If you are like me, you have some general knowledge about how your computer works and are just glad that when you turn it on and press the buttons, you get the correct response to connect with your family, friends, or colleagues and get your work done on a daily basis.
I write for a living and so I live on my browser while researching countless topics and an endless flow of material accessible within a few keystrokes. The technology that makes my Google searches respond accurately amazes me. The internet has transformed our lives in ways that seem nearly magical…and then I got wind of BigchainDB (Distributed Database) and nearly choked on my morning cereal.
I have a personal friend that connects channel partners in respective industries in order to develop relationships that are beneficial to all involved. You never know who he will meet and who he will connect, but ultimately the goal is to see the sparks of like-minds create a new concept or invent new techniques that improve an industry or several at a time. Recently, he stumbled on an individual bent on customizing the blockchain concept for supply chain applications and recognized the implications to the internet, not to mention the resulting global impact on industries across the board as electronic processes are literally reinvented. Am I being dramatic? Nope.
Block Chain to Bitcoin
I’m getting ahead of myself. Many people have heard of Bitcoin, which is an open source public ledger of all financial transactions between companies and individuals who choose to use it. The chain lengthens each time someone completes an action, creating blocks that are recorded in a linear and chronological order. Massive data centers called “miners” across the world participate in authenticating transactions for rewards including newly minted bitcoin.
Each computer connected to this ledger network gets a copy of the blockchain automatically which includes addresses and balances on transactions from the first block to the most recently added. New blocks are extending the chain by several hundred lines about every ten minutes making it currently “over 8,000 times the length of the Bible.”
Like many things that are a bit ahead of their time, the blockchain, published by Satoshi Nakamoto in 2008 and implemented into the source code of bitcoin in 2009, became an incredible tool that never really caught on with the general public which continued operating quite happily with credit and debit card use. However, criminal minds immediately found a way to avoid regulations regarding the use of cash for illegal transactions such as gambling or drug dealing; proof that its use merely requires some creativity and ingenuity to involve the masses.
The financial industry has certainly used it to conduct securely recorded transactions in some segments and recently began to worry about a scalability problem that would prevent the ledger from accommodating, storing, and synchronizing larger volumes of data while still being able to protect records from tampering or revision. How can they make money flow as freely as data to purge the world of credit-card fees and foreign-exchange charges on the way to its much broader connotations and why must this technology be the answer?
The Best Features of Blockchain
Every block contains a hash of the block before it, a timestamp, and becomes a full financial history available to all users without the need for permissions. Chaining these blocks together consecutively prevents duplication of the same bitcoin making the system tamper-proof by any one party, such as individual users and government institutions, and there is no centralized organization; no “bank of bitcoin”.
The blockchain can’t be changed without overwriting all of the thousands of copies used by the miners (a large number of computers dedicated to keeping the system running) at the same time. This would require controlling “51% of the computing capacity of the 10,000 or so ‘miners’” which is highly unlikely. The cost alone to attempt to breach it would be phenomenal. The need for “unbreachable” data has inspired other attempts at cryptocurrencies with distributed databases as well. From financial institutions and department stores to personal music accounts and healthcare coverage, online data will be secure from cyber-attack, identity theft, fraud, and waste. There is an unbelievable savings potential here for literally any industry.
Blockchain Plus Big Data Equals New Companies Like BigChainDB
Now there are more than 80 crypto-ledgers out there and the blockchain concept has been continually advancing programming language to attach bitcoin-based sidechains and altchains to add assets for big data without creating more blocks on the transactional currency chain to solve the scalability issue; enter BigchainDB with the added benefit of protection by cryptography that is considered impenetrable.
Take a quick look at the intended uses for Blockchain technology:
- Variations are being tested in the music industry for royalty collection and management of copyrights globally.
- The Harvard Business Review researched securely moving and storing “money, titles, deeds, music, art, scientific discoveries, intellectual property, and even votes”.
- David Grace, Price Waterhouse (PwC) head of global finance, is looking at uses “to store validated ‘know your customer’ data on individuals or companies… a potentially global application that could provide more security over identity data and where that data [is] stored.”
- Companies like IBM and JPMorgan Chase, and venture capitalist firm Andreessen Horowitz, are preparing a shift to blockchain and network-based approaches to complement or rebuild the current centralized financial system.
- CoinSpark, based in Tel Aviv, wants to add messages to the bitcoin blockchain as an inexpensive way to notarize information.
- Lighthouse, developed by former Google engineer, Mike Hearn, is using it for a decentralized crowdfunding platform on bitcoin.
- The Economist describes new progress that not only allows for smart contracts to be executed at delivery but also “creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level.”
