Blockchain Unlocked: Business Transformation with Blockchain Technology

By Daryl Lim

Blockchain Unlocked will help you to understand the basic concepts of an emerging form of technology and how it will transform businesses. Part 1 covers what blockchain is and what it cannot do, despite the hype. It goes into the types and functions of various blockchains and its core concepts. Part 2 presents ten use cases to explore disruptive blockchain-enabled digital transformations across businesses and industries such as banking and finance, healthcare, insurance, energy, real estate, etc.

 

The book also explains the conditions necessary for businesses to design and develop their own blockchain, and the possible obstacles should you take the leap. This book is an easy-to-understand book for readers with any level of knowledge in blockchain — whether a beginner or an expert.

• Language: English
• Publisher: Candid Creation Publishing
• Release date: Jul 27, 2020
• ISBN: 9789811472183

Daryl Lim

I walked a path like many before me. Graduating with a degree in Mechanical Engineering from the National University of Singapore, I have always been fascinated by the latest innovations and inventions in technology. Going into engineering was not a surprise to anyone who knew me well, and my university days cemented my pursuits. Not long after, I started my first business using capital accumulated from several gigs while in school. I invested in technology solutions that were merely ideas, developing them into products to sell to companies. I would invest in intellectual property rights around the globe followed by innovating and designing products. Solutions were developed for sectors like water treatment, alternative energy, and nanotechnology. Following these successes in commercializing technology, I started another company to expand my passion for matching innovative products and technology for industry adoption, while at the same time creating investment opportunities for clients. As an entrepreneur, I am privileged to have a front row seat, through which I could observe the shifts in how technology is developed, adopted, and now, the emergence of “bedrock” technologies that will disrupt the world as we know it. The future is coming faster than we imagine. We have no option but to keep up.

Book preview

Preface

It is as simple as A, B, C

Many emerging forms of technology and trends are of concern to innovators, entrepreneurs, and end-users around the world. However, we can expect to see critical growth in three broad areas, which I believe can be aptly described as the ABCs: Artificial Intelligence (AI), Blockchain, and Cybersecurity. In my opinion, these three technologies have a significant impact on all the others. I believe strongly that they are the foundation of growth in almost all industries going forward, which is why I have developed a keen interest in them.

Above all, as individuals and as companies, we have to relearn our ABCs to prepare ourselves better for the future. We want to know in advance how these technologies and trends are going to change enterprise and society in general. This book covers this broad perspective that I have gleaned as an entrepreneur who deals with technology daily. Blockchain, in particular, can provide critical support and privacy for AI devices in the Internet of things (IoT), which is why I have chosen to focus the lens of the ABCs through B: the blockchain.

Now let’s go through each of the elements in my ABC formation and summarise how each might impact the world.

A for Artificial Intelligence

Machines possessing cognitive capabilities akin to humans, or AI, has existed as an idea since the 1950s at least. However, we have always failed to actualise it. The beginning held great hope that the mass application of AI was within reach. Those who worked on it and kept close tabs believed that within a decade or two, machines would take over industrial processes, including aspects of planning, designing, and execution. The primary expectation was that, with very little human input, it would solve many of the problems faced by society.

However, the dream died in the sixties and seventies as the attention of governments, technology companies, and universities went elsewhere. As a result, funding for AI studies and innovations dried up. This period has been dubbed the AI winter period. Then in the eighties and nineties, there was an awakening. A new generation of scientists returned to this technology that once upon a time inspired a lot of hope in academia, business, government, and society. A few governments and investment firms were ready to listen again and offer the necessary financial support. In the years since, many steps were taken. But it was not until the turn of the millennium that we began to see meaningful development in AI and machine learning.

This time, what stood in the way was the lack of other necessary technical capabilities. While AI is possible in theory, it needed a high volume memory and fast speed data processing capacity, which were not available in the 1950s but have come into being gradually over the years, as dictated by Moore’s Law. Now we have the most appropriate technological environment to actualise AI in the most useful way. As a result, almost every major technology company has a robust AI project and numerous startups globally are working on something AI-related.

