Journalists get to ask people rude questions. I had one for Oracle, which announced a new suite of blockchain services Tuesday. Is blockchain good for anything?
Hype around blockchain tends toward the utopian. See this typical example; the author predicts that blockchain will make banks unnecessary and restore confidence in elections around the world. Here, we see blockchain helping to eradicate poverty. And I'm not immune to the hype; in May 2017 I reported that blockchain would disrupt startup investing the way that Airbnb and Uber disrupted hospitality and transportation. (See Blockchain to Blow Up Startup Investing.)
But when I look at real-world examples of blockchain, it seems to me that any useful problem allegedly solved by blockchain is better solved by a conventional database.
I posed that as a question to Atul Mahamuni, Oracle Corp. (Nasdaq: ORCL) VP of IoT and blockchain technologies. Then I paused for the angry blowback.
But to my surprise, Mahamuni was delighted by the question. "I've talked with so many people who say blockchain solves any problem in the world," he said. So he found it refreshing to talk with someone -- me -- who thought blockchain is useless.
And Mahamuni had a reply: Blockchain is highly useful for some business cases, particularly tracking items in big, complex, multi-tier supply chains, Mahamuni said. Those make up much of the world's important transactions, and resolving disputes is expensive, adding 12-15% of the cost. Blockchain-enabled applications can reduce the cost of dispute resolution by 30-50%. "That's such a big business benefit and the cost is not so high. So why wouldn't anybody do it?" Mahamuni said.
How does that work? As anybody who's been following blockchain even casually knows, a blockchain is a ledger with multiple records -- called blocks -- distributed among multiple computers. Each block is added to the preceding block, to record a change. Because there are multiple copies of the ledger, shared among the multiple participants in the transaction, that makes blockchain extremely resistant to tampering. Every participant in the transactions can check their own copy of the blockchain to find records of who did what, when, and to whom.
That tampering resistance vastly improves trust in the system. Conventional databases are centralized, often operated by a third party, which encourages suspicion in the validity of those records. Maybe the person operating the database is dishonest, or has sloppy security. But with blockchain, every participant in a transaction has a copy of the blockchain, which encourages trust in the records.
"With blockchain, I have a copy and you have a copy. It's protected with cryptography and the block architecture," Mahamuni said. That makes tampering a lot more difficult. "It's not like it can't be done. But there's a cost."
For example, one of the world's largest semiconductor manufacturers is using blockchain to guard against falsifying records in its multi-tier supply chain, where its suppliers have suppliers of their own, Mahamuni says. Each participant is subject to quality and quantity requirements, but there is incentive to cheat, and alter a record certifying the quality of a component that is in fact marginal. Blockchain guards against that kind of falsification, Mahamuni says.
Security aside, blockchain simplifies record-keeping among participants in a complex, multi-tier supply chain. That makes it easier to trace the provenance of each component of a complex product like a phone or car; which is useful in reducing costs in case of a product recall by targeting only products made with the affected component. Similarly, food service businesses can trace the provenance of produce and the ingredients of foods and beverages, for ethical reasons, to satisfy the demands of gourmet customers, or for health reasons in case of contaminated foods.
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