Evolving magnitudes of blockchain technology

By Vivek Zakarde

Researchers and professional executives have classified current expansions in digital technology field into two important groups. The first one is expected to bring revolutionary transformational
fluctuations and the second has aptitudes for value additions to business in changeable degrees of value-adding impressions in financial terms. Until late 2015 Blockchain was observed as a
technology that has abilities to produce high-value impacts through industrial and marketable applications. This does not comprise all that is being talked about for dealings on cryptocurrencies.

It is previously a recognized fact that during conceivable Industry 4.0 era 3D Printing, Autonomous Vehicles, Brain-Computer Interface, Artificial Intelligence (AI), Machine and Deep Learning, Robots and Drones powered by AI, etc. will bring in transformational impacts for the marketable world.

Innovations in areas of Swarm Computing, Privacy-Enhancing Technologies, Self-adaptive Security, Quantum and Cognitive Computing, etc. will subsidize towards producing higher levels of business values.

All these progresses are also being projected to accelerate the process of piloting in Industry 5.0,
when clients and handlers of the technology will be able to customise the given digital facility for
meeting their inimitable necessities, as compared to the programmed solutions, albeit versatile,
being offered now. But not much is being talked about what will be their aids for accomplishment
the fruits of such technological expansions to people at all levels of civilizations across all
countries and for the overall comfort of humanity.

However, the whispered limited level of views and gratitude for Blockchain technology seems to have started changing. It is gradually being considered as a technology with abilities to make transformational effects on industry trade and business, as we have experienced for the internet.

Blockchain – Motives for Desirability
Don Tapscott, one of the ecosphere’s foremost authorities on invention, media, and the financial
and social influence of technology, and counsellors to business and government said, “The
technology probably to have the most reflective influence on the next few years has arrived. It’s
not social media. It’s not big data. It’s not robotics. It’s not AI. You’ll be amazed to absorb that it’s
the fundamental technology of digital currencies like Bitcoin. It’s called the blockchain.” Since its
very foremost application for cybernetic currency Bitcoin, such a powerful technology is being
strained and tried for very many engineering and marketable applications including distribution
of services by governments to peoples. Marco Iansiti and K. R. Lakhani observed that “Blockchain
could dramatically reduce the cost of transactions and if widely adopted could widely reshape the
economy.”

Without attainment into the descriptions of how a DLT framework functions to attain all these,
the key reasons for users’ magnetisms toward Blockchain technology can momentarily be
summarised in the following lines:

• Blockchain is an internet-based capability for originating and finishing peer to peer
  transactions and securely communicating information without any intermediation permit the
  system to be broad-based across topographies;
• The Smart Contract entrenched in a Blockchain based application, with pre- provisioned
  compliance rations, can be self-initiated without any intermediation and in a much quicker and
  profitable manner;
• Decentralised Data Storage Mechanism (DDSM) of a DLT permits each contributor to be
  known by a public key and has access to the complete history and data of transactions directed
  by all participants stored in their own computing system;
• Transparency with secrecy is safeguarded, as each contributor digitally signs into the
  system with a digital private key and thereafter can be recognized only by a different public key.
• There is no need for any central authority to keep the master data of participants. The
  entry of each contributor is post completion of KYC procedures, with uploaded documented
  evidence, in compliance with regulatory necessities of the concerned country/countries if
  exceeded by the participation of users.
• All transactional data are inimitably encrypted by compound algorithms which can be
  programmed to alter robotically from time to time in a permissioned blockchain framework.
• Whenever a participant in the Blockchain inductees a transactional message from his /
  her computing system, called a ‘Node’, a digital signature is created attaching the participant’s
  public key, and other participants from all Nodes can view that.
• Once a portion of transactional data with the digital signature is authenticated by other
  nodes, it gets pooled into and further to the chain as additional block. Every block is encrypted
  with a cryptographic hash function which cannot be manipulated ever after.
• Persistency and capability of the system for authentication of each transaction
  distribution across the network;
• System based submissions are programmed with cryptographed computational logic
  and algorithmic rules for activating transactions, storage and recovery;
• Cryptography and DDSM reduce the complete system almost non-hackable as one needs
  a computer with a hitherto unobserved supersonic speed to hack all the Nodes at a time.

All these services and features for heightened security and protection of data and privacy of
participants cannot be ensured by any hitherto developed digital technology.

