Blockchain: Understanding the fundamental technology that will change our lives

When I attended the Mobile World Congress (MWC) in Shanghai, I met several successful entrepreneurs who took advantage of disruptive technologies that have turned out to astounding business value. This made me curious about the fundamental technology that I heard many times - Blockchain. Imagine you can eliminate the middlemen without worrying about the trustworthiness of the other party in a business transaction. In my opinion, any new technology that can reduce costs and maximize business efficiency will stay.

The Byzantine Generals Problem

Blockchain was created by dealing with a type of problem called the Byzantine Generals Problem.

Byzantine Empire had a large territory. To protect its boundaries, several divisions of the Byzantine army had to camp outside an enemy city, each division commanded by its own general. The generals could communicate with one another only by messengers. After observing the enemy, they must decide upon a common plan of action. However, some of the generals might become traitors, trying to prevent the loyal generals from reaching an agreement. Therefore, the general must have an algorithm to guarantee that all loyal generals decide upon the same plan of action, and so a small number of traitors could not cause the loyal generals to adopt a bad plan.

Blockchain was created to deal with this type of problem: to build a reliable system able to cope with the failure of one or more of its components.

What is Blockchain

Blockchain can be viewed as an encrypted digital ledger that keeps a record of all transactions that take place across a peer-to-peer network. All information transferred via blockchain is encrypted, and every occurrence is recorded. This record cannot be altered. Moreover, all Blockchain use is decentralized, meaning there’s no need for any central certifying authority.

Source: Internet of Things World News #IoTSec16

The Main Characteristic of Blockchain - Decentralization

There are many ocean killers, i.e. great white sharks and killer whales. How do the weak sardines survive in the ocean?

Sardines have formed a group effect in the natural evolution. When facing a shark, they will gather together to form a group. The rule is simple: each sardine maintains the same distance and direction of the ones around it. When the predators attack them, the changes of the group will make the shark lose a single target and does not know who to capture. This group is indeed a decentralized system, which allows sardines to survive and constantly evolve in cruel nature.

One of the major characteristics of Blockchain is decentralization. In a system with many distributed nodes,  each node has a high degree of autonomy. Nodes can be freely connected to create a new connection unit at any time. Any one node can become the centre of a stage, but does not possess central control functions.

What does Blockchain Mean for the Internet of Things (IoT)

Christopher O’Connor, GM at IBM Internet of Things wrote a great article about this topic.

According to Chris, Blockchain is beginning to play a major part in the IoT by enhancing security, enabling inclusion of low-value devices to be increasingly viable and making managing a device easier for decades to come.

Source: Internet of Things World News #IoTSec16

Blockchain Use Case - IoT Security

IBM and Samsung formally unveiled ADEPT at CES 2015 in Las Vegas. The ADEPT concept, or Autonomous Decentralized Peer-to-Peer Telemetry, taps blockchains to provide the backbone of the system, utilizing a mix of proof-of-work and proof-of-stake to secure transactions.

IBM and Samsung envision networks of devices that are capable of autonomously maintaining themselves. For example, “using ADEPT, a Samsung W9000 washing machine can become a semi-autonomous device capable of managing its own consumables supply, performing self-service and maintenance, and even negotiating with other peer devices both in the home and outside to optimize its environment.”

Source: Internet of Things World News #IoTSec16

Blockchain Will Change Our Lives

We have seen that the Blockchain has been disrupting the financial industry such as Bitcoin. There is a great video about the real value of Bitcoin and crypto currency technology. Although there are some challenges of a decentralized blockchain, billions of connected smart things will need a ledger of everything.

Here are some examples of companies involved in the Blockchain and IoT businesses:

Slock is a Blockchain + IoT solutions company in Germany. Slock has worked with clients to build a fully decentralized, 100% free, and open source DAO (Decentralized Autonomous Organizations) framework - the future infrastructure of the service economy.

Visa has worked with Docusign to use Blockchain technology for car lease, rental and more. Each car is registered on the blockchain using a unique digital identity assigned to them. The cars digital identity is connected to Visa payment channel and to DocuSign platform. Whenever a customer wants to rent a car, he/she can enable the services by authenticating his preferences using his/her DocuSign electronic signature.

Source: "Blockchain: Reshape the economy and the world "

Special thanks to Mr. Xu, Mr. Liu, Mr. Duan, and Mr. Guo who generously shared their insights on this topic. I have no relationship with any of them, and no stake in sales of their book, or in promotion of companies mentioned in this article.