The Internet of Value-Exchange
The Internet of Value-Exchange
“[The] Bitcoin protocol and network today is that
foundational layer. It is [a] value transfer network.
Beyond that, it is a core, backbone security service
securing contracts, physical and digital property,
equities, bonds, robot AI and an enormous wave of
applications which have not yet been conceived.”28
Jeff Garzik, Bitcoin core developer and CEO, Dunvegan Space Systems
How does a blockchain deliver value?
The way in which many established transaction
processing systems work is very different from the
decentralised and distributed nature of a blockchain.
For certain applications, the current model of value
creation is likely to be bettered by faster, cheaper,
more reliable and transparent processes enabled by
the blockchain. This is illustrated in Figure 3. However,
Jeff Garzik, one of Bitcoin’s core developers, cautions
against trying to do too much with a blockchain:
“Do not try to stuff every feature into the Bitcoin
protocol. Let it do what it does best. Build systems on
top of Bitcoin which use its strengths…. Putting all
the world’s coffee transactions, and all the world’s
stock trades, and all the world’s Internet of Things
device samplings, on the Bitcoin blockchain seems
misguided”.29
There are clearly both practical and philosophical limits
to the scope of applications amenable to blockchain
approaches. But with a little careful thought, linking
users and organisations directly together through a
shared ledger and distributing processing across a
network, we should be able to remove the friction that
makes existing transactions slow and expensive. And
because a blockchain breaks many of the rules and
conventions that traditional business processes are built
upon, it forces organisations to think differently about
how they create value.
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The problem for many organisations at the centre of
traditional value-exchange processes, especially banks,
or credit card and other types of payment company, is
that blockchain technology is a double-edged sword.
Public blockchains, like Bitcoin, Litecoin and others,
threaten disintermediation as they empower peerto-peer networks. The value they create is taken
away from central institutions and returned mainly to
consumers. However, early predictions of the demise
of our global banking system or national governments
seem hasty and premature in the cold light of day. The
reality is that while many transactions will benefit from
a decentralised approach, many others will still need
to be handled via an intermediary, which can, despite
additional complexities and regulation, veto suspect
transactions, provide guarantees and indemnities, and
deliver a range of associated products and services that
consumers cannot yet access on the blockchain.
Figure 3. Value of a blockchain
Characteristic
Consumer blockchain
• Increases speed of exchange
and reduces time delays
Decentralised
processing network
• Reduces price of exchange
(if a fee is charged)
• Improves quality, reliability and
availability of services
• Increases transparency (in the
case of public blockchains)
• Increases confidence
Single organisation
blockchain
Collaborating organisations
on a blockchain
• Increases speed of exchange
between departments/
divisions, which reduces
backlog and overall costs
• Increases speed of exchange,
which reduces backlog and
overall costs
• Improves availability, reliability
and maintainability of services
• Increases efficiency by
standardising data formats
across departments/divisions
and ensures process integrity
• Improves auditability because
records are verified in near
real-time
Distributed ledger
• Improves availability, reliability
and maintainability of services
• Increases efficiency by
standardising data formats
across multiple organisations,
enabling interoperability, and
ensures process integrity
• Reduces risk of fraud, error
and invalid transactions across
the group because records
cannot be altered
• Improves auditability because
records are verified in near
real-time
Digital signatures
Programmable logic
• Reduces risk of fraud or theft
• Helps identify customers and
participating departments/
divisions
• Helps identify customers
and participating organisations
• Enables transaction criteria
to be strictly enforced
• Enables new capabilities to be
added to existing services and
processes
• Enables new capabilities to be
added to existing services and
processes across the group
• Enables collaboration criteria
to be strictly enforced
Private vs. public
• Public blockchain enables
anyone to participate in any
capacity
• Private blockchain restricts
processing to members or
employees of the organisation
but opens up use to
consumers
• Private blockchain restricts
participation to members of
the group of organisations but
opens up use to consumers
Source: Deloitte
There are considerable opportunities for organisations
that adopt blockchain technology internally, using
bespoke blockchains or so-called ‘side-chains’, which
provide some interoperability with public blockchains,
like Bitcoin, while adding new functionality.30 Perhaps
the most significant opportunity, though, comes
from blockchains that link currently disparate parts
of one enterprise together or even many different
organisations from within the same sector.
Blockchain Enigma. Paradox. Opportunity
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