Opinion: Three Common Misunderstandings of Blockchain Technology

Author: Rajesh Dhuddu (Tech Mahindra block chain global practice director)

Translation: Chen Dajiu Editor: Wang Siyu

Source: World Economic Forum

The blockchain was first launched in 2009 and released its first application, Bitcoin. If explained according to the simplest application method, blockchain is a decentralized digital recording system, allowing untrusted transaction parties to share digital historical records and reach consensus without an intermediary . The blockchain consists of a series of time-stamped and tamper-resistant data records that are managed by a computer cluster that does not belong to any single entity. Each data in these blocks is protected and bound to each other using encryption technology. Each block in the blockchain contains the hashed encrypted value, timestamp, and transaction data of the previous block. Through sophisticated design, the blockchain can resist transaction risks brought by data modification.

After many conversations with many Chief Experience Officers (CXOs) around the world, I realized that many of them were not completely confident in their understanding of the blockchain . Here are some of the most common misconceptions and pitfalls that policymakers have when considering the application of blockchain to their respective business content:

1. "Blockchain is related to cryptocurrencies, especially Bitcoin or Ethereum. We cannot internalize cryptocurrencies in our business."

This universal view is incorrect. There are many forms of blockchain, such as public and private chains. The most famous examples of public chains are Bitcoin and Ethereum. Everyone (node) in the public chain has equal rights and can create and verify transactions and access equally Data and generate new blocks.

The circulation of cryptocurrencies relies on "unlicensed" public chains. But there are other forms of public chains, such as "permit-type" public chains, that is, anyone who meets certain predefined standards can download the agreement and verify the transaction, but all parties joining this blockchain network need to obtain prior permission .

As far as privacy is concerned, "permissive" private chains may be most relevant to enterprise applications. Each node or participant in the blockchain network is selected and verified in advance.This function is usually implemented in the alliance chain and is used in situations that require inter-firm collaboration. In this application scenario, cryptocurrency and hash power mining (proof of work, abbreviated as pow, computer hash power proof of work, used to verify blocks) are irrelevant.

For example, an enterprise can establish its own private chain network to achieve network effects, and establish business cooperation relationships between its suppliers, partners, and customers to complete the procurement and delivery of goods. Suppliers and partners who belong to another company cannot join the private chain.

2. "Blockchain is an emerging technology, which is cool. For the sake of technological progress, we will use blockchain!"

Some companies are adopting blockchain purely for technology worship, which is exactly why it failed. The implementation of blockchain technology should be led by business output. The software and platform industries continue to release more advanced products and continue to emphasize their technical characteristics, which has fostered an atmosphere of technology worship. In fact, when companies hope to achieve the following goals with the help of blockchain, both public and private chains can succeed:

  • Provide a new experience for end customers;
  • Meet the needs of customers who are currently underserved or underserved;
  • De-intermediation in whole or in part;
  • Data from trust mechanisms and historical information on economic activities or sources of materials are kept to reduce mistrust in transactions.

These four attributes can solve millions of problems in any form of interaction today, be it B2B, B2C, P2P, M2P or M2M.

People tend to think of private chains as flat files or databases-in other words, they are old technologies. The public chain uses many mature technology components, such as the C ++ programming language (the language used by Bitcoin, invented in 1985), asymmetric encryption (invented in 1976), and proof of computer computing power workload (in 1993 (Invented) and SHA 256 hash encryption algorithm (invented in 2001). When these different technologies merged, Bitcoin was finally born in 2008 and solved the double counting problem in currency applications that computer scientists have been hoping to solve since the early 1980s.

In fact, at the current stage, when other technologies fail or are suboptimal, private chain technology needs to be used to solve some difficult business problems. Otherwise, the grand plan for blockchain will fail and prevent people from continuing to use or explore this technology.

3. "To use blockchain technology, we need a consortium that covers the entire industry. We need to wait for others in the industry to start a new chain before joining it."

A common misconception is that for the blockchain to land, everyone in the industry must participate in it to form a consortium. Enterprises believe that because blockchain is a consortium, others in the industry need to take the lead, launch a new chain and establish its effective code of conduct. Once these preliminary tasks are completed, companies can join this "blockchain consortium". This view is incorrect.

Based on our experience in implementing blockchain in multiple industries around the world, companies can enable private chains themselves and get huge benefits from them. The method here is DIY instead of DIFM (Do it for me), which can be considered as a private chain or micro chain. These self-built chains are very effective in solving the trust gap. When companies, suppliers, partners and customers are affected by each other in order to achieve common goals, the trust gap will be further widened. When the business chain of an enterprise involves the combination of legacy and non-legacy systems, which leads to information silos, this self-built chain will further increase the value of the company. Companies spend a lot of time and energy on data and information coordination, and blockchain technology can help solve this problem very well. In this way, the self-built chain can bring huge collaboration benefits and achieve positive network effects.

We have deployed these chains to various enterprises to solve business problems, such as:

  • Reduce failures of purchase orders running on electronic data interchange (EDI);
  • Improve the expected arrival time of customer orders involving multiple parties (corporate teams, order executors, warehouses, and others);
  • Track the movement of high-precision tools and share such tools among OEMs and their many suppliers;
  • Manage forward and reverse logistics for non-serialized inventory involving multiple stakeholders;
  • Protect personally identifiable information and its exchange in systems involving multiple participants and prevent such information from being used for improper gains

Essentially, companies now have the opportunity to build and use their own blockchain to drive transformation, both in process management and digital operations.