CTOs and tech leaders need a blockchain guide. As the technology grows in potential, panelist and presenter at Tech Leaders Summit, Dr Vince Ming — chief regional director at FST Network and business advisor — helps Information Age dissect the technology.
From what is the blockchain, to adoption issues and advice surrounding regulation, compliance and more, this blockchain guide from Ming is an invaluable tool for CTOs and other tech leaders looking at blockchain for their business.
1. What is blockchain technology?
What is a blockchain? — in a nutshell, the technology is an autonomous decentralised management system (DMS) for information storing and sharing. Here, the data is periodically validated and securely recorded by a group of distributed computing machines (or nodes).
These computing nodes jointly “warrant” the confidence of information being entered each time — making sure that it is always secured via a special consensus mechanism through performing an enhanced mathematical verification process simultaneously by all participated nodes.
Blockchain is an autonomous Decentralised Management System (DMS) for information storing and sharing
It can be viewed as a “self-organised” ledger (often known as DLT) with continuous growing pages of information added periodically. Each page in the ledger is a ‘block’ and the ‘chain’ is the page number linking all the blocks together in a sequential orderly manner, creating a chain of immutable and non-reversible data structure which is robust against the centralised hacking.
Each node holds a copy of the ledger, which is periodically synchronised and updated in a distributive decentralised manner to ensure everyone see the same information as the ledger grows in size. The choice of data and its storing structure represents various types of “value” that the nodes are hoping to maintain for its community, which can subsequently be utilised and “transferred” across multiple users or entities within its community.
Because of these distributive, secured and immutable characteristics, this DMS is in fact a newly invented community “Trust” machine (or rather an autonomous trustless system which allows parties that are otherwise not trusting each other to come together and make deals). It’s a technology that enables a “virtual trust” without a centralised management and allows anyone (or any things) to come together and transact on large peer-to-peer networks.
Now, due to the needs to “transact”, a new form of digital currency or “token” (powered by the relevant DMS model) has been created, integrated and formularised. The so-called “cryptocurrency” is nothing more than a new way of having a distributive trustless system to allow a secured transfer of “value” in the autonomous fashion across various parties when certain terms and conditions are made (e.g. payments or assets ownerships, etc.).
“Not all business model needs the blockchain solution”… This technology is still at its infancy
2. Suitability and adoption issues in blockchain
The potential economic impact and influence that cryptocurrency can bring onto the society, ensures this area becomes the new focal point of debate, whether it is on the viewpoints of future financial inclusion mechanism or the future drive of a new social economy landscape.
This inevitably brings on the question of adoption and suitability into the equation. Currently, not all business problems need blockchain solution. (Note that the complete blockchain model we discuss here comprises of two parts: cryptocurrency and its relevant DMS).
The bottleneck in adopting blockchain in a common business environment is largely caused by:
a) They don’t see the underlying values that can revolutionaries their business.
b) They don’t have the capacity and capability to develop and execute it.
c) They don’t think it is fit for purpose and not suitable for the business.
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No doubt, this technology is still at its infancy and most businesses view and evaluate the suitability of blockchain as the pre-cursor of adopting this technology, in which many fail to identify its full potential. So, the question of adoption is somewhat deteriorated already — at the very first stage of suitability determination, where many are restricted by their conventional mindset and limited understanding of this technology.
On the other hand, to the general public (whether businesses or individual), the blockchain is still a big unknown, as most do not fundamentally understand the underlying notion of having this new form of DMS and the relevant link to its cryptocurrency (in past decades, we are so getting use to the centralised management process in most aspects of our lives and we “trust” them — e.g. central banking system, etc.).
Many people only see it as another money making or investment opportunity via creating or purchasing the cryptocurrency in advance in the hope to see its value surge at a later date, without actually understanding the underlying potential utility functions and development. When they realised that most crypto-projects were not realisable or in fact just a hype (failure to deliver a working DMS and its relevant cryptocurrency), they lost the confidence and quickly viewed it as scams and become very sceptical.
To correct this perception and ensure the positive drive adoption, proper education is the first key to provide good understanding of what impact this technology can really bring about in order to gain the confidence needed for its full deployment. People needs to know why the blockchain technology could be the next innovation revolution for driving the future generation of a new social economy landscape.
