Podcast: How blockchain is taking on a new form in the corporate world
10 December 2018 |
Blockchain was initially developed to facilitate Bitcoin, but it is now reinventing the way companies work. But how much influence is the cryptocurrency having on organisations? Business Reporter travels to VMWorld 2018 in Las Vegas to find out
Ever since Bitcoin was invented, companies have been looking at how the technology behind it – blockchain – can work for them, developing their own versions of the technology behind the cryptocurrency to reduce the need for middlemen, cut costs and improve processes.
Blockchain works through an open distributed ledger. There is no centralised data storage system (or middleman) – rather, each transaction is permanently recorded and shared among a network of computers. Nothing can be changed unless all of the computers in the network agree.
Firms have been building their own blockchains, setting up smart contracts (a digital version of a physical contract) on the system to negotiate with each other, which removes any need for a third-party intermediary. For example, organisations can use the system to easily track where their products are on the supply chain, as blockchain enables complete transparency on where everything is.
Technology firm VMWare is one company that has been creating an enterprise blockchain to help companies become more efficient. “We have been working on this for about four-years,” David Tennehouse, Chief Research Officer of VMWare, told Business Reporter at this year’s VMWorld in Las Vegas.
“We saw things happen in the blockchain industry and saw there was an opportunity. But as we looked at the Bitcoin blockchain, we realised enterprises did not really want to go down the cryptocurrency path.
“We took a look and said, we really like this idea of distributed ledgers because it gives you a chance of having a consortium, a group of organisations to get you all on the same page about something,” Tennehouse explained.
“This could really not just change how companies work together. It can reinvent audit. It can reinvent regulation and how it is operating – as everything is transparent, it simplifies operations as there is no need for a central regulator. It enables decentralised trust, in a way that organisations can improve the trust, which they can work with each other. You can think of forming a consortium, I think of them as clubs.”
But VMWare did not want to use a cryptocurrency approach because in Bitcoin all parties are anonymous. Enterprises, on the other hand, want to know exactly who they are dealing with. “If I am at a supply chain arrangement and there is a counterparty out there that promises to deliver something to me just in time to my factory to avoid running dry, I need to know who they are,” he said. “I am counting on their reputation in assessing the risk of delivering versus not delivering in factoring that in.”
Bitcoin also is not especially efficient, thinks Tennehouse: to verify transactions, crypto-puzzles need to be solved, which takes up computational resources. He said: “It wastes computation. Work equals energy, so proof of work is like proof of energy wasted. From square one, we said that is just not acceptable. We should never just be wasting computation and energy.”
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