Most of you are familiar with the concept of bitcoin, enabling direct payment transactions between users without the need for an external financial institution to validate this transaction. And some of you may be aware that bitcoin is a specific application of the blockchain technology, which according to many visionaries is the most defining technology for years to come.
Blockchain: an introduction
But what exactly is blockchain? Without going into too many technical details, blockchain is a peer-to-peer technology which allows direct transactions between two parties (such as a bitcoin payment) with the validation coming from other peers, who act as witnesses and validators of these transactions.
This may not sound very reliable, but there are some technical features which help increasing the level of trust. The most important feature is the ‘chain’ aspect of the blockchain: each block is linked to a previous block by an internal reference to it. This allows you to check the entire history of a transaction. That transparency will contribute largely to the succes of blockchain. Any attempt to change a specific transaction afterwards will fail, because the entire chain would then become false.
One of the advantages of the blockchain technology, apart from the transparency, is that there is no longer a need for a trusted third party. In the bitcoin example this would be a central bank instance. But this can be easily expanded (technically speaking) to other industries. You could easily imagine a house being sold without the need for a notary to supervise the entire transaction, except for the legal validation of course.
Another advantage is the promise this holds for the Internet of Things: when you bypass the need for third parties validating specific transactions between two ‘things’, you can automate a lot more than today. Think of a vending machine that needs replenishing. This could be performed by a drone, but this drone needs to be directed to the correct location, and before the actual replenishing starts, there should be an agreement between both machines that they both agree to this transaction. Such processes can perfectly be handled with blockchain technology, without any human intervention required.
iCapps’ blockchain journey so far
A couple of months ago, blockchain appeared at our research board as a trend that might influence the financial world. I gladly accepted the opportunity to delve further into this technology. After immersing myself in blockchain for a few days, I presented the results of my investigatory efforts at our ‘Bar Camp’, a recurring event where colleagues gather up in a relaxed atmosphere to learn about the latest trends.
Based on our experiences and the feedback we get from customers and other parties, we can see huge potential in the financial industry. Banks realize that bitcoin and blockchain form a serious threat to their activities, and they are actively investigating how they can use blockchain to their advantage. They do realize this would be a transformation that goes far beyond the purely technical, and that they would have to change their entire business paradigm. But they’re also aware that ignoring it would be even more dangerous, and might lead to them disappearing altogether.