This video offers an explanation of two of the leading uses of blockchain.
- [Instructor] Often when learning about a new technology, it can all seem rather abstract. Sure the description of the technology makes sense hopefully, but what does it look like in practice? For this reason, I'm going to spend this video discussing two products that are leveraging Blockchain technology in practical ways. Both are reasonably mature and in production. I've chosen Ripple and Hyperledger. I'll begin with Ripple. Today when a person or organization uses a bank to send a cross-border payment to another entity, this transaction can take many days and incur significant fees.
The global banking system has many intermediaries. I've personally sent money via my bank to other countries many times and it's often taken over 10 days. That's not great for the sender or the receiver, but that's the way it is generally today. Additionally, because of a variety of fees and other overheads, sending very small payments cross border becomes restrictive. How might this be solved? Ripple is a Blockchain enabled solution for banks that can reduce the time for sending payments from days to seconds.
How does it do this? Each bank that participates in a Ripple fund transfer must be part of the Ripple network or interface with an intermediary that is. Just like being part of the Bitcoin network, every user of the Ripple network gets a copy of an identical Blockchain ledger. All transactions will be captured and managed in this Blockchain. But before we get too far, let's use an example to make it easier.
Alice in San Francisco wants to send Bob in London $1,000. Both Alice and Bob's banks belong to the Ripple network. When Alice instructs her bank to spend $1,000, her bank uses the Ripple cryptocurrency called XRP which is similar to Bitcoin to send the XRP equivalent of $1,000 to Bob's bank. The Ripple Blockchain uses consensus to permit the transaction and a new block is added to the Ripple Blockchain.
This new block records that Alice's bank sent $1,000 worth of XRP and Bob's bank received $1,000 worth of XRP. The transaction is trustless and immutable. Alice's bank makes the adjustment to her account showing it has $1,000 less and Bob's bank makes the adjustment that Bob's account now has $1,000 more. For Alice and Bob, the transaction is complete and it appears it took just a few seconds.
However, in reality, no money has moved. Since a trustless and immutable transaction now exists in the Ripple Blockchain, both banks can settle the actual monetary transaction using any number of alternative but less immediate debt reconciliation processes. We can think of Ripple as a fancy IOU system. The difference is that it doesn't rely on trust but rather the cryptocurrency and consensus based immutability features of a public distributed Blockchain ledger.
Now let's take a look at Hyperledger. Up until now we've been discussing Blockchain or distributed ledger technology, DLT, that is open and public. Bitcoin and Ethereum for example allow anyone to join and for anyone to inspect the contents of blocks. In addition, their native design require cryptocurrency as the underlying digital signature transaction mechanism in order to function. What happens though if we want all the advantages of Blockchain technology but want to have a system that can manage private information that can support specific limited participants and doesn't require its own cryptocurrency? We'll need an alternate enterprise class Blockchain.
That's the purpose of the Hyperledger project. It was created in 2015 by the Linux Foundation as a cross-industry collaboration involving technology companies such as Cisco, VMware, IBM, and Intel, banks such as JP Morgan and Wells Fargo, and other organizations such as Accenture and Guardtime. The object was to create Blockchain distributed ledgers capable of supporting global business transactions by major technology, financial, and supply chain companies.
One of the first releases was published as recent as July 2017 based on an existing code base from IBM called Hyperledger Fabric. It's open source and designed to be Enterprise quality. Unlike many other public Blockchains, Hyperledger Fabric was designed to support private transactions, scalability, and a modular design that could be incorporate existing software solutions such as IBM's Bluemix, a cloud-based architecture for creating, deploying, and managing cloud applications.
Hyperledger Fabric also supports Smart contracts which they call chaincode. You might be thinking how can this be a true blockchain if it doesn't rely on the trustless qualities exhibited in Bitcoin and others like it. In Hyperledger Fabric, all the participants are known as opposed to anonymous. It's called a Permission system and users and validators have specific roles. Identity management is executed through encryption and signing keys.
It's a creative way of leveraging the advantages of blockchain technology, but in an enterprise context. Both Ripple and Hyperledger demonstrate the scope and evolving nature of distributed ledger technology. It's also a technology supported by many of the leading companies in the world which means it has the financial backing and momentum of big industry. We may just be at the beginning of the blockchain revolution, but we can already see it's going to be a really big deal.
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