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article imageOp-Ed: Blockchain — New tech buzzword means major tech change for world

By Paul Wallis     Feb 10, 2016 in Technology
Sydney - Expect to hear a lot about Blockchain soon. Blockchain is a new system designed to protect assets and transactions. It’s like Bitcoin, but more advanced. It includes a multi-user ledger to protect against fraud, and global money laundering.
There’s been a lot of cheerleading and fascination for emerging technology Blockchain. Expressions like “streamlining, reduced costs, and enhanced service delivery” are everywhere, where hard facts would be so much more meaningful. After all, this is business. Examples, working models, and less cheerleading would be a lot more credible.
The tech side of Blockchain — Exploration stage
Bitcoin uses a system of proofs to manage and verify transactions. This is basic Blockchain. It’s very secure, very thorough, and very quick. The processing volumes are gigantic, with a lot of number crunching. You’ll probably recall that Bitcoin paid for people to do this “mining” work for them.
The basic transactions in Bitcoin are purchases, sales, and confirmation. Each transaction is monitored and cross checked. Every transaction has “proofs”, ensuring that the transactions are valid, making tampering very difficult, if not actually impossible.
This is called a “distributed ledger.” Each party has a full transaction record. This is something like an instant audit, with no third parties like clearing houses, stock exchanges, or similar mechanisms. It’s a lot more efficient, and cheaper.
Even the idea is still at that “Hey!” stage, like the early net, in some ways. Apparently Microsoft has been putting together a tech Nirvana of Blockchain developers with their Azure Blockchain-as-a-service (BaaS) and they’re looking for more. This means someone’s seen more value, and some pretty healthy intellectual property values in Blockchain, on multiple levels.
A quote from Microsoft's director of technology strategy, Marley Gray indicates some very interesting positioning:
"We want, and frankly our customers want, access to every blockchain. It could be two guys in a garage that forked bitcoin and had this genius idea and people want to try that out. We don’t want to have any barriers. We’re open to all. We help even the smallest of players onboard."
Translated: This is going to be huge; we want to take it to the market with a potentially great marketing position, and the really inspired guys are welcome at all levels. That sort of involvement by the major league is exactly what Blockchain needs to focus on deliverables and operational performance.
You can safely assume other heavyweights are doing something similar, and in terms of the Cloud, Blockchain is definitely going to be must-have tech. It’s a natural development in a vast, complex, multi-element system running everything and anything. The question, like the early financial net, is how to get the best out of it, and getting the high end thinkers is also a must.
Sony is looking for Blockchain with music and film. They’re running a competition for new tech in which “Entertainment Using Blockchain” is a separate category.
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Brave New Coin.com
According to website Brave New Coin, UK asset managers are looking at a Blockchain-based environment which looks more like a complete financial system ecology.
The business end of Blockchain
It’s not a perfect system, and too much transparency, ironically, is one of the problems. Stock market people, for example, may want the efficiencies, but not want their every move on the market disclosed by the accounting process. Check out this International Business Times article on how Blockchain works for a good, straightforward basic model.
The hype
The current hype in global financial media is now at epic levels. It’s either a huge sales pitch or a huge sales pitch, covering the banking, stock market, and real estate sectors and even Rand Paul’s electoral campaign, among others. It’s also being touted as a Bitcoin-like digital currency operator for gaming, an interesting move given the controversy about buying stuff for games online. Obviously, Blockchain is getting a lot of support from within the market. It’s more likely to be a question of when, rather than if, this system goes global.
A very strong idea in Blockchain is “real time settlement”, meaning instant money moves in real time without those ridiculous 3-day bank waiting periods.
In fairness, Blockchain does address many very slippery issues of digital finance, fraud, and “creative accounting” as it used to be known. It also creates a few potential new problems, mainly because it’s obviously not designed to deal with at least some of those problems which are human-based.
