Beyond Bitcoin: How the Blockchain can Power a New Generation of Enterprise Software
Bitcoin has become one of the most intriguing and revolutionary technologies created in the last few years. From a functional standpoint, the crypto-currency has challenged the most fundamental principles of the world’s financial systems by providing a decentralized, secured and trusted model to process financial transactions. To enable its magic, Bitcoin relies on an architecture powered by a groundbreaking technology known as the Blockchain.
While Bitcoin has clearly become the most important implementation of the Blockchain, it is just one of many practical applications that can be powered by the Blockchain. From the conceptual standpoint, the blockchain provides a series of capabilities that can change some of the well-established architectures in the digital world.
What Is the Blockchain?
The blockchain is Bitcoin’s public ledger. From a functional standpoint, the blockchain provides a decentralized, time stamped, ordered record of all transactions in a Bitcoin network that can be verified at any time. These simple capabilities represent the first practical answer to profound computer science problems based on the trust of nodes in a decentralized network. One of the most popular and ancient problems that can be solved by the blockchain is the “the Byzantine Generals Problem”. To review this problem, let’s take some snippets from Lamport, Shostack and Pease’s seminal paper of that name:
“We imagine that several divisions of the Byzantine army are camped outside an enemy city, each division commanded by its own general. The generals can communicate with one another only by messenger. After observing the enemy, they must decide upon a common plan of action. However, some of the generals may be traitors, trying to prevent the loyal generals from reaching agreement. The generals must have an algorithm to guarantee that
A. All loyal generals decide upon the same plan of action.
The loyal generals will all do what the algorithm says they should, but the traitors may do anything they wish. The algorithm must guarantee condition A regardless of what the traitors do. The loyal generals should not only reach agreement, but should agree upon a reasonable plan. We therefore also want to insure that
B. A small number of traitors cannot cause the loyal generals to adopt a bad plan.”
The blockchain can solve the B.G.P because it provides a trusted and decentralized exchanges over an untrusted network. Generalizing this value proposition means that the blockchain can be used for different parties to exchange digital information in a trusted, secure and decentralized model in which each party can validate the legitimacy of the transfer and no party can challenge it.
How can the blockchain redefine the enterprise?
The decentralized, autonomous, trusted and secured capabilities of the blockchain that can redefine of the foundational patterns of enterprise applications. While the principles of the blockchain are well understood patterns in enterprise solutions, until now we have lacked practical implementations that validate its functionality at an enterprise scale. The blockchain opens a new set of opportunities to enterprise scenarios that weren’t possible before.
The internet of things (IOT) is becoming one of the most important trends in modern enterprise software. While many IOT platforms are based on a centralized model in which a broker or hub control the interaction between devices, this model has proven to be impractical for many scenarios in which devices need to exchange data between themselves autonomously. That specific requirement has been the fundamental principle behind decentralized IOT platforms. Those decentralized models are fundamentally powered by a trusted ledger of exchanges between smart devices fundamental to power real world IOT solutions.
The blockchain provides foundational capabilities of decentralized IOT platforms such as secured and trusted data exchange as well as record keeping. In this type of IOT architectures, the blockchain will serve as the general ledger keeping a trusted record of all the messages exchanged between smart devices in an IOT topology.
Public Key Infrastructure (PKI) has been one of the fundamental technologies powering data signatures. PKI models rely on a central authority to stamp and validate signatures on a data payload. While PKI models have been incredibly successful, the dependency on a central authority presents serious limitations for large scale scenarios and is also vulnerable to attacks involving quantum computation.
The characteristics of the blockchain can help to overcome some of the limitations of PKI models with a keyless security infrastructure (KSI). A KSI model uses only hash-function cryptography, allowing verification to rely only on the security of hash-functions and the availability of a public ledger commonly referred to as a blockchain.
Archiving historical data in a secure and trusted manner has been a permanent challenge of enterprise IT. Companies like EMC have become one of the most iconic enterprise software companies in history by providing robust storage and archiving solutions. More recently, cloud platform vendors like Amazon have provided alternative data archiving solutions. However, in both cases, data archiving solutions rely on a centralized storage model which possess very well-known limitations in enterprise scenarios in areas such as security and privacy.
Decentralized and autonomous data archives models such as the ones provided by the blockchain can be an interesting alternative to centralized data storage solutions. This model will eliminate the dependency on a centralized authority and will allow distributed and trusted storage across nodes in a blockchain network. More importantly, using the blockchain as a data archive will allow any nodes to validate the authenticity of the archived data without relying on central hub.
