This video features a short discussion on where we might be headed with blockchain technology.
- The blockchain is a work in progress. Being open sourced, it is continually being updated. In addition, how the blockchain is being applied continues to evolve in surprising and compelling ways. Here are just a few of the innovations that the blockchain is enabling. Up until now we've been talking about discrete data being stored in blocks in this distributed database or distributed ledger as we prefer to call it. But what happens if instead of simply data, a block contains some instructions that under certain circumstances are executed? In this way when a certain blockchain transaction takes place, some set of actions are triggered.
This is one of the most exciting areas of the blockchain and we call it Smart contracts. While a Smart contract actually is software code executed on the blockchain, the terminology use of the word contract indicates that the code enforces some form of governance or rule. We should think of this as the general concept since many argue that the use of the term Smart contract is also misleading. What might be a simple example of a Smart contract in action on the blockchain? Let's return to a previous example of managing digital products online.
Specifically, as the authentic owner as of say a photograph you took, you may want to use the blockchain to sell that photo to buyers. Since the blockchain already confirms you as the rightful owner, let's look at a Smart contract to sell a copy. We'll use the blockchain as the platform for the entire transaction. First, you're established as owning the copyright. Then a buyer submits payment for a copy of the photo. Once you receive payment and it is confirmed, a Smart contract executes and then delivers a copy of the photo to the buyer.
The transaction is recorded in the blockchain and each step is stored forever as proof of what has happened. In this example, the Smart contract was code that ensured that all the conditions were met for this purchase and even delivered the photo through some form of online transfer. While this is a simple example, you can imagine really complex transactions taking place in the blockchain that are enforced by Smart contracts. Think about all matter of financial transactions or real estate or legal agreements, and even agreements between machines like self-driving cars negotiating around each other in traffic.
It's easy to see that a smart contract takes the capabilities of the blockchain up a few notches and makes it a platform for complex action. One of the most exciting innovations in this blockchain space is called Ethereum. This software platform uses the blockchain and Smart contracts to enable the building of complex decentralized software applications. It's an ambitious project that is still in its infancy. However, the promise of Ethereum is to enable the development of software tools that can build solutions that don't require the traditional commanding control hierarchies that exist today.
In other words, these are applications that don't have an all powerful single owner to make and enforce the rules. Some of the initial solutions on Ethereum have included an alternate digital currency called Ether, an online identity management system called uPort, land title transfers and online system for managing digital signatures. And an entire suite of banking services developed by consulting firm DeLoitte and the blockchain firm ConsenSys.
In the final example, I'd like to discuss how one innovative organization is connecting the blockchain to the physical world. The solution is from a German team called Slock.it, and its first goal was to enable apps to unlock things but have now since grown to have much greater application. It works by using Ethereum and Smart contracts. Slock.it gives connected objects an identity, the ability to receive payments and the capability to enter complex agreements.
It effectively eliminates the need for a middle man when executing software on one device to trigger a physical action in another. This makes interaction almost immediate and significantly reduces the cost. For example, let's say we use a smartphone to unlock the lock on a bicycle. The authority to allow the opening of the lock no longer resides with a central authority but rather only between the smartphone and the lock itself.
It makes a lot of sense for example when you want to rent a bike and want to receive payment. A person who purchases the rental executes a transaction that includes identity, payment, and the unlock process directly with the bicycle. Slock.it enforces the transaction, it's remarkably efficient and secure. The innovations described in this video gives a tease of what may be to come. We know we're in the early stages of blockchain because already many innovations have failed.
This is common as a new technology emerges. Making bets right now is risky, but as these innovations illustrate, when success does come, it will likely be transformational.
Jonathan begins by describing some of the current challenges with the Internet, including existing risks and security problems such as identity management. Next, he describes how traditional online databases function, so that you have a basis for how the blockchain redesigns this function. He then describes how the blockchain becomes a potential solution for many of the existing limitations of online databases. Since the blockchain has its genesis in Bitcoin—the digital currency—he provides some background on that too. He also discusses how blockchain technology actually offers new capabilities beyond simply solving old problems. To wrap up the course, Jonathan shares steps you can take in your organization to understand the implications of the blockchain.
- Risk and security challenges
- Rethinking the traditional database
- What is the blockchain?
- What problems does the blockchain solve?
- Transforming transactions
- Examples of the blockchain in action
- Obstacles to blockchain adoption
- Risks to existing solutions and enterprises