How Blockchain Can Solve Real Problems

Of all the technology I read about, blockchain most feels like a solution people are trying to apply to the wrong problems. The application of blockchain as a platform for crytopcurrencies is the most well-known use, but governments and private businesses are looking to use it in other areas, notably identity. Dr Mark Staples, from Data61 is an expert in blockchain and a number of other technologies. I spoke with him at the recent Data61+LIVE event in Melbourne.

Staples says he’s been researching, with his team, the use of blockchain in broader systems as a component to solve specific problems in larger applications.

“It’s a very general purpose technology. It can be used all sorts of different verticals and industry areas. Just like you could use a database in any industry, you could use a blockchain,” he said. “You could think of a blockchain as a special type of database”.

Blockchain, he said, can be used for recording any transaction. It provides a logically centralised view of data even though data is physically and administratively distributed.

One of the areas blockchain is being used for is identity. But Stapels said a big part of the innovation around this technology isn’t just about using it but finding where it’s a good fit for solving problems. This is a reflection of the platform’s maturity; we can see that it can be useful but we aren’t sure where it will be best used yet.

Stapes has been looking at where blockchain could be used and has produced a number of reports on its use. One “hot area” is in supply chain, where multiple parties need access to common data while needing to protect their commercial interests.

“In a supply chain you have lots of different parties collaborating, it’s very dynamic and participation in transactions can change dynamically. That sort of ad hoc structure can be a nice match of blockchain because anyone can potentially participate,” he said.

A typical supply chain would include a manufacturer, shipping services, warehouses, distributors and retailers. If each product that is made is uniquely identified then there can be a centrally accessed provenance trail that covers all of the relevant history every party in the supply chain needs to see.

I asked Staples why a centralised database, rather than a blockchain, wouldn’t suit that kind of use-case.

“If you have complete end-to-end control over the whole vertical supply chain you can do it with your own corporate database – perhaps you should in that context. But if you are crossing a lot of organisational boundaries, nobody wants anybody else to be in control of the whole supply chain data. Blcokchain gives you neutral territory for sharing information across organisational boundaries,” said Staples.

The challenge then becomes deciding what data is shared. And Staples noted that while blockchain was a good solution for ensuring data integrity it was not so strong at ensuring confidentiality and privacy as it’s focus is on replicating and sharing data.

“You don’t put plain-text data on a blockchain unless you’re happy for your competitors to see what it reveals about your market position”.

But if you encrypt data then the ability to use a blockchain solution for sharing supply chain information might be negated. This is an area Staples said is being researched.

“A lot of the innovation is exploring what are the new business models in this space”.

With traditional retail models changing, blockchain could provide solutions, or partial solutions, to logistics and customer service challenges. We are seeing retail shifting from physical malls to online marketplaces such as Ebay, Amazon and the new Catch market. Participants in the markets, including customers, could potentially have greater insight into products, including where they are made and their shipping path through blockchain technologies.

Blockchain does have limitations.

“One of the limitations is that, out of the box, it’s not good for private or confidential data,” said Staples. “It’s also not good for low latency or high through-put data – there are some scalability and performance limitations”.

While some of the performance issues will be addressed as computing and network performance continues to improve, Staples said the nature of blockchain as a distributed database with lots of nodes means it wil never be good for big data. It will scale up more as technology improves, and it could be useful for metadata about big data but it is inherently limited when it comes to large volumes of information.

Another application of blockchain, one that Staples described as “low hanging fruit” was to address some of the organisational data silos within businesses. Many companies don’t have a coherent set of integrated systems. But blockchain could assist with making data from different systems more broadly available.

For example, accounting data across different geographies could be shared in near real-time rather than relying on weekly or monthly reports. Or where different parts of the company use different systems.

“This wouldn’t be for all accounts – just the ones at organisational interfaces,” said Staples. “It gives you a logically centralised place to store data but gives all the different geographies or departments administrative control over their own pieces. That’s the key thing thing. It’s logically centralised but physically and administratively decentralised”.