Blockchain Technology 101 – Decrypted and Explained

Andi explains all you ever wanted to know about blockchain – from the concept to its applications to the ample opportunities for every kind of organization. And that’s all you’ll ever need to read!

Over the last few years there has been a lot of chatter about blockchain technology and how it invariably ends up at cryptocurrency. However, there is very little understanding of the actual technology. Could you elaborate a little about how blockchain works?

Let me explain blockchain to take some of the mystery out of this distributed database technology that will dramatically improve the storage, access, and safety of data and information. Today, when you want to access something on the Internet or on your bank account, your health records, or your emails, you typically have them each stored on a centralized database that you access using a user name and a password.

You hope you are secure and their database is as well. Yet, we are already aware of how many hacking or data breaches have taken place where millions of records have been stolen off those servers—whether it was a database of target customers or a company having its entire database corrupted and held hostage by hackers. What if that data had been completely encrypted, widely distributed, and governed only by you? Blockchain is a database of exactly that type of technology.

Blockchain encompasses a chain, a physical chain of fixed-length blocks where each transaction is freshly added to the existing ones. Each transaction is cryptographically validated, added to the block. When the block is validated and completed, it is added to the existing block and then added to the end of the existing chain of blocks.

Most CIOs view blockchain technology with suspicion or apprehension. In your opinion, should CIOs be looking at blockchain as an opportunity to revolutionize business instead of being afraid of its inherently disruptive nature?

CIOs, indeed the entire c-suite, should be exploring the potential roles that blockchain can play in their business . This is of such scope with a breadth of possibilities that it is going to replace the Internet, or at least transform its role in our lives.

It is an exceptionally good time to see blockchain, the Internet of Things, and artificial intelligence intersecting in ways on which innovative CIOs can capitalize. They should avoid the “me-too” follower role because the Over 160,000 cyber attackswere reported in 2017. Business organizations have become targets for ransomware attacks, data thefts, and data breaches (even from within the organization). Does blockchain have the ability to secure an organization’s data from such illegal activities?blockchain space is wide open for meaningful innovations. These are “blue oceans” where they are market creators.

For example, cities, such as Zug in Switzerland are adopting blockchain wherever they can, enrolling their citizens into the blockchain identification system today. Dubai wants to eliminate the middleman and the paper that documents are filed on, and, create a blockchain economy.

How can CIOs/CTOs leverage blockchain to boost the productivity and efficiency of the company’s IT assets?

This is not just how text messaging is going to undermine emails or complement them as a means of communication. Blockchain is going to transform how one ledger interacts with another without an intermediary and without the cyber security issues we face today – the way you keep up with the deals you have agreed upon with vendors, how you ensure information protection and cybersecurity, the “go-betweens” intermediaries, and the need for accounting.

Over 160,000 cyber attacksOpens a new window were reported in 2017. Business organizations have become targets for ransomware attacks, data thefts, and data breaches (even from within the organization). Does blockchain have the ability to secure an organization’s data from such illegal activities?

Essentially, this is what blockchain eliminates—at least to a great extent. Because of the crypto security, and the limited access of others to the data on your blockchain, and the distributed network of secure decentralized locations for your data to reside, you have eliminated the majority of means for hackers to access your data.

Since it is not centralized, it eliminates a single point of failure. It is composed of blocks of data. These chains of data serve as a public ledger. The input into those ledgers of each transaction cannot be reversed. Without a key to your blockchain, others cannot access it.

David Treat, Managing Director of Financial Services, Accenture, says it is “a technology which enables people to confidently and securely share access to data because they are able to prove to themselves mathematically that it hasn’t been tampered with”.

As per an article on Gartner, blockchain has its own set of limitations – scalability, transparency, lack of resistance to centralization, and, governance. How can a CTO tackle these challenges while deploying blockchain for their organization?

Winston Churchill once said: “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” The limitations are always there. Here are some ways to think about them as opportunities.

