In recent months, the hype and hoopla over cryptocurrencies such as Bitcoin have reached a fevered pitch. Speculators have flocked to these currencies in growing waves. But behind the stories of fortunes won and lost is an emerging fact: the underlying technology that drives Bitcoin, blockchain, is quietly redefining cybersecurity. “Blockchain provides a mechanism for verifying the integrity of data,” explained Sean Smith, a professor of computer science and Director of the Institute for Security Technology and Society at Dartmouth College.
Although early adopters of blockchain have mostly been seen in financial services, the technology is poised to ripple through virtually every industry and impact almost every organization over the next few years. It will affect everything from internal auditing and supply chains to medicine and global trade.
It is also at the center of effective cybersecurity. “Blockchain adoption is growing dramatically. The technology will move into the mainstream of business over the next few years,” observed A. Michael Smith, a partner in the U.S. Internal Technology Audit Services practice for Financial Services at consulting firm PwC.
In basic terms, blockchain introduces a distributed and cryptographically protected ledger system that allows parties involved in a transaction to track and trace the movement of an item with a timestamp. Each block includes the hash of the prior block in the chain. This makes it possible to dramatically speed transactions involving numerous parties while making it extraordinarily difficult to tamper with data or forge a document. By creating total transparency, Blockchain allows multiple entities that do not completely trust each other to exchange information without an intermediary. Essentially, it eliminates processes that are now manual and often inefficient.
A more secure approach
Blockchain technology was developed for the cryptocurrency Bitcoin and introduced in 2009. The aim was to provide a secure transaction ledger that could be shared among all parties and participants. However, over the last few years, it has taken off in a big way and the uses for blockchain have expanded dramatically. Online statistics portal Statistica reports that the global market for the technology will swell from U.S. $210.2 million in 2016 to more than U.S. $2.3 billion by 2023. Much of the initial interest has come from the financial services sector, but blockchain is steadily rippling out to other industries. Statistica also found that in 2016, 90 percent of respondents at companies said they had begun to explore blockchain and distributed ledger technology for payments.
For now, many companies are tapping the technology for internal tasks–including auditing and verifying the integrity of data. However, real estate companies, construction firms, law offices, healthcare providers, and entertainment companies are all beginning to use blockchain. Retail giant Walmart, for example, recently established a consortium to trace raw foods and other items through the supply chain using blockchain. Relying on IBM technology, it includes food companies such as Dole, Nestlé, Unilever, and McCormick and Company. The initiative is designed to track food-borne illnesses and recalls across farmers, brokers, distributors, processors, regulators, retailers, and consumers.
Meanwhile, in the healthcare field, a startup named Umbra Health, has developed a platform that allows authorized healthcare practitioners—doctors, dentists, therapists, nutritionists, and others—to access electronic healthcare records and view only the specific information they require to do their job. The framework connects and merges disparate medical data automatically while protecting the identity of patients. It provides a high level of security. Ophir Frieder, professor of computer science and information processing at Georgetown University and chief scientific officer for the company, believes that blockchain could eliminate numerous medical errors while ratcheting up privacy for patients. “It can serve as a lingua franca for healthcare data,” he said.
A new chain
A starting point for any blockchain initiative is to understand that the technology is only beginning to take shape and there are challenges associated with launching an initiative. For one thing, few standards exist, PwC’s Smith said: “Almost every vendor has a different approach…and many of the products and systems available are not compatible with each other.” This makes it more difficult—if not impossible—to connect blockchain products across organizations, which reduces both the scalability and flexibility of an initiative. Even within a company, different constituencies might have different objectives and requirements that can lead to different blockchain solutions.
PwC’s Smith said that it’s important to develop a fundamental strategy and identify value points for blockchain. This means not only understanding where blockchain can improve processes, but where it can reduce costs, trim risk, or deliver a return on investment. But use cases may or may not lead to desired results. At present, organizations can approach blockchain in one of two ways: permissioned and permissionless. The former, as the name implies, requires all participants to gain authorization to use the blockchain, while the latter makes it available to all who come into contact with it. Smith recommends organizations start with permissioned blockchains, gain experience, then expand the initiative.
Education and training are critical components as well. Business leaders and others must understand how, when, and where blockchains can provide benefits and value—and how to put them to use for maximum results, including security. Legal, audit, risk, and compliance (LARC) are particularly important areas, and they require key executives to participate in the planning and deployment process from the start. PwC’s Smith also noted that it’s crucial to identify partners or create a consortium within a business or industry to streamline adoption and boost the odds of the project achieving success.
Blocking out a future
While there’s no killer app, and blockchain remains somewhat untested—and perhaps mistrusted—it would be unwise to dismiss the technology as pure hype. Over the next few years and beyond, blockchain will redefine the way many business processes, workflows, and even entire supply chains function. It will also reshape business partnerships and change the way organizations address regulations, compliance, and cybersecurity. The upshot, according to PwC’s Smith? “Blockchain is something business leaders should be thinking about now, and it is something that organizations should focus on and begin architecting today.”