It may not need to be an explanation on technicality, but at least to provide good reasons on how blockchain can provide further upgrades, while enhancing efficiency and convenience (in contrast to a centralised one) to dramatically improve lifestyle and quality in an unprecedented way. Only then will the public feel comfortable using and adopting it in their daily life styles.
3. What are the key challenge in blockchain adoption?
Adoption challenge comes in the following aspects:
a) Technical development
The major problem and issue within the blockchain still lies mainly in the technical provisioning and its development aspects. The complexity of development is the key challenge in the following aspects: i) the ease of codes writing and implementation, ii) the scalability and performance, iii) upgradability and flexibility.
Although the relevant programming languages for smart contracts may be having Turing completeness for implementation, it is still down to the developers to deliver the frictionless and flawless codes. The current format of smart contracts and its coding structure is still rather rigid due to the immutable characteristic it trying to preserve.
A smart contract is like the vending machine where all conditions and choices for execution must be “hardwired” in advance
Think of it like a vending machine where all the choices of execution and conditions must be “hardwired” in advance. Hence, the prolonged period of testing before it can be confidently deployed, as no changes are allowed afterwards. Because of this, it is only suitable for those straightforward cases currently, which is highly inappropriate for most enterprises to use as the business logic is required to be evolved from time to time.
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Transactions within blockchain are still very slow (as compared to current centralised method e.g. visa or master card) due to the validation process via the consensus protocol (i.e. PoW). It is still immature and insecure as compromises were made in those newly proposed protocols (i.e. PoS and PoA). The challenge in finding the ultimate solution for addressing once for all the blockchain ‘trilemma’ issues (i.e. decentralisation, security and scalability) is still at large.
It is also crucial to have upgradable capability within the confinement of the smart contract — immutable structure where business logics are allowed to be updated periodically without compromising the integrity of the past records. The flexibility of allowing the feature of updatability and upgradability could be the next crucial step towards driving better adoption in blockchain technology.
b) Standardisation, integration and collaboration
With the increasing number of players and various emerging blockchain networks, each promoting their own technology, there are simply too many choices without a proper way to evaluate whether or not these networks (and their techniques) are suitable and sustainable for its future usage and development continuation.
Good standardisation and interoperability could help to ensure the suitability, sustainability and project integration for better adoption
Hence, it is vital to either have an industrial-scale standardisation for future blockchain development (suitable for all vendors to adopt regardless of their use cases and business models) or to allow some forms of connectivity or integration of different blockchain models via the route of the interoperability provisioning.
Having good standardisation and interoperability could help enterprises to collaborate on application development, validate proofs of concept, and share blockchain solutions as well as making it easier to integrate with existing systems.
Interoperability allows the “transferability” across the networks, which in turn helps to drive collaborations amongst institutions, industries and corporates
Interoperability will allow the “transferability” from one network to the next one, especially on mechanism for having various cryptocurrencies to transact through different (DMS) systems is crucial for the successful survival and evolution of this technology.
This transferability will help to drive the collaborations amongst institutions, industries and corporates towards defining and devising new waves of business development and extendibility.
This is also applicable for the rise of other potential emerging technologies such as AI, IoT and 5G ultra high speed communication protocols, which also signify the potential technological combination and integration possibility with the blockchain used as the underlying data engineering.
From the user perspective, efforts should be focused on how to combine seamless and safe user experiences, while utilising gamified rewards to incentivise usage. Complicated blockchain features (such as tedious login, lengthy password keys and even wallet address) should be “camouflaged” and hidden away from the users (i.e. user does not need to know if the App or platform they used is driven by blockchain or not), while still maintaining high level of security.
Again, the user wants to feel safe and in control of their data with a reasonable level of privacy, while having easy access of services via a robust yet minimum safety mechanisms to protect their cryptocurrency. Until all these are sorted and designed properly, blockchain technology will require constant integration adjustment and improvement with actual consumer utility — before it is well-positioned to lead the masses towards a future where users are rewarded constantly, as they take an active role in crafting the services the trust and rely on.
c) Regulation and compliance
Regulation and compliance will be one of the major deciding factors in determining the utilisation of the blockchain technology. In particular, how the relevant authorities define and envision the regulatory framework will have direct influence on the implementation of the use cases. The regulations are supposed to protect the people from the potential destructive influences of technology but not to directly shape the discovery and invention of technology.