Asset prices, for example, can be artificially created. When a transaction occurs at very favorable prices for example, the proof process, in theory, can make it “real” and validate the transaction. The trouble is that in theory the cash received, as an asset, then becomes clean, beyond reproach and validated by the system.
The very positive side of Blockchain
Total negativity and bean counting, however, are definitely not the answers to these foreseeable and fixable issues. Future finance will need a very efficient accounting management system with a super-strong working dynamic to manage gigantic loads of transactions. The current system is approaching expiry date, and/or has passed it in some sectors. Anything that gets rid of the absurd logjams of old processes and creates a comparatively much stronger form of oversight from multiple sources isn’t to be sneered at.
Evolving Blockchain
If you’re getting the impression that the whole idea of Blockchain is an extremely long piece of string, you’re right. The good news is that Blockchain, even in theory, upgrades financial management efficiency in pretty much everyone’s favor as far as handling and keeping things on the level. The bad news is that system flaws and the current lack of practical experience in this methodology means a lot of tweaking will need doing.
I see a layer of new tech coming on top of Blockchain as quality controls. Bitcoin is not perfect. If the checks are commendable, the asset itself, Bitcoin, is the problem. It’s also not the best example of Blockchain’s potential. Bitcoin values move around incessantly and erratically; it crashed spectacularly in Japan last year, taking its founder with it. Conventional currencies and commercial transactions, for all their faults, don’t behave like that. Interestingly, the quality control-based Blockchain will need strong internal quality controls on itself to deal with this environment.
Quality controls will need to be multi-tiered:
1. Local-specific, to ensure that Blockchain can deliver both its efficiencies and its cross checks in practical forms instantly. Blockchain’s could be a great fix to sort out things like merchant service needs, etc.
2. Market-based, with an added, much broader-based oversight system to track patterns of questionable transactions. Organised crime makes a habit of laundering money, and the habitual patterns should be visible.
3. Security and privacy – Blockchain’s somewhat understated advantage is that it’s likely to be very hard to crack. This is an extremely valuable asset in commercial and private business. The security of a chain, however, will have to be OK in terms of penetration testing. This can be done fairly easily,
4. Sidechain quality - One of the obvious issues is a thing called “sidechains”, which are basically local blockchains, linked to market blockchains. The efficiency, honesty, and credibility of sidechains, which are likely to proliferate in infinite numbers, will be important.
5. Accounting standards - Any accountant will tell you that one accountant’s idea of good accounts and another’s are likely to be quite different. That’s particularly the case in different sectors, where basic accounting practices can be quite diverse. Blockchain, to its credit, solves this issue by creating a very useful, all-purpose standardized approach. But – If initial numbers are disputed, what happens up the chain? What if a cascade of dud or disputed transactions happens?
This is highly relevant to the modern world of ultra-wary, fact-checking accounting. The biggest growth in accounting practices by far in recent years has been “forensic accounting”, which is the CSI of accountancy. This includes forensic bookkeeping, which is right in Blockchain’s backyard. Blockchain is likely to be a major asset, but it’s also likely to be the battleground for competing interests.
Having multiple people checking is fine; but what if everyone disagrees? How do you resolve disputes? Can you cancel a transaction after the money’s been and gone? How do you deal with “irregularities”, when you may not be sure what’s irregular?
Blockchain is a good idea, but it needs clear examples. Bitcoin can’t really be considered to be an adequate model for the vast array of ramifications that Blockchain is likely to encounter. Bitcoin is a single focus; Blockchain is a universal system in embryo.
Meanwhile, a suggestion — cognitive Blockchain. Use cognitive functions to test, debug, and explore what Blockchain can do. It's a good option for checking the entire system of any chain. At the moment, Blockchain’s being applied to real-world basics. What about Blockchain for space travel, research, communication systems, etc.? Another gigantic piece of string, but an obvious area for development.
The most important thing at the moment is that the markets will need to be convinced that Blockchain is a positive. Forget the hype; focus on working values. This idea needs to get a real shakeout and some performance trials going. Proof will convince where verbiage won’t.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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