AI stands to make life a little easier as more processes are automated and therefore increase the speed of delivery. The technology makes the production of goods and services a little cheaper and has the potential to provide an efficiency that often lacks in human labour. For example, a machine could perform an operation on a patient with far fewer chances of error as it has the advantage of processing more data with more accuracy within a shorter time than a human surgeon.

Most of us already have some form of experience with an AI application. For example, Facebook has deployed it to perform facial recognition, while other social media apps like Telegram have developed the necessary capacity for third parties to programme and deploy chatbots to respond to queries and provide critical information to users. Notably, these chatbots learn on the job and become more effective with time. Even more disruptive AI applications are coming into the market. Practically every major car manufacturer is testing self-driving-car, and some countries are even putting the necessary legislation in place to accommodate this new reality.

B for Blockchain

The letter B stands for blockchain. This technology has made achieveable several things that just a decade ago seemed impossible, including the collaboration of independent entities on peer-to-peer networks on the status of transactions. In other words, it has made it possible that multiple independent computers on a decentralised network agree on a single truth through a consensus process, taking just a few seconds without the need for a central authority. Another value it brings is the immutability of digital data. Before blockchain, there was no way to protect online data from being arbitrarily changed aside from limiting access. Even then, you had to trust that the administrator of the system is honourable enough not to interfere with the data. With blockchain, data is safeguarded by a protocol instead, and with which no one can interfere. This characteristic of immutability also solves the age old problem of double-spending, which had stood in the way of having truly digital cash.

Importantly, through the smart contract application and a native digital currency that supports micropayments, the blockchain can automate financial transactions between AI devices in the Internet of things (IoT). For example, a self-drive car could pay for the charge received at a charging station. Simply put, the self-drive car and the electric charging station can enter into and complete a business transaction without input from a person.

Thus, blockchain is best suited to secure the data that is processed and stored by the AI system through its unique characteristics of having immutability and a decentralised backend. The technology also provides mechanisms through public-private key cryptography to provide privacy to those who interact with the intelligence devices.

C for Cybersecurity

The Internet is still largely the wild west. Various actors are practically free to do anything they want. The anonymity gives criminals the cover they need to steal, blackmail, or even destroy critical data as well as systems. It is not easy to fix this problem as the Internet comes with several huge dilemmas. While people and companies need their data online to access or provide services more efficiently, doing so exposes them to the risks of theft, blackmail, and breach of privacy. Another dilemma is that attempts to make the Internet safer often results in trampling on the rights of some users. For example, making it mandatory to identify yourself to use the Internet in order to track possible bad actors necessarily breaches everyone’s right to privacy.

Nevertheless, cybersecurity is becoming a major concern, especially with so much sensitive data and processes going onto the Internet. Individuals and businesses lose billions of dollars annually to hackers. The risk could be higher with new technologies like AI and blockchain, forcing businesses, governments, and individuals to bring more data, money, and processes online. It is also important to point out that as the Internet becomes faster, and more expansive and inclusive, hackers are growing smarter and more powerful over time. The question then: how can the Internet be made safer for all without trampling on the rights of any?

Interestingly, the solution to cybersecurity also comes from new technologies, in particular, blockchain and AI, which provide us with tools that we have never had before. In the case of blockchain, it allows specific pieces of data to be secured through immutability and decentralisation. As mentioned earlier, immutability makes it difficult to change the form of data once it is created, while decentralisation makes it difficult to steal or destroy data because doing so requires one to take over thousands or even millions of independent computers, which is, of course, impossible. Thus, blockchain makes it possible to secure the Internet without affecting the privacy of Internet users.

Blockchain also offers another way to protect data. Through cryptography, data can be encrypted and only accessed with a private key, which can be stored offline. The AI technology, too, gives the capacity to monitor systems in a way that human labour cannot replicate. Relying solely on human oversight is always inadequate. The technology can detect and prevent threats that humans cannot easily foresee.

I invite you to read this book with an open mind. What I offer is a personal perspective on how technology, with an emphasis on the new ABCs, could turn out in the next few years. My intention with this book is to inform and give you the tools you need to make the right decisions for technology of the future now.