• The language is obscure. How do I talk about this with a shared set of words with common meaning? Cryptography, blockchain, distributed network, miners, all sound like a foreign language, which to an extent they are. There are a growing number of efforts to standardize these. But even if they are standardized, you will have to gain a comfort factor using them in the right context. That requires practice. Join a forum or form your own think tank to get the juices flowing and the conversation more familiar.
• Network for blockchain are essential. The larger the network, the more resistant they are to attackers. If, for example, a blockchain solution for a supply chain doesn’t have sufficient users, it is a challenge to implement and reap the full benefit.
• Human error is often cited as a problem. The information going into the database is only good if it is good information. There is nothing inherently pure or trustworthy about the data itself. It has to be recorded correctly and then it can serve as a secure, accurate affirmation of what has been agreed to.
• Lies become truths. This is a flaw of great concern. If more than half the computers working as nodes tell a lie, the lie becomes a truth. This is called a “51% attack” and was highlighted by Satoshi Nakamoto when he launched bitcoin. The bitcoin mining world is highly monitored by this distributed community, so no one has the ability to gain network power.
• Miners and the digital governance model is fragile. These miners are forming other governance communities. There is no shortage of opportunities for disagreements. There is a lot of questioning about “forking” a blockchain. This is when a blockchain protocol is updated after a majority of users have already agreed to it.

The democratization of this distributed network with the ability to transform our relationships is not without challenges.

IoT is another technology which has gained momentum. What impact does IoT have on blockchain and vice versa? Can these technologies go hand in hand in the coming years?

Firstly, what is IoT? IoT is the pervasiveness of data-capturing sensors that are capturing our activities, every day, in every place, to enable others to do all sorts of things with the data – from tracking the flow of oil through pipelines to monitor your use of space as Steelcase is doing. Blockchain is an encrypted, secure, distributed digital filing system that can create real-time records of all that data that is being collected. There is, the issue of transparency that blockchain’s records allow someone to monitor. If breakage occurs or data leaks, the blockchain makes it possible to see where and why it took place and how to fix it. Machines can record, without human intervention, details of transactions and record them securely.

For the IoT environment, blockchain technology can significantly improve the security of the data capture systems. That data can be highly personal. It is being shared with other machines and services to be of use to us. There are, however, many more opportunities for others to attack us through those IoT devices. Allowing data access and security to be controlled by blockchain technology could add an additional layer of security that hackers would have to overcome. Those blockchain encryption standards are among the most secure available making the intersection of the IoT being collected more valuable and less fragile than it would be without that additional layer.

The two technologies may find themselves coming together into an integrated, more powerful system than each of them alone. As the cloud services supporting IoT become overwhelmed with data, that bloating, it may make a decentralized system even more attractive, and secure.

Companies who provide IT solutions are slowly exploring blockchain. What tips would you give a CIO who wants to gain a foothold in this space?

It is a good time to step back and see how your organization is running today. What areas could be seriously improved with new technological solutions? Develop your own list and build a team of inside and external advisors to maximize the idea generation and observational research possibilities. Watch staff do their jobs. Watch clients try to use your services. Then, realize that no matter what type of change you need or want to do, people will throw up hurdles.

We often talk about the four major hurdles that our clients have to anticipate before we begin a change project with them. These hurdles emerge because the brain hates change and the habits of the past are so much more comfortable than changing those habits. People revert back to them when faced with the unknown or the risks of changing.

Tell us a little about some of the exciting, upcoming projects at Simon Associates Management Consultants. Anything our readers should keep an eye out for in 2018?

For the rest of 2018 and into the following two years, we have launched the Simon Initiative in Entrepreneurship at Washington University’s Skandalaris Center. We are particularly interested in helping people of diverse backgrounds, particularly women, capitalize on great technological innovations and turn them into successful business ventures. We just completed a “Primer for Entrepreneurs” that will be launched in July.

In addition, our podcast has been growing rapidly and we are focused on building interviews, case studies and insights around blockchain and other new technologies. We are writing a book on how technology today is, once again, a culture transformer. There is a lot coming soon to change our society well beyond what we can imagine today.

About Simon Associates Management Consultants (SAMC): SAMC is a uniquely designed consulting company. A corporate anthropologist, Andrea Simon, Ph.D. developed SAMC to apply anthropological concepts, methods, and tools to the needs of corporations, entrepreneurs and organizations as they adapt to changing times.

SAMC’s team approach helps you apply these proven anthropological concepts and methodologies to create better strategies, processes, and products. We help you “see, feel and think” about your business in ways you haven’t before. And it is often these experiences that open you up to better solutions for your current customers and “big ideas” to attract future ones.