Blockchain is a hot word in the business world right now, mainly in the financial and high-tech industries. According to a new study at the University of Cambridge, at least 115 startups worldwide with over 2,000 employees are currently active in the development of blockchain technology platforms or applications.
Blockchain is a distributed ledger system built from a chain of data blocks with encrypted links between them. These blocks contain data about transactions. Blockchain is on a large number of computers synchronized with each other on a network, with no central concern supervising it or managing its activity.
The first and best-known blockchain application is the bitcoin digital currency, which was revealed to the world in 2008 by Satoshi Nakamoto - a software developer or a group of software developers whose identity remains a mystery to this day.
One of the interesting discoveries in the study, which was conducted by Dr. Garrick Hileman and Michel Rauchs of the University of Cambridge Judge Business School, was that over 80% of the world's central banks are now considering an issue of digital currency on a blockchain system. As reported in "Globes," the Bank of Israel is also now considering the use of a blockchain platform.
"It will not replace all databases"
According to the study, most of the currently active blockchain applications focus on financial services. At the same time, entrepreneurs in the field are expressing growing interest in other applications that are not financial, such as digital identification, supply chain, and intellectual property. One of the startups that consented to disclosure of the fact that it participated in the study is Coin Sciences, a company managed by Israeli entrepreneurs, headed by Dr. Gideon Greenspan. This company is now developing a multichain platform designed to create systems for "private "blockchain.
Greenspan told "Globes," "From a technological standpoint, there is a lot in common between public and private blockchain. Where the applications and those interested in them are concerned, however, they are two separate worlds. Public blockchain is open to everyone for use, seeing what is happening on the system, and mining cryptocurrencies. In an open system like this, you have to preserve an incentive for mining digital currencies, and you also need a mechanism for preventing spam on the system.
"In private blockchain, on the other hand, we enable a group of organizations familiar with each other to privately manage a common database without control by a single central party. The purpose of this is not necessarily management of digital currency or money."
One of the conclusions reached by the Cambridge study was that blockchain technology was not yet mature enough, and there were therefore not many companies adopting its use.
"This is true," Greenspan says, "but even if you look in general at database technologies, you can see that they were developed over decades. It is true that blockchain platforms are still relatively new, but there are platforms such as multichain that can already be launched, and that can work in stable fashion. It will obviously take more decades to improve them. How many businesses will want to adopt it is primarily a question of business, not technology.
"No company will put its entire database on blockchain, because it would be a mistake," he explains. "Blockchain is suitable for a very specific scenario of a group of companies wanting to manage a common database that none of them controls. It is suitable for solving very specific problems.
"There are a great many people in the world saying totally unrealistic things about blockchain. Blockchain is not going to replace all of the world's databases. It's a new type of database, or a new type of messaging system, that is suitable for certain situations. Blockchain also has disadvantages in comparison with an ordinary database: it is slower and less efficient."
"It is hard for a business owner to work with bitcoin"
Greenspan, who has a PhD in computer science and is a veteran Internet entrepreneur, is the man behind several revenue-generating Internet services. He says that two of the more successful of these are Websudoku, a popular suduko game website, visited by hundreds of thousands of surfers daily, and Copyscape, which accommodates searches for copies of textual content in order to find out whether a certain text is original or has been stolen from the owners of the rights to it.
Greenspan admits that when he first learned about bitcoin, the digital currency was of great interest to him, both as someone dealing in technology and as an owner of an online business. "This is something I find attractive as someone who sells on the Internet as a means of obtaining payment without an intermediary concern or third party. As a taxpaying business owner who makes reports to the authority and obeys the law, however, I felt that it was very difficult to do business with bitcoin as a currency. It's hard to explain to the income tax authorities or an accountant what your income is when you get it in a currency like bitcoin. I therefore looked for a way to use the bitcoin network for transfers of ordinary money: dollars, shekels, and so forth."
In late 2013, Greenspan began working on the development of a protocol named CoinSpark, which facilitated transactions in ordinary money (called "fiat" money - currencies existing under national law) over the bitcoin network; it bears some resemblance to a known blockchain platform called Colored Coins. Another application that he started developing then was the transmitting of messages over the bitcoin network, in addition to transactions.
"Development of CoinSpark started with Bitcoin Core, the core bitcoin platform, so we're well acquainted with this system," he says. "In late 2014, we already launched most of the CoinSpark features, but we quickly concluded that no market was interested in it. The serious companies we wanted to get to use such a system were unwilling to put their important processes on public blockchain, so we halted the development of this platform.
"Globes": How interested were the banks and financial institutions in these platforms?
Greenspan: "We're not aiming our platform so much at financial institutions," Greenspan says. "Blockchain technology can solve a lot of problems for these concerns, but it also involves exposure of the information on the web, which is not the case with other database platforms. The level of transparency with blockchain is too high for the financial world, even though it was the first to discover blockchain's business potential.
"We launched Multichain in June 2015, and have since continued its intensive development. There are now over 30,000 people visiting the Multichain website, and the platform already has over 50 partner companies. We launched our most recent version last summer. Of course, there are other private blockchain platforms competing with us in the market. We want to continue increasing the number of people using Multichain, and are currently developing its second version, in which there will for the first time be both a free version and a business version. Our development team currently has four people: three in Israel and one in California.
"The success of blockchain platforms depends on how many of them eventually progress from the stage of a trial to the production stage," Greenspan declares. "Today, I tell all of our customers one simple thing: if you have an idea for doing something on blockchain, think also about the possibility of implementing the idea on an ordinary database platform.
"Consider the advantages and disadvantages of each of the two possibilities. This is what has to lead you to a decision of whether to use blockchain for all types of applications."
Published by Globes [online], Israel Business News - www.globes-online.com - on January 21, 2018
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