Blockchain branches out, away from cryptocurrency

Source: FleishmanHillard.

Scott.

The consensus seems to be that Blockchain is not only about cryptocurrencies, and interest in other industries is growing fast.

Blockchain was a key topic of interest over 2018, said Sophie Scott, Global MD of FleishmanHillard’s Technology practice, quoting from the Tech Trends 2019: The Fads. The Fears. The Future. report from the company, which analyses 1 billion tech-focused consumer conversations on Twitter between 2017 and 2018, along with insights from technology thought leaders.

She noted: “Moving beyond cryptocurrencies, Blockchain could expand, supporting developments like smart cities and digital transformation. Discussion volume share increased 52% between 2017 and 2018 – and the opportunity for deeper, more forward-looking conversation is growing.”

Finance is likely where Blockchain will shine.. first

“Blockchain technology, especially, will see widespread adoption in the banking and financial service institutions sector. Its ability to speed up and simplify cross-border transactions allows for significant time and cost efficiencies,” predicted Nilesh Mistry, VP, Head of Asia Pacific at World Wide Technology (WWT).

Source: WWT. Mistry.

“Beyond that, it could also impact shares and other types of trading by enabling greater trade accuracy and a shorter settlement period, as well as smart contracts which enforces the obligations of all parties without the added expense of a middleman.”

“The Asia Pacific region has become a hotbed of innovative Blockchain applications. The financial industry ranks as the main market for implementing Blockchain technology, with the transportation/logistics industry following a close second.

"It’s important to note that financial services firms are deploying Blockchain to support mainstream sovereign currency processes—not the controversial cryptocurrency transactions that initially thrust Blockchain into the spotlight. Worldwide Blockchain spending growth among professional services and process manufacturing businesses is also experiencing an increase,” said Matthew Kuan, Director of Solutions & Marketing, South East Asia & Hong Kong, Fortinet.

Source: Fortinet. Kuan.

Max Kordek, Co-Founder and CEO of Lisk agreed. “I can see the institutional attitudes towards Blockchain continuing to shift in 2019 as rapidly as the technology itself. Mainstream business, traditional finance, and even government institutions will continue to both accept Blockchain into their everyday practices, as well as shape its progression through usage and regulation,” he said.

Steve Leonard, Founding CEO of SGInnovate, sees a bigger role for Blockchain as well. “Blockchain’s close relationship with cryptocurrency has created an impression in many that it can be used only for financial transactions...The potential of Blockchain technology in solving real-world problems far outweighs the economic ramifications of Bitcoins,” he said.

“Beyond financial transactions, Blockchain is a deep technology that can be applied across a wide spectrum of industries. For instance, it can be used to address food safety by preserving the integrity of food supply, create a greener ecosystem through energy or electricity-sharing on the Blockchain, increased transparency in logistical supply chains, and stamping out counterfeit drugs in the healthcare system,” he added.

Source: SGInnovate. Leonard.

“Organisations now understand that decentralisation – the key tenet to Blockchain technology – can be used to help solve intractable challenges,” he said.

A technology in search of a problem?

Bee Kheng Tay, MD, Singapore and Brunei, Cisco, cautioned that Blockchain should not become a solution looking for a problem, instead of the other way around.

“Businesses need to first identify the problem they want to solve. Once companies have done that, they should look for a Blockchain framework is easy to deploy and able to integrate with their existing technology, thus enhancing its overall ease of use,” she said.

“Organisations should also ensure that their platform allows for a holistic security approach with end-to-end protection to block threats on all fronts. Finally, organisations need to focus on an easily distributed system to allow them to eventually implement the Blockchain framework on a large scale. In essence, companies should look for a Blockchain framework that has three necessary elements - simple, secure and scalable.”

Source: Cisco. Tay.

Roger Lim, Founding Partner at NEO Global Capital (NGC), also touched on what he called the 'Blockchain-for-everything' approach. “From an investment perspective, 2019 will be a promising year for Blockchain as projects move away from a 'Blockchain-for-everything' approach to implementation.

