Blockchain: a data metamorphosis?

Not every blockchain is Bitcoin. Not every blockchain is currency related, but there's a huge amount of transformative potential. The sad fact of life is that the preceding five years of promises, hype and misaligned expectations has led us to some biased views on blockchain and separately cryptocurrency as a means of either investment, payment or asset capture. 

Is blockchain an attempt to democratise transactions?

Blockchain wasn't the first technology to democratise things. There’s a brilliant framework from Peter Diamandis from Singularity University. Standardisation is also integral. You can't digitise something if you can't define what it is, so NFTs do an interesting job. The token model defines what the data structure is, what the protocol is for exchanging, what the requirement for having a wallet to host those tokens is. So, you have to have standards.

Standards were essential to the development of the internet. That’s also true for digital photography, for it to be able to be portable, exchangeable, etc. After you have digitisation, you have a concept called demonetisation (as described by Peter Diamandis), which describes reduces the cost of ownership or cost of participation.

Demonetisation in terms of photography is when it costs a lot less to produce a digital photo. Demonetisation also means it costs less to start and manage digital businesses. Then, as it’s cheaper to participate, the barriers to entry are lower, so you then get democratisation of participation.

Whether that's everybody having a phone in their pocket and suddenly becoming a professional photographer, or whether that's any artist being able to launch a private collection with a token behind it, that democratisation has happened in a number of different sectors. Then, once you get to democratisation, you get the innovation and transformation around photography, tokens or whichever aspect you choose, because you've got more people participating with a lower cost of entry.

Can blockchain be used as an artistic platform?

A fashion brand can launch a digital collection, which will allow people to express themselves through avatars or an augmented reality experience, so they can own digital representations of clothes - without the global impact of buying physical clothes. This allows the buyer to engage with fashion whilst making less of a footprint on the world.

There’s also a case for expressing creativity through gaming. There's a lucrative business model around esports. It is possible to create and monetise a collectible item or weapon - such as the rare sniper rifle from this year's Call of Duty Modern Warfare Grand Final - for gamers to use in their own games.

There’s a huge market for content creators to monetise custom content. What must exist in this digital marketplace where the ownership rights of items can easily change hands, is trust. Knowing that you’re not going to be defrauded or that the system's not going to be taken down. There's a lot more to consider than ‘create a token, problem solved.’

To speed up the adoption of new technology, does blockchain have an ‘as a service’ model?

Blockchain as a service is pretty well established. For example, the IBM Food Trust is a platform that IBM has developed in terms of the standards, the protocols, the infrastructure, and has been for around for five years now. It means just as cloud is used as a service, blockchain can follow the same model.

It opens up opportunities for new and more established companies to bolt on applications or new services as required. Multinationals such as Walmart, Carrefour, Nestle and others are not only buying a service that promises integrity of the system, but ultimately an ecosystem that can enhance their capabilities over time.

It’s the standardisation that makes those journeys possible. If different people are adopting different standards across the world, it won’t work. If my supply chain management process is a bit different in Belgium as it is in Canada, I'm not necessarily going to be able to use a global blockchain standard.

Also, I might see the value but decide I’m going to customise and create my own - so then, you might end up with a private network for Belgium or a private network for fisheries or for leafy greens, because the process is nuanced and a standard version doesn’t satisfy the need. There may still be business value in this approach, but it will ultimately be less scalable beyond the discrete network you’re using the technology for.

Does blockchain change the value of the product?

It depends whether what was original is still valid. So, Bitcoin, as a speculative asset or a means of transferring value, hasn't changed materially since it was launched 12 years ago and its value is simple because the robustness and security of the platform increases and the pool of participants on the network gets larger. The network effects behind bitcoin are still the original and best. Even if we see different token standards evolve over time, or Bitcoin adopt a new consensus mechanism that is less energy-intensive, I suspect we will still get backwards integration.

Jack Dorsey's tweet token will still be Jack Dorsey's tweet token with the appropriate time stamp that's available on the Ethereum blockchain now as it might be 20 years from now. Technology and the IT industry, generally speaking, solves for backwards integration more often than not.

What exactly does blockchain bring to the table?

