Joe Kim, Executive Vice President, Engineering and Global Chief Technology Officer, SolarWinds
The potential of blockchain has mesmerised the business world. Gartner estimates that blockchains will create at least one business worth $10 billion by 2022, and some pundits claim the ledger-based model—which powers cryptocurrencies like Bitcoin and Ethereum™—could literally end poverty.
That’s a lot of expectation for what is essentially a new method of record-keeping. But I think it’s more than justified: in fact, I’m guessing that blockchain usage will peak within the next three years. That’s because blockchains can offer us something that’s sorely missing in today’s digital world: trust.
Why so precious?
Blockchains are essentially lists of records, but with a difference: each record, or “block,” is linked to others by a cryptographic algorithm, forming a “chain” of connected records. Try to change any individual block after it joins the chain and you’ll end up altering all of them. That makes them nearly incorruptible.
It gives them the power to transform not just financial transactions, but the fundamentals of how humans digitally interact with organisations and one another.
At present, our digital identities are by and large fragmented. To determine whether an individual or business can be trusted, we reconcile numerous records from different sources. Think of the various background checks, credit scores, and other hoops you jump through to prove you can be trusted with a bank loan, for example.
Using blockchains, these different records can demonstrate how they relate to one another without requiring those high-intensity checks and balances. In other words, the blockchain becomes a marker that says: “this data can be trusted.”
Eliminating traditional data verification processes could transform almost every aspect of business. Organisations that keep huge volumes of sensitive records no longer need to worry about misplacing or accidentally modifying their information.
Blockchains can not only detect if that happens, but demonstrate to regulators the integrity of such records. Industries where transactions touch numerous other entities, like the airline industry, no longer need to go through rigorous and time-consuming data reconciliation; the cryptographic elements of blockchains essentially verify themselves.
Any business dealing in personally identifying information, from healthcare to e-commerce, can use blockchain to prove beyond reasonable doubt to customers that their data is indeed secure.
Blockchains provide an elegant solution to the problem of trust: if you verify one block of data in the chain, you verify all of them. And like the One Ring of Tolkien’s saga, a blockchain can’t be duplicated or broken. Perhaps blockchains will someday rule over all data—but adopting them, like their Middle Earth equivalent, also comes at a price.
And in adoption, bind them
It takes many blocks to build a chain—and each of them can cause an organisation to stumble. If Bitcoin has taught us anything, it’s that blockchains are only as good as the underlying performance of the systems that encrypt, track, and reconcile them.
When these systems crash, either because the volume or complexity of chains involved grows too large, the business value bound up in these blockchains also disappears. And if their security gets compromised—as happened with Mount Gox, once the biggest Bitcoin exchange in the world—so too do the basic operations of any businesses relying on them.
How can we avoid these Mount Doom (or Gox) scenarios? Organisations will have to treat blockchain adoption like any other IT project. The infrastructure beneath it will need to be scalable, speedy, and secure—even more so because of the sheer amount of data and value at stake.
I expect that most blockchains will soon operate through an “as-a-service” model, mainly through large cloud providers. While various organisations are currently pursuing private ledgers, these will inevitably struggle to meet the performance, durability, and cost-efficiency that cloud-hosted blockchains—like most other platforms in the cloud—will provide.
Private blockchains will also prove harder to adapt to different applications and data, meaning businesses that invest in their development may meet an innovation dead-end faster than those who opt for publicly hosted chains.
Ultimately, the success of any blockchain platform will hinge on its ability to deliver high throughput, low latency, and a frictionless user experience—just like any project since the dawn of IT. With the sheer amount of hope and value being placed on blockchains, IT will need to maintain even greater visibility of their systems than the All-Seeing Eye.
Fortunately, the same basic rules for IT success still apply: monitor your infrastructure performance, optimise your various networking and storage systems, and always assume your platform is less secure than you want it to be.
Even the seemingly indestructible One Ring had a fatal vulnerability that two amateurs managed to exploit.
