Imagine for a moment you are transported back to the late 1980s and early ‘90s – the Internet was systemic transformation affecting most all aspects of people’s lives and processes. Certainly, many were skeptical as typified by this Newsweek article. We may be living through a similar moment today as more people across multiple industries highlight the potential for blockchain technologies to create a similar shift.
While the roots of blockchain technology can be found in the world of cryptocurrencies, many organizations are exploring how they can harness blockchains to transform their businesses, enable more efficient markets, or create new products and services. In financial services, there is potential to reduce trade settlement times from days to seconds, streamline audit processes, and speed up trade finance negotiation. More than that, blockchain technology can be used to help ensure conflict-free diamonds, protect against counterfeiting using IoT, and reliably track the provenance on an item from source to delivery. Companies are also starting to apply blockchain to anti-counterfeit, supply chain, and health records. Already, companies including Overstock and Paypal are accepting payments made on blockchain-based currencies and there are many blockchain app review that provide more info regarding other applications that facilitate these transactions.
What is blockchain?
The blockchain is basically a distributed database. Records in each block are verified through unique algorithms that assign a hash – a unique combination of letters and numbers – to each block. It is the hash that makes the information secure and encrypted on the shared ledger. If any information is changed within the block, the algorithm will no longer produce the correct hash.
Hashes are continuously checked for correctness, and the individual blocks are combined to form the blockchain. Due to the interlinking of these hashes, the information stored on the blockchain cannot be tampered with, unless an entire chain is re-written before a new block is entered. This would require unprecedented amounts of processing power that is currently not economically or technically possible. This continuous verification process is performed by all members of the blockchain.
Imagine the existence of one master ledger for a class or type of investment. Rather than a single broker (e.g. a bitcoin online broker) or investment house having to update its in-house proprietary ledger, and rely on counterparties accurately reconciling their own records, everything is done automatically. Customers have transparency and full assurance on the trades that are being made on their behalf. Errors would be mitigated with trades passing through less hands. Through this, financial fraud like Ponzi schemes could be eliminated.
Another application of blockchain that is attracting a lot of investment is smart contracts —automated protocols in which the terms of a contract are directly embedded in lines of code. The code and agreements exist in the blockchain, and therefore given the inherent trust in the chain, contract transactions can be automatically and securely executed.
This enables peer-to-peer transactions between persons or organizations that currently require complex and expensive services of an intermediary. A great deal of investment in financial services is centred around smart contracts, due to its ability to reduce the time, cost and complexity of trades. This includes the cross-border payments sector, in which McKinsey estimates that blockchain could save a staggering $50 – $60B per year through faster transactions and lower costs. Processes that required days or weeks could be reduced to minutes or seconds. Just like it was not viable for someone to rent out a seat in their car before ride sharing services, blockchain could create entirely new portions of the service economy.
The need for greater energy efficiency and lower cost
Scalability is a major ceiling for current blockchain implementations, making it difficult for the technology to be applied at scale to applications like payments. For instance, VISA processes 1,667 transactions every second. Bitcoin has a capacity of 3-4 transactions per second, and Ethereum supports up to 15 per second. Even more significantly, blockchains today require colossal amounts of electricity.
To provide some context, it is estimated that for the Bitcoin network to process 3 to 4 transactions per second it requires 32 terawatt hours of electricity annually — about as much as consumed by the country of Denmark. Scaling this to handle a credit card network isn’t possible from either a technical or energy perspective.
To enable blockchain and other next generation technologies such as artificial intelligence, and augmented and virtual reality, the semiconductor industry must find new ways to build processors that deliver more performance and operate more efficiently. From 3D chip stacking to better circuity design, engineers are tackling these challenges. Tremendous advances are being made in this area by processors including CPUs and GPUs. These advances are achieved through architecture innovation, improved power management, and new packaging options. Standardizing blockchains on these broadly available processors increases the potential to attract users and further focuses research and development on improving performance and efficiency.
Unlocking the power of the blockchain
It is early days for blockchain, but the prospects are intriguing. In fact, industry expert Don Tapscott believes this is a true paradigm shift. His view is that blockchain could revolutionize the world economy by levelling the playing field regardless of participant economic status and create new opportunities for value creation.
Immutable, distributed ledgers and smart contracts that improve finance are only the beginning. For example, blockchain has the potential to enable secure lifetime medical record sharing across providers, overcoming the differences in implementation of electronic medical records and improving healthcare for all. As a time-stamped, programmable ledger, blockchain could track and correlate all the health records for a person, and present a chronological and complete picture of care at any point in time.
It is a brave new world that can only be realized if we solve the performance, efficiency, and cost challenges to power blockchains. Through smart engineering and a true commitment to energy efficiency, the semiconductor industry can play an important role in supporting the growth of blockchain and other advanced technologies.