Status of Applications – Current and Predictable Future
PwC Global has directed a global survey in early 2018 cover 600 executives in 15 regions of the
world. They have come up with exact surprising facts about the status of profitable organisations
being working with Blockchain technology. The same can be summarized in the following tables.

Thus 84% of the above 600 respondents are aggressively tangled with Blockchain. 45% of them
were of the view that the acceptance of Blockchain may be delayed due to trust. This may be due
to the undue adverse aspersions that have been cast on Blockchain technology rising from
substances related to illegal trading happenings and explosiveness in valuation cryptocurrencies.
28% of those respondents have acknowledged interoperability between two or more Blockchain
based platforms is perilous for accomplishing achievement.

In terms of leading the drive, the respondents were of the view that by 2023 China will surpass the USA with 30% share in applications of Blockchain. The latter’s share will drop from 29% in 2018 to 18%. Australia will be in the third position far away with an estimated 8% share in 2023. India’s share is estimated to increase from the present 5% to 6%.

Blockchain – Encounters in Adoption for Problem Solution
Since the inception of industrial automation around 1970 through computing systems and its
progression from time to time, business executives always agonized from disbelief and mistrust
before accepting IT system-based solutions for their business procedures and activities. While
return on investments always persisted the overarching standard, the fitness of the solution,
eminence, time, speed, obsolescence, maintenance and training supplies of staff members etc.,
always included in their questions. Most precisely their objective should not be to ride on the
wave and buildup about any emerging technology but to certify that they implement the most
suitable one for ensuring justifiable success in their corresponding businesses.

Global consulting firm EY has come up with a set of ‘Five Point Test’ to govern whether Blockchain is the true resolution for a business problem. If answers to three of the five questions are in affirmative, a CXO can rationally settle that Blockchain is the solution. Questions to be raised for conducting the test are as under:

1. Are there manifold revelries in this ecology? (Blockchains are principally combined association.)
2. Is launching trust between all parties a problem? (Blockchains enlarge trust between
contributors by having several points of authentications.)
3. Is it critical to have an exhaustive transactional record for activity? (If everyone agreed on
everything, you wouldn’t need a blockchain to authenticate who did what and when it was done.)
4. Are we safeguarding the proprietorship or management of a predetermined source?
(Fundamental lucidity in the blockchain system is prearranged to stop double-counting of assets
and to record possession and transfers.)
5. Does the network of partners benefit from augmented transparency across the ecosystem?
(Blockchains are translucent by strategy.)

If any business executive suffers from further uncertainty about the application of Blockchain,
he/she can get a more elucidated view about blockchain by referring to the researched-out
report of McKinsey & Co. The following is a spotless summary of the descriptions provided in the
report:

• Blockchain is not Bitcoin, but the just one and the first application for cryptocurrency.
• Blockchain, on a single firm basis, may not be equal to an outdated database, but its
  benefits come with substantial technical trade-offs predominantly in a low trust environment.
• In terms of tamperproof eminence of Blockchain, its platform can tamper if 50% of its
  network-computing power can be measured and rephrasing of the previous transactions is
  possible. Such a hypothesis is not a practical one.
• Blockchain’s security is almost cent per cent as it uses an incontrovertible data structure,
  which is cryptographed.
• Blockchain is not a truth machine, but it can verify all transactions and data entirely tangled in a blockchain platform.

Blockchain and Carbon Foot Print
In some corners of the ecosphere, clamor is being overheard about the rising carbon footprint of
Blockchain. Desktop study on this discloses that one bitcoin transaction gulps more than a
megawatt-hour of power ensuing in the emission of about 500 Kilos of carbon dioxide. Ethereum
consumes about 78 KWH of power per transaction. There are noticeable ingenuities by several
startups to find out advanced solutions for reducing such carbon footprints. One such initiative
is being braced by the United Nations. Jason Deign reports that “Carbon Grid Protocol, owned by
the Singapore- grounded New Era Energy, has established a blockchain-based outline that is
projected to help other blockchain companies balance emissions.”

While it is true that DLT will devour more electricity as all the nodes will be affected by each transaction of any blockchain framework, digital scientists are making all conceivable labors to
increase the speed of computing for DLT. Thus, all such opinions of ecologists in this regard prima
facie have some bases. Jason Deign quoted in his report some inspiring note of the CEO of a
startup who said, “There is an anticipation that corporate social responsibility, environmental,
social and governance factors will creep up the organization agenda within mature blockchain
companies determined for corporate integrity to attract institutional investors, the CEO noted.”

