Blockchain: a view from the trenches

April 29, 2016 Blockchain, Education

As of April 2016, there are over 250 blockchain companies globally with $1+ Billion USD in cumulative investments. It goes without saying that blockchain is a hot topic in the tech world and for good reason— it’s a game changer. We’ve spent a lot of time thinking about this technology and helping our enterprise clients make sense of this space and how applies to them. Here are the cliff notes.

What is blockchain?

To put it simply, blockchain is a digital ledger that can be shared publicly (or not!). It can be imagined as an Excel spreadsheet shared on the Internet; but entries can’t be deleted, only added. Each entry in this spreadsheet is essentially a transaction with four pieces of information:

  • Sender- this is represented by an address which looks like this: 13hgurVQ1rcawJK3NMjEfhQGh5egy653MS
  • Recipient – represented by an address in same style as sender’s
  • Amount – this is measured as a unit of the relevant cryptocurrency (eg. Bitcoin, Ether, etc.)
  • Message – a small message corresponding to the transaction

Transactions are bundled by the network participants, also called nodes, into blocks and then computing power is used to solve a mathematical equation in order to validate and add this bundle of transactions to the chain— hence, blockchain. Once a transaction is validated and relayed, identical copies of the ledger are maintained by each node. Each entry is time stamped, immutable, and due to the consensus required in the network, the transactions are accurate.

How does bitcoin fit in with talk of multiple protocols?

First, there’s Bitcoin and then there’s bitcoin— the former is the computer protocol and the latter is the cryptocurrency. Blockchain infrastructures are built on a protocol, either Bitcoin or a new alternative protocol such as Ethereum. Ethereum is news worthy since they’ve introduced the ability to execute turing-complete smart contracts, in addition to the distributed network functionality introduced by Bitcoin. Rubix is actually built to be Ethereum compatible.

Smart contracts are something that I personally find the most fascinating about blockchain. Smart contracts are essentially self-executing applications that will make the network do one thing if a triggering event occurs. For example, I can write into a smart contract code a trigger event that if you send me a token that represents ownership of a vehicle, then I will transfer you payment (via a coin wallet). This is a simple demonstration of smart contracts in action. Smart contracts are being developed to handle some very complex transactions; such as, calling on future contracts on crop yields based on weather forecasts. In brief, smart contracts are applications that allow for if/then transactions to occur between nodes or individuals on the network.

In a public blockchain network, like the Bitcoin network or on Ethereum, any node can participate. However, now with large corporations and governments using blockchain technology, there’s a need to support the unique needs of consortium and enterprise-specific blockchains. Consortium blockchains, like R3CEV, are most useful when an industry is better off working as a well-oiled machine rather than silos. With R3CEV, over 40 of the world’s largest financial institutions are collaborating to participate in a single blockchain network to enable faster, and theoretically less costly, interactions. Similarly, enterprise-specific blockchains can be used to streamline operations, like inter-firm billing within an organization or data management of personal identity.

Can blockchain be applied to everything?

Yes, and no. We have a running joke in the office where someone will raise a mundane concern like “how do we solve world hunger?” and someone else will answer “blockchain.” This is a joke— although blockchain can be used in virtually anything; we believe that the full value of the technology can be exploited when it is used under certain conditions. The details of these conditions will be discussed in a future post.

The year 2016 will be seeing many consortium and enterprise-specific blockchain trials to put the technology to the test. Blockchain has been referenced as having an impact just as great, if not greater, than the Internet. The technology is still immature for large-scale projects but we at Rubix are very excited to contribute to the industry to enable its potential to be a bigger game-changer than the Internet.

-Mawadda B.