De-mystifying Blockchain

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At its simplest form, blockchain is a decentralized, distributed ledger that provides a way for information to be recorded, shared and maintained by a community. It enables members in a network to communicate and exchange value, information and data outputs with one another on a peer to peer basis, without having use an intermediary. A blockchain is exactly what the title suggests; an interconnected chain of blocks of data; with each block added to the network containing details of a transaction and a reference to the previous block; hence creating the chain.

Because transactions are recorded chronologically, it enables a clear audit trail of transactions for the network to access. The formation of the chain of blocks also makes the transactions tamper-proof which enables blockchain to be considered a single source of trust and truth for the participants in the blockchain network.

The 5 Key Blockchain Characteristics

The five key blockchain characteristics that set it apart from other technologies are:

Value transfer: the ability to transfer value (currency, identity, data) peer to peer without using intermediaries

Immutability: the ability to have a tamper-proof audit trail of events within the network

Disintermediation: the ability to remove the requirement for a third party to validate the transaction

Decentralised: the ability to remove a single point of failure

Smart Contracts: self-executing pieces of code that enable a transaction to enact once certain criteria is met

Three Key Challenges Faced by Blockchain

While the potential of blockchain technology is clear, some challenges still remain as a barrier.

Standards yet to be formalised:

Whilst there is plenty of attention and activity ongoing in formulating standards at an industry and enterprise application level, there is still no formalised standards around the technology at a global level.

Not all regulators are on board:

To date there has not been such a level of interaction around a nascent technology as there has been around blockchain technology. Regulators across the globe are actively researching, exploring and navigating their understanding around the technology and the impact it may have from a regulatory perspective. However, to date there has been no official ruling as to how all regulators will respond certain implications of the technology, particularly around the area of crypto-currencies.

Collaboration is required to make it a success

Blockchain is a network technology. It requires an ecosystem of participants who need to share or receive some form of value in a trusted manner. In order for blockchain benefits to be truly realised, a consortia of industry participants need to collaborate, align standards and agree new ways of interacting with each other.

Summary

In conclusion, from humble beginnings in 2008 as a simple peer to peer electronic cash system, people today are confidently claiming the only limitation on harnessing the vast potential of blockchain is our imaginations.

The technology does have a number of hurdles to overcome in terms of regulation and government approval, but as the technology becomes mainstream, regulators will become more proactive in ensuring the technology continues to grow and this approval will lead to the most exciting use cases being developed. 

For more contact: Lisa Simpson, Manager, Deloitte EMEA Blockchain Lab, lisimpson@deloitte.ie

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At Deloitte’s EMEA Blockchain Lab, we are actively supporting our clients across a range of industries such as financial services, consumer goods and public sector. Our goal is to allow clients to understand the potential of this technology, focus where to focus to unlock the most value, and co-create ground-breaking transformations that deliver real change. For more details on the exciting work being conducted at Deloitte’s EMEA Blockchain lab, please follow the link for more information. https://www2.deloitte.com/ie/en/pages/technology/topics/blockchain-lab.html