"Consensus in a distributed system is determined by entities checking each other's work and providing a stamp of approval as to transactions and activities allowed," Champion de Crespigny explains.
Blockchain also leverages a technology called "smart contracts," which are bits of executable code that only act when specific conditions within the blockchain are met. This allows a blockchain to automate activity like payment transfers when a task is completed, or even a partial payment when a milestone is achieved.
By providing a way to record transactions as automated trusted activity among digitally networked peers, audit and professional services firm Ernst & Young believes "blockchain technology has the potential to streamline and accelerate business processes, increase cybersecurity and reduce or eliminate the roles of trusted intermediaries (or centralized authorities) in industry after industry."
To be sure, there are challenges: technical challenges, the shadow of the public's perception of bitcoin, tax and regulatory questions, not to mention resistance from the very businesses that stand to be disintermediated. But Champion de Crespigny warns that a "wait-and-see" approach, could leave your business in the same position as the record executives who spent their time thinking about how to use the internet to sell more CDs.
"The technical innovation will be extremely powerful and will change how business models operate," he says.
Ernst & Young cites one early experiment: A New York City neighborhood that has set up a private blockchain that helps homeowners share solar power generated on their rooftops without the local utility's involvement. There are other pilots, too: Internet of things (IoT)-connected washing machines that order their own detergent when supplies run low and autonomous agriculture sensors that control water flow in fields.
If the challenges can be overcome, Champion de Crespigny says blockchain adoption will be extremely rapid and extremely disruptive. For instance, Ernst & Young notes that if blockchains can prove they reduce cost and increase trust in financial transactions, we can expect financial services firms to abandon existing transaction-processing technologies in favor of blockchain technologies. Software and services incumbents that aren't prepared may be left in the dust. And the end result of the disruption could be even more significant.
"What is very interesting to me is the idea of value just becoming another form of data and allowing finance or payments to move from what is currently an industry vertical to a horizontal that goes across other industries," Champion de Crespigny says.
Blockchain also promises to be an especially good mechanism for distributing computing workloads, which would affect infrastructure as a service (IaaS) providers and providers of other cloud services. The technology could also rewrite the book on cybersecurity when it comes to authentication, and could form the trusted basis for all sorts of machine-to-machine interactions in IoT.
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