One vital feature in blockchain is that a proper DMS provisioning could potentially remove the centralised control, which from the monetary perspective is an uncharted territory for the authority to consider…
We have seen various rounds of definitions in blockchain driven currencies or digital entities that have emerged (i.e. ICO, STO, stablecoin, etc.) and how the authorities struggle to determine their relevant confinement and exclusion for the suitability and adoption consideration.
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However, this is a rather an interesting aspect. It has been mentioned earlier that one of the important features in blockchain is to allow a proper DMS provision and development that could potentially remove most of the intermediary or centralised control, which from a monetary perspective is a completely unchartered territory for authorities to consider.
On one hand, it tries to protect public from the scam and make sure those investing in crypto-based models understand the risks involved and on the other, it tries to understand how this blockchain innovation tends to migrate towards a more decentralised model that could potentially change the future monetary and regulatory decision.
However uncomfortable it may seem to realise, the blockchain evolution is here to stay and must be allowed to grow into maturity, where the regulatory decision makers must weigh and balance on both sides of the technological contribution, as well as the legal implications.
Regulation and compliance authorities must stay open-minded, keeping up-to-date familiarity with the evolution and revolution of blockchain…
Regulation and compliance authorities must stay open minded, keeping up-to-date with the evolution and revolution of blockchain technology, as well as “innovate” its legal provisioning for optimising and safeguarding the simultaneous progress of a) having rightful protection in place as well as b) maintaining positive views and c) allowing progressive developments for this technology to evolve towards building a better social economic landscape in the future.
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4. Is hype a problem?
Generally speaking, most blockchain projects are mostly still “hype” at this stage, because of it development immaturity. However, through this hype, greater innovations can be realised through competition. Competition is good as it drives the better products on the market. Therefore, having multiple blockchain protocols won’t be the issues as different protocol has its own advantages in different business scenarios and use cases.
Nonetheless, the issue is how are we effectively going to transfer the values amongst different chains/protocols? This is a key concern that needs to be addressed in order for blockchain technology to thrive in a so-called global collaborative environment. We will ultimately need a middle layer connecting these difference chains and allow them to transfer assets or value across smoothly and making sure the relaying of the data is secure and available.
For example, think of it like the previous internet era where there are many ISPs (internet service providers) and servers keeping the records for information exchange and accessibility, but it is only when companies like Google “the ultimate Search Engine” thrived then only internet become a better place.
However, we might be at a pre-crisis era where innovations are evolving so rapidly in such a way that it may have unpredictable impacts on the younger generation, as they may not have the chance to understand and witness the entire journey of how this innovation progresses.
For example, a three-year-old boy may not have the chance to realise the use of fiat currency, as well as the concept of money spending. To them, maybe the new form of cryptocurrency is just a tool (evolving towards a point system) for obtaining what they want. They may not even understand the meaning of finance and investment as the machines are doing all these on behalf of them (constantly mining for the points they need).
5. Future predictions for the blockchain
Nevertheless, blockchain technology is still quite remarkable. We now have a technology that for the first time in history allows anyone (including machines) the capability to build a “corporation” or business model on the network (via coding smart contracts) without having to domicile in a specific physical location. Instead, we can operate as an independent entity on the blockchain (this is also know as the Decentralised Autonomous Organisation — DAO).
Although the calling of DAO can be quite confusing, its original intention is to streamline the idea of the “open-software” concept for various smart contracts to collaborate together — where anyone can access existing developments, borrow the structure and build further “extended parts”, in order to create another better or new version of smart contracts autonomously, where smart contracts can eventually be really smart. (Smart contracts calling and generating smart contracts, creating new super-smart decentralised Application — Super dAPP).
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The notion of smart contracts was supposed to be a globally accessible capability to be used by anyone (as they see fit) to develop a better and greater idea. If this original notion can be pursued, then it will be a game changer — it will ultimately, drive attempts to achieve an unprecedented level of institutional collaboration via a global peer-to-peer trustless system.
So, when blockchain adoption is no longer an issue and the technology becomes fully mature, various forms of new ideas and business models can be instantly generated, tested and realised with rapid adjustment via this autonomous DMS structure (smart contracts calling smart contracts), where collaboration can be automated and subsequently improved or fine-tuned towards driving, defining and creating a better version of the social economic landscape. As CTOS and tech leaders you should know that the possibilities are infinite with blockchain!
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