Business, government leaders weigh options on emerging blockchain technologies

A $100 investment in Bitcoin on July 28, 2010, would have been worth more than $28 million as of Dec. 12, 2017. Since that time, the grandfather of all cryptocurrencies — as of Jan. 7, there are 1,384 — has taken a tumble, losing about half of its value since Dec. 17.

The volatility and sluggish transaction times led payment processor Stripe to drop support for it in the last week, capping off a brutal month in which many established coins became almost indistinguishable from the hundreds of shitcoins – the technical term for “altcoins” that become worthless over time or turn out to be scams – polluting cryptocurrency exchanges.

Despite the downward trajectory, many are still bullish on “blockchain,” the underlying technology that powers these currencies, with Hackernoon/Inc. Magazine contributor Nicolas Cole in a recent analysis blasting the headline, “2018 Will Be The Year Blockchain Technology Goes Mainstream. Here’s Why.” Computing platform ArcBlock has emerged to help developers build and deploy blockchain applications for many blockchain technologies outside of the cryptocurrency space. IBM is a partner.

Most significantly, Reuters recently reported the first-of-its-kind completion of an international agricultural trade using blockchain among five entities that included Louis Dreyfus Co., Shandong Bohi Industry Co, ING, Societe Generale and ABN Amro. The cargo: U.S. soybeans. The destination: China. The result: “We noticed very significant efficiency gains … far beyond what we expected,” Robert Serpollet, global head of trade operations at Louis Dreyfus, told the newswire, adding that time spent processing documents and data had been reduced “five-fold.”

WHAT IS BLOCKCHAIN? 
Blockchain “isn’t complicated,” according to Nathan Voss, security engineer for Fort Smith-based Propak Corporation.

“It comes into play when you want to share with other people and collaborate or just give visibility and transparency. In the shipping process, you can have multiple people sign off and manage the chain of command. In that scenario, you have multiple actors and different companies all participating, so having that distributed ledger that everyone can access makes a lot of sense.”

Blockchain is not meant to replace technologies like GPS or the Internet, but rather it works with such technologies to record data points that can then be seen by everyone on the blockchain. Voss says it is “a kind of database. That’s all it is. But it solves a lot of different problems than many of the traditional databases we use, and it’s easy to share. But you want to make sure you find the exact appropriate-use case for it. If you just put blockchain on anything, it’s probably going to have negative consequences instead of positive ones.”

Blockchains can be public or private, Voss said. Public blockchains allow read-write capabilities to anyone with access. Private blockchains are viewable by all, but write capabilities are designated to only a few.

“This is how a bank would want to use it,” Voss added. “‘We (Bank) can show you that we have all of your money. We can prove it. It’s on this blockchain. We can’t let you move money from one account to the other, but we can let you audit it. You just can’t change it.'”

An oversimplified explanation of how a blockchain works would be comparing it to a Google Doc, which might allow access to a closed team. Unlike a Google Doc, however, “the blockchain never forgets,” Voss said, adding that it is an “append-only document,” so corrections would appear as footnotes rather than overwrites. As with a Google Doc, the blockchain would interface with the Internet and could be accessed on a tablet, phone, or desktop. The big difference is that it operates on a peer-to-peer network, and the larger the P2P, the more difficult it would be to hack — so there is transparency, but there is security as well. One would need to hack into 51% of the networks on the P2P in order to control and manipulate what is done on a blockchain.

While words like “database,” “ledger,” and “document” don’t sound high-tech, the implications could be massively disruptive to many financial service sector businesses. Contract law, escrow, and most forms of record-keeping and middlemen, Voss said, could be handled more efficiently through a blockchain as well.

WAIT AND SEE
“We are not at this time using blockchain, and we have not seen a notable impact to banking at this point,” said Sam Sicard, president & CEO of First National Bank of Fort Smith, telling Talk Business & Politics the technology “is something we are observing and studying however.”

Russell Gibson, head of the Information Technology department for the city of Fort Smith, shared similar thoughts.

“At this time, the City does not have any active initiatives involving blockchain. That said, we do understand the theory of blockchain and are investigating the potential benefits to the City’s business processes, transparency, and partnerships with private business and other government organizations,” Gibson wrote in an email to Talk Business & Politics, remarking that as the city moves into implementation of its Enterprise Resource Planning (ERP) software, “we are mindful of how the newly-centralized data structure could potentially be leveraged in a blockchain for information such as land records (e.g. parcels, easements, zoning, land use, etc), various geospatial data, permits, fees, and select financial/purchasing data. In turn, this ‘distributed ledger’ could then be used for a variety of purposes including expedited access to inter-government services/data and potentially business recruitment and development.”

Propak is having “high-level conversations,” said Davy Mears, vice-president of technology for the logistics firm, but “We are not doing anything specifically from an application perspective for a couple of different reasons. One would be, in order to see a real benefit, you have to have network partners, meaning blockchain isn’t a technology we put in place and it’s just for us. We’ve got to have customers, partners, vendors … It takes two to tango.”

AVOIDING THE ‘HYPE CYCLE’
Mears said Propak would need “the right application” as well, which it doesn’t have yet.

But “yet” is the operative term, as Mears notes the company is in talks with potential partners on transportation and retail sides of its business.

“We are interested, and we monitor it, and we would love to be able to sit here and say, ‘Yes, we’ve implemented blockchain, and here’s the application for it.’ But we want to make sure we’re not too early in the hype cycle, and we don’t want to get out too far in front of our partners.”

That said, Mears is sold on the technology’s usefulness.

“We were at a conference recently, and there was a retailer there talking about how they’re doing a large pilot in their produce section. And the thought there was, say there is an E. coli breakout for spinach. Well, now what happens is they know it’s the spinach that comes from this one supplier, but they don’t have real-time visibility for where that spinach is at, so they’ll rip all spinach from all their stores across the U.S., and it’s a massive hit for them — a lot of waste, a large financial hit. But with blockchain, they can say, ‘Okay, we know that the breakout, that the E. coli, is coming from this producer, and because of blockchain and the added visibility, we know it’s on these shelves in these stores. So they eliminate waste and good healthy spinach is still available to consumers who want it. That’s something the average consumer would never even know, but it’s happening beneath the surface,” Mears said.

On the flip side, Mears said a larger technology company at the conference had tried and failed with a blockchain pilot.

“Their partners didn’t see the value in it. ‘There’s no value to us other than to say we’re doing it and blockchain is running it,’ (one of the entities said). There was benefit for the software provider involved, but there were three different groups using it, and for another, it didn’t have value. It just goes back to the emphasis on having the right application and the right partners so there is something in it for everyone. Otherwise projects like that can die pretty quickly.”