By making it possible to exchange information almost instantaneously, the Internet has ushered in a revolution. However, carrying out a transaction on the network – such as a payment – requires implementing complex intermediation, verification, and compensation mechanisms. Blockchain promises to do away with this limitation by making it possible to transfer – and not just share – a piece of information.
On the web, the sender keeps a copy of the data being sent. With blockchain, data is transferred once and for all to the recipient, and what’s more, the data transfer is certified without having to use a trusted third party. It’s like a bank note passing from one hand to another. From that point on, it becomes possible to confer intrinsic value on the information, whose authenticity, integrity and legitimacy are guaranteed from owner to owner. Blockchain therefore makes it possible to create unassailable, tamper-proof digital assets and to achieve digitization and disintermediation for documentation (identity, authenticity, ownership, provenance, etc.), rights (usage, access, authorization, etc.), traceability (receipt, reading, editing, time-stamping, etc.), and even units of account (loyalty points, currency, etc.). From mobile payments to protection against counterfeiting, logistics and access control, blockchain opens up a field of applications we hardly considered before – applications that streamline, secure and drastically reduce the cost of transactions, free from the trust-related controls and procedures currently required today. This is why we are currently witnessing an almost irrational enthusiasm for a technology that is still not yet mature. We do not necessarily need to grasp all of the technical subtleties in order to understand that a tool capable of rendering all sorts of intermediaries obsolete is capable of radically redefining value chains and redesigning entire sections of economic activity. In all sectors, from banking to distribution, from energy to thepublic sector, this outlook is perceived both as a threat and as an opportunity. And to avoid being swept away by what will be the size of a tidal wave in two or three years, we need to prepare now.
What answers does this revolution bring?
Blockchain is a technology based directly on the Internet, but separate from the Web. It is therefore possible to create applications exclusively on the blockchain or hybrid applications that access it via the Web.
A roadmap for getting started
Blockchain technology is not expected to fully mature until 2018-2020. However, preparations should be made now because there are numerous obstacles that will need to be overcome. Those who are thinking about it today will be primely positioned tomorrow and leaders thereafter. To help companies adopt blockchain technology, DXC offers a four-step roadmap. The first two steps are already available: Awareness and Test & Learn.
As breakthrough innovation, blockchain technology still lacks maturity. Skills are rare, and there have been only a few successful implementations. The subject is slow to be abstracted from the technology, and the concepts are still being developed, with a lack of standards and tools, as well as questions regarding scalability. In addition, there are psychological barriers, particularly due to the association between blockchain technology and bitcoin, which has somewhat of a notorious reputation, and due to the system’s decentralized governance. These are similar to the struggles faced by the cloud in its early days.
Like the pioneers of cloud technology did a decade ago, the first step is to understand the technology and, especially, its potential implications for the company’s business. Just as not all applications are meant to be used in the cloud, not all processes are likely to be “blockchained.” Initially, use cases will need to be identified by asking whether generating, programming (possibly), and transmitting non-falsifiable digital assets could speed up, simplify or reduce transaction costs. This may include, for example, monitoring a dynamic right, identifying customers (KYC), or packaging an event with sensitive information.
Test & Learn
Once the use case has been identified and defined, the blockchain requires some smallscale experimentation. This study and demonstration phase will provide a wealth of lessons from a technical standpoint (implementation, performance, etc.) and from a business standpoint (acceptance, uses, etc.). Some companies have already made the leap, which, among other benefits, builds their reputation and their modern image, as such pioneering projects attract much media attention. Consider Bouygues Immobilier, for example, which announced the implementation of a local smart grid demonstrator based on blockchain technology in October 2016. Based on Ethereum, the system will allow interactions between solar energy generators and consumers to be tracked and monitored within the Lyon Confluence district.
Questions & Answers
Blockchain technology raises many good questions that are all aspects that companies must clarify before committing to its adoption.
What does blockchain technology look like for the end user?
From the user’s perspective, the blockchain might resemble a database. Of course, it is very different in how it works (the
“base” is now active and programmed), and it can offer many new functionalities. The technology will remain invisible and hidden,
behind an ordinary application interface.
What are the risks associated with blockchain technology?
The blockchain is secure by design, and eight years of bitcoin operation have demonstrated the validity and soundness of the implementation methods. However, there are other types of risks:
- Private key security: As the only proof of the user’s identity for accessing the chain, this can be stolen, hacked, or usurped if sufficient precautions are not taken.
- Smart contract robustness: Being programmed, these themselves are susceptible to flaws.
- Data storage and confidentiality in a public structure: The transactions themselves are secure, but the associated information must also be and should be visible only to their owner and to authorized individuals
- Volatility of blockchain cryptocurrency (public): Necessary for rewarding the work of validating members of the community, a surge in prices could jeopardize the system’s economic attractiveness.
What is the current legal and regulatory framework?
The subject of blockchain technology is thorny for lawmakers: On one hand, it is a popular innovation among companies that is evolving extremely quickly and too often we risk having inadequate provisions; on the other hand, it is a technology that promises to shake up the balance of particularly sensitive industries – banking, health, legal professions, intellectual property, etc. – and therefore requires the highest level of vigilance. Currently, the law reflects this in-between state, with blockchain technology already being recognized (European Parliament resolution, Sapin 2 Law), but with cautious vagueness. However, the April 28, 2016, ordinance, which amends the Monetary and Financial Code, states that “the issuance and sale of mininotes may also be recorded in a shared electronic recording device,” which is the first implicit recognition of the legal value of an entry in the blockchain.
Blockchain: What you need to remember
Here is a quick and easy reference guide for this technology, which you could soon find very close to you.
What it is
A blockchain is an intelligent, chronological, distributed and verifiable asset log protected against any falsification by a trusted system distributed on constituent nodes. The blockchain manages a secure, decentralized chronology of all transactions performed
since the start of the distributed system. Transactions submitted by a user network are documented in information “blocks,” sequenced together by referencing the secure ID of the previous block. The perpetually growing chain is maintained by a peer-to-peer network of specialized calculation nodes, but each user can access the entire log at any timeand view it. Blockchain technology can be defined in three different ways:
- Functionally: An active, chronological, distributed, and verifiable log that is protected against any falsification by a distributed trust system.
- Technically: A combination of paradigms: network application (P2P), distributed database, block processing, asymmetric cryptology, self-execution (Event-Driven), and proof-of-Work.
- Socially and economically: A trusted operation that allows a group of people to exchange assets securely without using an intermediary.
What it is not
It is not a database, at least not in the traditional sense. Data does not reside in a single location or on a central server. The blockchain is replicated over the entire network and therefore does not require a centralized “authority” to store and secure it. And it is no longer just bitcoin, which is only one application of blockchain technology. However, alternative currency has played a key role in demonstrating the value of blockchain and its possible applications.
One of the primary benefits of blockchain is trust. While traditional databases require secure access to a central server, trust in blockchain technology is inherent in transactions, which are secured by cryptographic systems, using many transactions over the Internet. The non-use of a trusted third party makes it possible to automate processes and thus drastically reduce costs. Other benefits include transparency (all transactions are visible to all participants) and inalterability. It is practically impossible to modify transactions without being detected, which virtually eliminates the possibility for fraud and censorship. We should also mention the availability, maintainability and interoperability of the blockchain, which reduces interface costs with various fragmented protocols since it automates and replaces them.