It is more than noticeable that all accountable organisations while accepting Blockchain in their
digital transformation strategy, will responsibly be aware about compensating actions to be
taken for both reducing and defusing the carbon footprint.

Use of Blockchain for transacting cryptocurrencies like bitcoin is mainly for investment and/or payment management drives. It does not have doles of eradicating a series of disjointed and
monotonous transactions like when a Blockchain is used for directing transactions in a unified
platform. For instance, in cases of transactions in a DLT platform for say fintech, supply chain,
health care, or property registration and deal-making, one can visualize how much computing
work and digital storage necessities will be saved at each point. Blockchain will abolish all these
decentralized activities for the same transaction by evading repetitions and intermediations.
Technological trade-offs for actual work done in a DLT platform vis- à-vis removals of
decentralized legacy processes will perhaps more than compensate additional energy
consumption by Blockchain solutions.

Risk Management and Transaction Audit
Readers must be aware by now that gigantic volumes of value additions are expected to be
created and deposited in worldwide Blockchain based applications. As has been stated above this
will be in trillions of dollars and measure up to about 10% of global GDP by 2027. Such a powerful
digital transformation can, therefore, be logically expected to be masked with many systemic and
non-systemic risks.

Risk-based audit approach have cautioned against two specific points:

• Blockchain may not be at the topmost of CEO’s and CFO’s’ agenda; and
• The audit team may not have the proficiency in certifying how to increase comfort with a system that puts conviction in progressive cryptographic algorithms.

Suggest the following risk management framework for risk-based audit approach for blockchain
based transactions:

Developments in India
India is highly praised by the world as one of the prime benefactors of pioneering human
resources for information technology. With the arrival of entrepreneurial culture by ‘startupians’
and ingenuities of the Indian Government at the national level and State Governments, there are
momentous expansions in the fintech space. India has piloted in Industry 4.0 with great
initiatives.

Blockchain acknowledged specific attention when the Finance Minister of India post
his budget speech for 2018-19 stated that, “… the government will explore the use of blockchain
expertise proactively for piloting in the digital economy.” Several actions have also been taken
for conveying in related laws and regulations to enable launching a digitally transformed India.
With the reassurance through Digital India Initiatives of Indian Government and acceptance of
digital transformation approaches by corporate houses, Blockchain has underway finding its
rightful place in their business plan for implementation.

Certain large banks in India have directed in 2017 explorative pilot run of ‘Bank chain’ to acquaint with Blockchain based banking solutions. State Governments of Andhra Pradesh, Telangana, Karnataka, Bengal and Maharashtra, have tossed initiatives of rendering governments’ services through blockchain platforms. Information technology and consulting giants, viz., TCS, Infosys, Wipro, Cognizant and EY have showed plans for investing more and developing DLT based solutions for clients.

Conclusion
This paper on Blockchain has encountered a moment of achievement if it can contribute toward
clarifying the uncertainties about Blockchain technology and its universal impacts on corporates, environment and society. The readers get some help in supplementary developing their understandings about DLT and initial impacts that it can produce for any economy and folks
across all levels of civilization. This paper plea to digital scientists and ‘startupians’ is for put on
this commanding technology to usher in comprehensive progress, inclusive contentment and
inclusive humane smile for all under the Sun.

(The author is the Head- Business Intelligence & Data Warehouse, Reliance General Insurance Company)

Bibliography and Webliography

• Don Tapscott, “How the blockchain is changing money and business”, tinyTED,
  https://en.tiny.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_
  money_and_business
• Marco Inansiti, and K. R. Lakhani, “The Truth about Blockchain”, HBR Reprint, R1701J,
  February 2017.
• PwC Global, “Blockchain is here. What’s your next move?”
  https://www.pwc.com/gx/en/issues/blockchain/blockchain-in-business.html
• Ey.com/mena “Is it time to industrialize blockchain – Unlocking the potential of
  blockchain across organisations.”, 2018,
  https://www.ey.com/Publication/vwLUAssets/Is-it-time-to-industrializeblockchain/$
  File/Is-it-time-to-industrialize-blockchain.pdf
• Jason Deign, “The Startup Aiming to Wipe Out Blockchain’s Carbon Footprint”,
  https://www.greentechmedia.com/articles/read/the-startup-aiming-to-wipe-outblockchains-
  carbon-footprint#gs.nLgBPf8
• Prakash Santhana, Abhishek Biswas, “Blockchain risk management”, Deloitte, UK, 2017.

 

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