Level one is the data provenance or the data integrity. Data that is stored on Blockchain systems, or records of transactions are particularly hard to tamper with, or we can append certain additional fields such as who (a person or organisation) or what (a sensor or machine) contributed that data. This allows us to have greater trust in the authenticity of origin of data we use at a later stage. That’s not to say that all data on a Blockchain is accurate - you can still have garbage in, garbage forever - but the platform is designed in enhance trust around data that multiple parties want to access.

Level two is automation, which is what we call smart contracts. This essentially says that, based on certain criteria being met, we can automate certain activity. Blockchain allows you to do automation across multiple companies because you're all on the same network. Back to the supply chain example, if the product arrives with the digital information around the temperature control of the vaccine or the salmon being fresh, we initiate bonus payment or we unlock the invoice. That's native to some of these platforms that we can create automation across multiple different company systems. Historically, you typically focus on automation only within your own company systems and processes.

Level three is around an ownership model where tokens can be created and traded. Even with those tokens you can attribute certain smart contracts. So, an example would be: if I have a piece of artwork and I, as a digital artist, list it on a platform, then every time it gets sold, I can encode a rule that I can received 5% of the sale value each time it changes hands. For such an approach to work seamlessly, you’re likely to need a cryptocurrency (vs. a series of bank transactions) that can be moved easily across wallets, and that cryptocurrency has to be one that is widely accepted, but as long as it's being bought in a cryptocurrency I recognise, 5% of the sale value will move from the buyer’s wallet to the artist as well as payment to the seller. So artists can benefit if their stock or eminence rises over time. I don't have to die to become famous. Also, when I die, my estate can continue to benefit in perpetuity.

Has blockchain evolved?

There are some vehement and strong-willed dogmatic folk in this space who say, there is only one true blockchain and it's ‘Satoshi's original vision’ - which I think is somewhat narrow view of the potential that distributed ledgers can provide to the world.

Ethereum as a platform started off with the proof of work consensus mechanism; requiring significant computing power to validate transactions. That is clearly not sustainable in every sense of the word. So, with ‘Ethereum 2’ they are changing the consensus mechanism to govern how transactions are created, ordered and verified to a method called proof of stake, in which members on the network commit stake to attest (or ‘validate’) blocks into existence with Blockchain tokens.

The protocol is the same underneath in terms of the data model, the payloads, the token structures, all of those protocols are the same – it's just the consensus mechanism has changed. Ethereum still remains largely the same as a concept but they've modified the mechanics slightly. In real terms, the experience for the user or the token holder shouldn't be any different.

Does blockchain make the world a better place by making people more accountable?

The concept here is data integrity. There is a requirement for integrity and traceability of certain data, or the prominence. People are going to want to know that their salmon has come from a place that is farmed and not ocean caught, because they want to know it’s ‘dolphin friendly’ for example.

Equally, they want to know whether the salmon has come from Scotland or Alaska, because it’s becoming increasingly important to factor in sustainability for methods of transport and the carbon output. Once you start getting the visibility of that data, you can start lobbying producers to make better choices. This will certainly be true when we move towards net zero; organisations will have to understand and show their carbon footprint.

Salmon, coffee beans and diamonds - all can be produced ethically or not. Will blockchain make transactions more ethical?

There is nothing you cannot create a digital twin of. However, If visibility is important, how much investment is going to be commercially viable in enabling creation of that digital twin and surfacing the relevant data? How much of that data needs to be tamper-proof or 100% infallible. You are unlikely to apply the same degree of rigour for a packet of mashed potatoes as you do for a diamond or a tonne of cobalt.

When it relates to hundreds of millions of dollars of sensitive vaccine doses, that’s a very different story. This is the job of every supply chain specialist, to understand not just the technical feasibility, or desirability for the consumer or the organisation to have that traceability, but the commercial viability of doing so.

If I have to strap a sensor, an IoT device, or a radio frequency id (RFID), onto every single packet of salmon at point of catch, that's going to become very invasive very quickly. But if I'm putting an RFID into a cold storage packet containing vaccines, that is reusable and can be part of a broader supply chain visibility initiative, that could be more financially viable.

In the future, with higher value items such as art and diamonds, those companies who invest more in solutions that demonstrate anti-fraud can try to claim either the quality or trust ‘high ground’ and absorb the digital transformation cost in exchange for increased revenue, or potentially charge a price premium. The question is, will consumers pay it?