"We will see a more sophisticated industry emerge across a variety of sectors, including identity solutions, gaming and, financial services, — one that has tremendous potential, both jointly and autonomously, for cryptocurrency and its underlying technology,” he predicted.

There are already innovative uses for Blockchain. Leonard shared that AID:Tech, one of SGInnovate's portfolio companies, enables aid, welfare, remittances, donations and healthcare to be digitised and delivered through Blockchain technology in a completely transparent manner. This eliminates the possibility of funds raised for one beneficiary being sent to another beneficiary instead, for example.

Source: Lisk. Kordek.

Leonard said that the attention on cryptocurrency has brought Blockchain to the fore, with a growing interest in how the technology can be applied as practical use cases beyond the financial sector.

“People making donations will now have a bird’s eye view on the end-to-end process of whether their donations end up with the intended beneficiaries,” he said.

Leonard also suggested that Blockchain could help to solve poverty issues on a large scale and create an economic impact to the underserved community in Southeast Asia. “In Southeast Asia, only 27% of the 600 million population have a bank account. In Cambodia, the number dips below 5%. The unbanked or underbanked typically do not pass the vetting process to get access to financial services, nor do they have the ability to pay the costs associated with such services,” he noted.

“The lack of access and difficulties to borrow or save money is creating barriers to come out of poverty, resulting in a chicken and egg problem. Blockchain technology removes the need for a ‘middle man’ that requires a fee for a bank account opening or usage, reducing the cost of transaction,” he said.

Source: NGC. Lim.

Blockchain security at stake

Kuan also warned that Blockchain will become an attractive target for cybercriminals as it grows in economic importance. “There are a number of Blockchain and distributed ledger technology (DLT) vulnerabilities that we need to be aware—ones that will impact how we deploy and where we apply Blockchain,” he said.

According to Kuan, stakeholders must be aware of:

Consensus hijacks

In decentralised, permission-less networks, where consensus is formed through majority assent, taking control of a large enough portion of participating clients could allow an attacker to tamper with the validation process.

Distributed denial of service (DDoS) attacks

The distributed nature of Blockchain ledgers means that they are potentially vulnerable to spam-based DDoS attacks. “Even when these attacks do not completely close off access to a Blockchain, they can increase processing latencies, as the nodes will be busy checking the validity of the fraudulent transactions,” Kuan said.

Sidechain vulnerabilities

These can afflict the gateways used to transfer assets and messages between parent and sidechains. “Here, if an initial 'locking' transaction is later considered invalid, then subsequent proxy transactions would also be affected,” Kuan warned.

Smart contracts

These are automated transaction programs that run on distributed ledgers. They typically feature business logic such as self-executing insurance policies and financial futures contracts. “This makes them subject to coding errors, often related to the specialised programming languages used to formulate smart contracts. In particular, this phenomenon has been observed in Ethereum Blockchain smart contracts written using the Serpent or Solidity object-oriented languages,” Kuan disclosed.

Private Blockchain vulnerabilities

Some enterprises have implemented private Blockchains using existing network infrastructure, cloud-based services, and user access privileges. This configuration helps protect them from external interference.

“From the adversary’s point of view, discovering the existence of a private Blockchain can intensify their motivation to break in. After all, their thinking goes, there must be something valuable there if they have a safe like that to protect it,” Kuan suggested.

That said, Kuan said that all is not lost. “Fortunately, at the technology’s current stage of evolution, almost every Blockchain project is a greenfield project. This offers application designers the opportunity to build security into the project at the beginning of its development cycle,” he explained.

Kordek concurred that it is still early days yet. “We’re dealing with extremely futuristic propositions here and there is work to do. We must strive to meet industry challenges, such as the lack of formal Blockchain education and the need to keep attracting top talent into the industry. Most importantly, however, the Blockchain industry needs to continue driving the technology’s research and development and share their cumulative knowledge through a strong, global open-source development culture,” he concluded.

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Browse the full list of 2018 round-ups and 2019 predictions in TechTrade Asia