I hope you enjoy it.

Introduction

This book contains very little technical content. There are no instructions on things like coding, building a blockchain, or a decentralised application (dApp). Anyone completely new to blockchain will be able to read and understand this book comfortably. Nevertheless, a reader with extensive exposure to the technology will also glean new perspectives.

You can expect to gain a handy capacity for making sound decisions about blockchain technology whether for business or public policy. Divided into two broad parts, the book takes us through the basics of the technology in Part 1, which will get you conversant enough in the concepts for Part 2, which covers different use cases of the technology.

In this introduction, I highlight important points in each chapter to give an overview of the book. I hope this provides clarity and a roadmap as we explore the many vast topics behind the blockchain.

We start by asking what blockchain is precisely. Chapter 1 breaks down the technology to its essential components, explaining what each one does. It describes how they work together to become the potent technology that blockchain is turning out to be. It explains the advantages of the blockchain technology vis-à-vis the centralised systems that it seeks to replace and anticipates how this technology stands to transform business.

Chapter 2 looks at what blockchain can and cannot do, taking an objective look at the capacity and potential of the technology and where we can draw the line. The chapter also tries to explain why blockchain is not a solution for every single problem out there. It covers its strengths, such as decentralisation, immutability, and privacy through cryptography, as well as its weaknesses, such as poor scalability and reliance on third-party infrastructure such as Internet connectivity.

Chapter 3 covers a use of the blockchain that many believe to be the most exploited to date: tokens. It explains what exactly blockchain tokens are, the different kinds that exist, and how a business can leverage this capability of the technology. It looks at four primary types of tokens: (1) Initial Coin Offering (ICO) tokens, (2) utility tokens, (3) assets backed tokens, and (4) security tokens.

Chapter 4 goes into the primary concern of many considering this technology—the security of the blockchain itself as well as of the applications and systems that run on top of it. It attempts to answer the question of whether blockchain is secure through three angles: (1) protecting your ownership of a blockchain asset and the privacy of your identity and activities, (2) whether a blockchain is secure from a possibility of a bad actor compromising, taking over, or destroying its entire system, and (3) the robustness of the core software and, by extension, the protocol.

Chapter 5 defines the types of blockchains, mainly public and private blockchains. It offers examples from either category and looks at what differentiates them as well as their strengths and weaknesses. It focuses on three primary areas of difference: (1) access to read and edit data on the shared ledger, (2) how the core software is developed and maintained, and (3) how much the system relies on game theory to function effectively.

In Chapter 6, we explore the concept of smart contracts. This is an application that is almost exclusively used on the blockchain, and is believed to be its most disruptive of all its applications in the long term. It explains what a smart contract is, how it works, and why it is a very potent application. The chapter also takes us through the history of smart contracts, a concept that precedes blockchain by about 15 years. The chapter also explains why the blockchain is the most suitable foundation for smart contracts.

In Chapter 7, the book focuses on the application of blockchain in business. It asks whether all businesses need this technology and how specific needs should guide how a business embraces and makes the technology part of its systems. This is a critical question, as there is a general belief that every business can benefit from blockchain. It answers this question in reference to three broad categories of benefits: (1) better security to data and systems, (2) improved privacy for users online, and (3) more efficiency in terms of speed, capacity, and cost.

Chapter 8 continues the previous discussion, except now we consider possibility of you building your own blockchain. It explains what conditions necessitate a business or someone to design and develop their blockchain. It also brings into attention the obstacles that stand in your way should you take the leap to build your own blockchain. This chapter is meant to help you answer three questions: (1) do you really need a new blockchain?, (2) do you have the capacity to design and build a new blockchain?, (3) can you bring together and inspire a community to support and maintain it so that in the long term, it is a genuine blockchain?

A matter of how, not when

In Part 2, we explore how the blockchain technology can, and is already, changing business in various industry areas. This might be the more critical part of the book for many readers.

We start with the use of blockchain in banking and finance in Chapter 9. In particular, the chapter explores not only how the technology might replace the legacy institutions in the sector, but also how it might turn out to be a blessing and not a curse. It also covers emerging decentralised finance (DeFi) applications and gives examples of projects that are utilising the technology for this purpose. The chapter also explains how, unlike previous technologies, the blockchain shifts the balance of power in finance and banking.