Decentralized Growth and Evolution
Blockchain architecture has the ability to unite a consensus of all transactions into a single version despite users running anonymously, having reduced interconnectivity, or attempting malicious cyber-attack. It provides a consistent history. Traditional financial business models are in for an overhaul and while some are still resisting, others conclude it is inevitable. Banking institutions are becoming an unnecessary middleman.
The world economy has long trusted this need for third-party intervention and recently that has led to global financial strife. But this “piece of innovation [is] on a par with the introduction of limited liability for corporations, or private property rights, or the internet itself. The blockchain is public and widely distributed so anyone can download a copy of it. Identities are protected by clever cryptography and the system is entirely transparent.”
All major banks have teams analyzing the impact of blockchain right now. In 2016, the National Settlement Depository (NSD) of the Russian Federation began its own pilot project based on this technology. A barrier to making this enormous change is the difficulty of finding staff who can get them up to speed on the technology. “The sort of people who understand blockchains don’t usually want to put on a suit and go work for a bank,” says Gideon Greenspan of CoinSpark.
Here is where my channel partner friend comes in to make an introduction to someone who can implement the software, integrate it into your existing system, customize it to your business, and train staff to use it effectively. The implications on return on investment are enormous and you can read the details on several presentations featured by Don Klos, Encrypted Labs consultant on LinkedIn. Charlotte, NC area has its own BigchainDB experts at Encrypted Labs, Ian Worrall and partner, Quincy Ruckert.
Block Chain Tech Companies
This new technology may not deal with currency at all. Encrypted Labs in Charlotte, NC has succeeded with solutions containing similar programming language and code source offered by other tech companies like RethinkDB, and adding assets onto blockchain to execute complicated tasks. These may include verifying fulfillment of contracts between participating parties with “smart contracts” and handling supply chain issues by watching over every invoice, order, or product entering and leaving the warehouse. Again, presentations created by Ian Worrall and Quincy Ruckert explaining this process can be found here.
The New York Stock Exchange purchased a stake in Coinbase at the beginning of 2016 to prepare for possible stock exchange decentralization. Banks agree that financial contracts could be decentralized through their own private blockchains as well and payment networks are enticed by the comparatively small transactions costs. New payment centers would likely begin with blockchains from the start such as Ripple Labs. This company wants to provide “secure, instant and nearly free global financial transactions” using decentralized ledgers on a platform called Prosper inspired by technology strides at Fintech. It believes the current financial system could be made more efficient. The way we transfer money has become antiquated and needs to be brought up to date the same way computer networks became a single internet.
The Bottom Line
BigchainDB took an existing scalable, queryable, low-latency, high-throughput distributed database (RethinkDB) and added blockchain characteristics: decentralization, immutability, and cryptographically-secure asset transfer. The result:
- Bitcoin transaction latency is about an hour (if you wait for six confirmations), while BigchainDB’s latency is hundreds of milliseconds or less.
- The small storage capacity of the Bitcoin blockchain (tens of gigabytes) is replaced with a database capable of growing to petabytes. The transaction rate can scale up to millions per second (Bitcoin handles only one per second).
The mining process of verifying blockchain transactions is what enables it to be undeniably secure proved by enduring untold numbers of cyber-attacks. While bitcoin itself requires going through exchanges to convert hard currency into crypto-currency and store it, new blockchain technology programming changes eliminated the need for this.
At the rate technology advances, blockchain will run its course and sprout other potential uses along the way. Technology companies have finally broken through to the next leap in business transactions of every kind along with a new concept of the “internet of value” and the rapidly advancing “internet of things”. I could go on and on, but I think I’ve made a point of sparking conversation. I invite you to comment on this article or act on it by checking the resources and clicking on the links I’ve provided. At the very least it is food for thought.
Resources and Links:
Hepler, L., Greenbiz.com, 2015. 9 Supply Chain Techs Companies You Should Know, https://www.greenbiz.com/article/9-supply-chain-tech-companies-you-should-know
The Economist, 2015. The Next Big Thing, http://www.economist.com/news/special-report/21650295-or-it-next-big-thing
The Network Revolution, Blockchain Technology Will Disrupt Financial Services Firms, http://knowledge.wharton.upenn.edu/article/blockchain-technology-will-disrupt-financial-services-firms/
Investopedia.com, Blockchain Definition, http://www.investopedia.com/terms/b/blockchain.asp#ixzz49xKfejem
Wikipedia, Definition of Block Chain Database, https://en.wikipedia.org/wiki/Block_chain_(database)
McConaghy, T., Developer at BigchainDB, 2016.