Decentralized B2B Auditing
B2B exchange models are one of the foundation of modern commerce. In those scenarios, transaction tracking, auditing and reconciliation processes are essential capabilities of B2B processes. Traditional B2B platforms enable these capabilities by providing centralized transaction tracking models that will be used by the different B2B endpoints to log relevant events of a specific transaction. These centralized tracking models have proven to be unpractical to address many of the typical challenges of B2B transaction tracking processes in areas such as auditing and reconciliation.
Leveraging the blockchain as a decentralized, secured and trusted transaction ledger could be a more effective model to address the challenges of B2B transaction tracking solutions. Using the blockchain, each party in a B2B process could autonomously track the events related to a B2B transaction without the need to rely on a centralized authority. Additionally, the security capabilities of the blockchain will facilitate the implementation of more sophisticated reconciliation and auditing processes.
Legal Proof of Existence or Proof of Possession
Validating the existence or the possession of signed documents is an incredibly relevant element of legal solutions. The challenge of traditional document validation models is that they relied on central authorities for storing and validating the documents which presents some obvious security challenges but also becomes more difficult as the documents become older.
The blockchain provides an alternative model to proof of existence and possession of legal documents. By leveraging the blockchain, a user can simply store the signature and timestamp associated with a document in the blockchain and validate it at any point using the native blockchain mechanisms.
Distributed File Storage
Cloud file storage solutions like Box, Dropbox or One Drive are becoming regular citizen of modern enterprise environments. Despite its popularity, cloud file storage solutions typically face challenges in area such as security, compliance and privacy in order to be adopted in enterprise environments. Those concerns are all rooted behind the fact that enterprises need to trust a third party cloud system with their confidential documents.
Security Trade Settlement
Central Security Depositaries (CSDs), has been an essential element of modern equity and bond trading. In the US equity market, following frequent bottlenecks during the late 1960s in the settlement of securities trades, CSDs smoothed the post-trade process for transferring share ownership by eliminating the exchange of paper certificates and recording transactions in central, computerised book-entry systems. The international CSDs, Euroclear and Cedel (now Clearstream) played a similar role in the Eurobond market from the 1970s onwards.
The centralized nature of CSDs is essential to a successful bond and equity trades. However, the settlement process via CSDs is incredibly expensive and slow averaging two or three days per trade settlement.
The blockchain offers an interesting alternative to traditional CSDs as a decentralized ledger that can keep records of transactions without relying on a central authority. The query capabilities of the blockchain will allow the settlement of trades in minutes or even seconds and at a fraction of the cost of the current CSD solutions.
Counterfeiting remains as one of the biggest challenges in modern commerce. Segments like luxury goods, pharmaceutical or electronics are constantly affected by counterfeiting. As a result, the demand for anti-counterfeiting remains one of the hottest topics in the digital commerce world. Unfortunately, most solutions in the market require a trust in the third party authority which introduces a logical friction between merchants and consumers.
The decentralized and security capabilities of the blockchain can enable an interesting alternative to traditional anti-counterfeiting platforms. In that sense, we can envision a model in which brands, merchants and marketplaces are part of a blockchain network with nodes storing information to validate the authenticity of specific products. In this model, brands don’t have to trust on a central authority with their product authenticity information and can rely on the security and decentralized trust models of the blockchain.
Governments all over the world are investing deep resources to digitalize many of their existing processes. Many of these processes deal with sensitive information that require sophisticated levels of traceability, privacy and security. Inevitably, the digital collaboration process rely on trust on centralized authorities.
The blockchain capabilities provide a robust option to enable the digital collaboration between government agencies and citizens. In this model, different government agencies can store records in blockchain nodes so that it can be accessed and verified by other government parties and citizens in a secure and trusted way.
Traditional ecommerce business models are based on the presence of a centralized entity that control activities such as order processing, inventory management, catalog access etc. In order to buy and sell goods, ecommerce marketplaces need access to sensitive user information such as credit card information, user profile data etc. This information often becomes the target of cyber security attacks and many other security and regulatory challenges.
The architecture of the blockchain can enable the first effective peer to peer (P2P) ecommerce network in which buyers and sellers can interact directly without the need of a central authority. The absence of a central marketplace eliminates many of the restrictions of ecommerce models such as fees, regulated transactions etc.
The blockchain represents one of the most important advancements in computer science of the last few years. The ability to enable decentralized, secure, trusted and highly scalable architectures opens the door to a new group of enterprise software solutions on a large number of industries. Blockchain powered solutions have the opportunity to challenge some of the fundamental architecture principles of enterprise solutions in areas such as security, data storage, trust, etc. Similar to Bitcoin, we should expect to see spectacular platforms in the enterprise software space powered by the blockchain.