What is blockchain?
Cryptocurrencies such as bitcoin have been in the news a lot recently. One day it’s the currency losing half its value, another it’s the fact that bitcoin mining will one day consume all the world’s electricity, or maybe the idea that South Koreans are obsessed with cryptocurrency.
But amid all this coverage what is sometimes missed is the bigger story which is the technology behind it: blockchain. This is the exciting part that looks set to dramatically change the world around us and revolutionize how businesses operate.
In a nutshell, blockchain is a reliable, difficult-to-hack record of transactions – and of who owns what.
Some of the most important characteristics of blockchain are:
- Shared record book – the record of transactions is distributed among hundreds or thousands of computers all around the world. And they all have to agree on the details of every transaction that is added to the record book; otherwise, it doesn’t get added. This makes it reliable and secure and means that there is…
- Trust – the whole community verifies the new transactions and reaches a consensus, rather than relying on a…
- Middleman – there is no longer a central controlling entity. We have done away with the middleman.
Sounds good, but so what?
Blockchain may have originally been created for trading bitcoin, but its potential reaches far beyond cryptocurrencies.
Blockchain offers a way to verify the ownership of something digital, even if there are identical copies.
The implications of this are huge. The shared record book concept could include land titles, loans, identities, logistics manifests – essentially almost anything of value.
For example, imagine if when you streamed music, instead of paying a subscription to a content provider you were paying the artist directly. The artist no longer needs to register copyright and sign with a publisher, they just upload their music and it’s published through the P2P network, ready for everyone to browse. When a user decides to buy music, they make a payment that is visible on the blockchain, and the artist receives 100% of the revenue. This is the sort of thing Voise and Ujo Music are working on.
Logic that works on the “if this happens, then do that” principle can be used to automate the transfer of assets or currency between parties when certain conditions are met. (These conditions are known as “smart contracts,” but that’s not a great name.) For example, a logistics company could have a smart contract in place to say:
“If I deliver this product and receive cash at this location in a developing, emerging market, then trigger a supplier – many links up the supply chain – to create another item since the existing one was just delivered.”
What about utilities?
There are already several examples of blockchain in utilities. Here are three:
- The much-talked-about Brooklyn microgrid is a demonstration project where citizens can buy and sell locally produced rooftop solar power from each other. In a similar vein, Perth-based Power Ledger offers a platform to track the generation and consumption of electricity. It is one of three finalists in Richard Branson’s 2018 Extreme Tech Challenge.
- BlockCharge is a working prototype for electric vehicle charging created by RWE and Slock.it. Using a similar principle to mobile phone roaming, it allows EV owners to charge their car via any charging station network and be billed for the energy used in a simple blockchain-based way. The EVs interact automatically with stations, and the electricity payment process is autonomous.
- Bankymoon has a novel approach to foreign aid. Their Usizo project enables international crowdfunding for African schools in need of financial aid. The schools have blockchain-aware meters installed so anyone from around the world can make a payment directly to the meter, helping fund the energy or water needs of the school without the need for a charitable organization in the middle.
Is blockchain suitable for me?
The sort of scenarios that benefit most from blockchain share these characteristics:
- Multi-party – several participants, often spread across companies or industries
- Multiple “writers” – if there is just one writer then a master/slave replication would suffice
- Intermediaries can be made obsolete – we don’t want to get rid of a middleman if they add a lot of value
- Need for transparency – to reduce risks, avoid fraud, etc.
- Need for mutual control – since the blockchain network generates trust
Do you have a scenario that could benefit from blockchain? Come and try it out using SAP’s Blockchain-as-a-Service platform, which provides an easy way to experiment with the technology without the need for a large upfront investment.
Or join other customers and partners who are already co-innovating blockchain solutions with SAP.