Chapter 10 takes us through the uses of the blockchain in supply chain management. In addition to giving you a list of how blockchain is changing how the supply chains, it provides examples of projects that are building applications for this particular use case. The chapter goes through four primary advantages that the blockchain offers supply chain management: (1) improved efficiency and reduced operations costs, (2) simplified compliance as well as quality certifications, (3) reliable provenance for end consumers, (4) and tools for making trade finance faster, secure, and cheaper.

Chapter 11 covers how applying blockchain can make public governance better. It gives examples of immediate things that the technology can do as well as describe its potential to change the concept of government entirely. The chapter categorises the impact of blockchain on government in two ways: (1) improving the existing processes and systems and (2) changing the idea of government altogether.

Chapter 12 looks at the use of the blockchain for payment applications. The focus is on the use of cryptocurrencies, tokens, and other assets as a medium of exchange, store of value, and unit of account. It explores how this technology makes it easy to move money from one part of the world to another. It also explores how capabilities on the blockchain, such as micropayments, can change other industries. The use of blockchain for payments is covered as an extensive area with the following three classes: (1) customer to customer (C2C) payment solutions, (2) business to business (B2B) payment solutions, and (3) a combination of those two, which can be B2C or even C2B.

Chapter 13 covers how blockchain can change health care systems, in particular the delivery of healthcare services. It explores how blockchain is poised to achieve one of the most disruptive transformations in the healthcare sector. This is by (1) making possible an efficient medical information management system that is interoperable both nationally and internationally, (2) offering speed in processes, security for data as well as the privacy for patients, and most importantly, (3) introducing a novel mode of medical data ownership and usage, which places the patient at the centre of the medical information management system.

Chapter 14 looks at use cases of blockchain in the insurance sector. It focuses on the systems that the technology can make possible and how those can change how risks are covered around the world. It also points out a few of the startups and projects that are building specific applications for use in this industry. It explains how the following areas in insurance stand to benefit from the use of blockchain: (1) reinsurance, (2) fraud detection and prevention, (3) property and casualty insurance, and (4) health and life insurance.

In Chapter 15, the book focuses on the use of cases related to the energy industry. It explains how the technology can change the production and distribution of energy and points out specific blockchain projects. It covers the following four primary values blockchain technology offers the energy sector: (1) help with data management, (2) make possible new systems of energy distribution, (3) serve as a mechanism for tokenising energy for more efficient management, supply and trading, and (4) be the backend technology for the transition to green energy.

Chapter 16 is about the application of the blockchain technology in the real estate sector. The chapter explains how the technology can change title, listing, and trading systems and focuses on the new opportunities that the technology offers. It covers six benefits blockchain offers the sector: (1) a better title system, (2) a better way of listing assets in the market, (3) tools to facilitate peer-to-peer trading, (4) tools for managing asset portfolios, (5) better mortgage financing options, and (6) more efficient but less costly escrow services.

Chapter 17 looks at the application of blockchain to manage Know-Your-Client (KYC) and Anti-Money Laundering (AML). It begins by explaining the irony behind the technology as a solution to KYC and AML problems, when its initial applications (cryptocurrencies) were designed to beat such systems in place around the globe. We go into detail about the potential of the technology to fix the current systems in banks and regulatory agencies that are meant to watch against money laundering and terrorist financing.

Chapter 18 asks how blockchain can be accessed as a service. It explores some of the models that will make blockchain available as a service. That includes private enterprise, open-source community-supported projects, and hybrid models.

Finally, the concluding chapter looks into the future and attempts to predict future trends while relying on what has happened up to the time of writing this book. It attempts to explain the blockchain (crypto) winter, which followed the 2017/2018 boom. The chapter attempts to answer the question of whether it is really a winter that will be followed by a spring and then summer. Or a long-term reality that the industry should come into terms with. In every chapter on use of blockchain in a particular industry, the book also explores the challenges that stand in the way of implementation.

The Essentials