Blockchain: The beginning of the 21st century has also witnessed the emergence of a technology that holds revolutionary promises from a technological point of view and financially, socially, and personally. We are talking about blockchain. Could it also be a solution in search of a problem?
That’s what we’re going to discuss now.
What Is A Blockchain?
From a computational point of view, a blockchain is nothing more than a distributed database (i.e., present and replicated on several computers at the same time) that is, by definition, inviolable (i.e., data cannot be changed under no circumstances) and which maintains a historical record of all transactions. Its primary and most common purpose is to establish trust protocols between two parties, avoiding intermediaries.
This is, basically, the premise that guided the creation of the most famous application of a blockchain that emerged in 2009: the virtual currency known as bitcoin. However, it soon became apparent that the basic structure of a blockchain could be used for any class of problems that involved privacy, data immutability, historical data logging, concurrent requests, and auditing.
Some examples naturally arise recording deeds, medical history, financial transactions, tracking assets along a logistics chain, renting or making available assets (renting apartments or downloading music), etc. The blockchain guarantees, by its model, the reliability of the transaction between the parties (human or not): once it has been validated (through consensus algorithms), a copy of the transaction is available on each of the computers that are part of it. Network and this block can never be changed, allowing other parties to consult and audit this transaction without having access to the content recorded in the league.
Let’s analyze one of the most common actions in our lives today: making a purchase using a credit card. All that happens is to choose a product (or select it on a website), insert the card in the machine (or enter its number on the website), confirm your password, and that’s it! Purchase made. The process is much more complicated and involves a series of intermediate steps between you and the store where you are shopping. And in each of these intermediary steps (which include banks, card companies, infrastructure companies, etc.), you are being charged a percentage of the total amount of your purchase. It is the price paid for the existence of intermediaries.
As should have been clear from the above discussion, blockchain can eliminate the intermediaries and link the two extreme and main ends of the transaction. In our example, you and the store where you purchased (hence the appeal of virtual currencies).
Another example: is the request for medical examinations. It is widespread nowadays that when we enter a hospital (say, consulting a gastroenterologist), the consultation does not last even five minutes. We leave there with a list of requests for various tests. A few weeks later, we can go to another specialty (a pulmonologist) within the same network and walk away with an equally long list of tests. The previous specialist may have already ordered some (e.g., a blood count). What do these two cases have in common?
We are dealing with data that grows over time (multiple purchases, many medical exams) and that needs security and privacy. In addition, we are also talking about keeping them under our control (instead of being scattered and stored on several servers and being accessed by search engines or social networks). Blockchain promotes a radical change in the paradigm of transport, availability, and administration of data and values. If we have a tool with this capability, why isn’t it more widespread and used?
The Challenge Of The New
Firstly, the technology is very new and still too closely associated with cryptocurrencies (the most famous being bitcoin ). Recent cases of fraud and financial pyramid schemes involving cryptocurrencies do the blockchain a disservice. Therefore, mistrust and fear of new technologies are the first challenges to be overcome.
Second, we can point to the business impact caused by adopting a blockchain on a local or broader scale: if banks, for example, can transact with each other without going through a central bank, what are the implications for the financial market? We know that the transactions would be reliable and auditable – therefore subject to validation or regulation, but without the intervention of a central body (is it finally the materialization of the invisible hand postulated by Adam Smith?). Changing communication structures and networks for centuries is not an easy or quick task. The adoption of new paradigms (I repeat: not just technological, in this case) is caused either by moments of crisis or by disruptive technologies. Blockchain can bring both scenarios – and ignoring it can be a big mistake.
Another challenge is the questioning made by experts about the computational cost required to create new blocks (records) within a blockchain or the problem of exponential data storage (think about how many medical exams or card purchases you have made or will make over its lifetime and the size of the database needed to store it all. Now multiply by 8 billion people). These are legitimate questions. In the case of bitcoin, its monetary value derives directly from the computational effort (the famous “consensus”) necessary for the network to validate and accept the generation of a new bitcoin.
For example, in the Health area, a protocol known as HL7 was created and implemented, whose main objective was the transfer and administration of clinical data between hospitals, health plans, and clinics. One of the main criticisms and deficiencies of the model was the issue of handling the gigantic mass of data generated.
It seems, then, that blockchain is already born with a legacy of problems that have not been solved before. What can be done?
Blockchains: The Evolution Of The Model
The article that defined what a blockchain is and its subsequent use in cryptocurrencies is from 2009. Since then, new technologies have emerged, the processing power of computers has increased, and new people have started to think about blockchains. Consequently, the initial model proposed in 2009 was changed, expanded, and adapted.
Public platforms (such as, for example, Microsoft’s Ethereum and Azure) have emerged, allowing the construction of blockchain-based applications without the need to program one from scratch. Soon, new technologies were developed, bringing more facilities to the market and solution developers. Worth mentioning:
- Smart contracts: are computational protocols, guaranteeing the execution of specific actions, such as the reading of your exams by a particular doctor in a pre-established period;
- Hype ledger: it is a kind of “operating system” whose main objective is to guarantee communication between different types of industries, with a high level of transparency and performance;
- Parity: Allows rapid development of blockchain-based applications focused on security and high availability.
A new category of database (Microsoft’s Cosmos DB ), designed to handle “planetary-scale data,” can be easily coupled to a blockchain, efficiently managing exponential data growth. Using databases with this approach, the problem pointed out in the case of HL7 can be addressed and solved – with the extra gain of the immutability of the data provided by the blockchain.
In addition, combinations such as Ethereum + Parity + Hype ledger allow more people to access, test, and practice blockchain-based applications, spreading their adoption, to decouple the idea that their only application resides in cryptocurrencies.