples of how AI and blockchain are working together to solve complex problems faster and cheaper than conventional data base and security technologies. In the field of precision medicine, “Google DeepMind is developing an “auditing system for healthcare data.” Blockchain will enable the system to remain secure and shareable, while AI will allow medical staff to obtain analytics on medical predictions drawn from patient profiles ... DeepMind’s blockchain technology has been tested on NHS data, and its AI applications are being deployed to spot warning signs of degenerative eye conditions for Moorfields Eye Hospital.” The precision medicine example is extensible: AI provides intelligent search and analytics, and blockchain provides the secure transaction platform.
She goes on to describe 9 additional marriages (presented selectively here):
Smart Energy, Smart Buildings “Green-friendly AI and blockchain help reduce energy waste and optimize energy trade. For example, an AI system governing a building can oversee energy use by counting in factors like the presence and number of residents, seasons, and even traffic information. To supply the energy, distributed blockchain technology is implemented for transparent and cost-effective transactions between producers and consumers, while machine learning algorithms can even hone in on transactions to estimate pricing. Blockchain combined with AI significantly expedites real estate related transaction processes which can otherwise go through too many channels before a contract is approved.”
No Blood Diamonds
Public Science
Cyber Security 2.0
“When AI and blockchain are put together, they provide a double shield against cyberattacks. Machine learning algorithms can be trained to automate real-time threat detectionand to continuously learn about the behavior of attackers, thereby thickening the malware detection armor. Meanwhile, decentralized blockchains dismantle the inherent vulnerability of centralized databases, requiring cyber attackers to challenge not one but several entrance gates.”
Digital Rights
Computational Finance
BaaS Software
“Microsoft, the mother of computer software, is aiming to provide the best BaaS, or Blockchain-as-a-Service, platform in the cloud. Microsoft is integrating “BaaS modules” in Azure, a cloud-computing platform, that users can create test environments for. Blockchains are cheaper to create and test, and in Azure they come with reusable templates and artifacts. The BaaS modules are not coded by Microsoft, but are based on the public Ethereum blockchain platform, which is endowed with a ‘broad developer base’ that can feed well into Azure’s developer base. And unlike some blockchain platforms, Ethereum is interoperable with Azure. Competitors like IBM also offer BaaS products.”
Self-Driving Vehicles
E-Governance
“Blockchain technology and AI could both contribute to the development of direct democracy. Blockchain and AI together can transfer big hordes of data globally, tracing e-voting procedures and displaying them publicly so that citizens can engage in real-time.”
It’s Time to Overestimate
Some technologies are over-hyped from the day they’re born. Some even appear on a Gartner Hype Cycle. But some appear relatively quietly and then accelerate directly into industries and specific problem domains. AI is the former and blockchain is the latter. When combined, these two technologies represent transformation. Track, pilot and assess them right now. Do not underestimate them. They will change your company and your industry. The toolsets are well within reach and becoming increasingly embedded in delivery platforms, especially cloud platforms: blockchain-as-a-Service (BaaS) is already here. Innovators and early adopters have already left the category: while not “mainstream,” blockchain and AI are already hard at work.
