Blockchain the perfect data protection tool for banks using mainframes

Once exclusive to Bitcoin security, blockchain can now protect real-world coins for major fiscal players

Technophobic thrillers in popular media are always trying to convince us hackers are just a few malicious keystrokes away from crashing the world economy. And while doing such a thing is more complicated than just “deleting all the money,” one could certainly do a great deal of damage by changing what a computer thinks is true.

Wouldn’t it be great if there were software that could guarantee which data was and was not correct, backed up by the most powerful computer processors available? I give you blockchain, which more and more fiscal institutions are using to protect their data, backed up by the undeniable power of mainframes.

Blockchain first entered the public’s (OK, the techie public’s) awareness in the orbit of Bitcoin, as a means of securing that controversial digital currency’s code against someone who decided to break into the right server and add a couple zeroes to their account. But Bitcoin haters need not close this tab in disgust just yet, as blockchain has come into its own as a reliable security measure for more than just black market storefronts.

This powerful software has emerged from its point of origin to be the toast of the online security community, with giants such as HSBC and Bank of America looking to leverage blockchain to keep their data safe. Fortune predicts 15 percent of banks will use blockchain by the end of 2017, growing to 66 percent in four years.

What blockchain does is link every step of a transaction together into a discrete, secure “block,” with each step visible to each stakeholder. Each stakeholder must receive permission from every other stakeholder involved in each step to change anything about that step in the “chain” (see what they did there?) that forms the total process. Any attempt to make a change without all relevant permissions is flagged and negated. That’s not to say it’s impossible for a malcontent to forget every one of those permissions—any security expert will tell you no system is foolproof—but cracking a system with lots of steps and complexity is sure to discourage all but the most determined invaders.

Blockchain useful, safe for banks

A Blockchain is especially useful and safe for financial institutions because it creates a single ledger of all transactions and interactions rather than relying on cumbersome reconciliations between widespread systems to stay up to date. These reconciliations are a bank fraudster’s best friend, as criminals rely on the time between a fraudulent transaction going through and the system reconciling the discrepancy to get away scot free. This also makes precise, real-time visibility possible for data analytics, which is the driving force of market research in pretty much every field, finance perhaps most of all.

This is where big iron comes in. Not only are mainframes powerful enough to house a blockchain process, but they’re also fast enough to perform all the necessary checks to maintain blockchain’s level of security and perform all the stakeholders’ required analytics. Multiply that power by a whole bank of mainframes, like what most fiscal institutions use, and you’re putting up a big iron wall to stymie any online attackers. Blockchain sets in place which online information is true and mainframes make sure the truth is written in stone.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

Could blockchain be the operating system of the cities of the future?

 

Many trends on the horizon offer opportunities that could transform our cities. From self-driving vehicles and the sharing economy through to cloud computing and blockchain technologies, each of these trends is quite significant on its own. But the convergence of their disruptive forces is what will create real value and drive innovations.

Take blockchain and the sharing economy as an example. Bringing these two forces together can potentially disrupt established companies like Uber and Airbnb. The success of these companies is largely due to their ability to make use of existing assets people owned, that had been paid for, but from which new value could be derived.

Effectively, these companies set up digital platforms that harnessed “excess capacity” and relied on other people to deliver the services. The same applies to other so-called “sharing economy” companies that merely act as service aggregators and collect a cut off the top. In the process, they gather valuable data for further commercial gain.

But can this business model be challenged and enhanced for the benefit of those who are delivering the service and creating the real value? Can technology be used to bypass the third party and allow direct peer-to-peer collaboration within a distributed governance structure? What could a “peer-owned” and “peer-run” marketplace look like? Blockchain technology could just be the answer.

What is different about blockchain?

You can think of blockchain as the second generation of the internet – a transformation from an internet of information to an internet of value. Blockchain allows suppliers and consumers – even competitors – to share a decentralised digital ledger across a network of computers without the need for a central authority.

The assets that can be described on the blockchain can be financial, legal, physical or electronic. No single party has the power to tamper with the records – sophisticated algorithms keep everyone honest by ensuring data integrity and authentication of transactions.

But the impacts of blockchain go well beyond financial services and transactions. Its real value is in establishing trust-based interactions and accelerating the transfer of governance from centralised institutions to distributed networks of peer-to-peer collaboration. The impact can be profound: a centralised institution acting as intermediatory in a transaction of value is now at risk of being disrupted because the same service can be provided on the blockchain through peer-to-peer interaction.

Blockchain gives service providers a means to collaborate and derive a greater share of the value for themselves. Smart agents on a blockchain could do just about everything provided by a service aggregator. The technology’s trust protocol allows autonomous associations to be formed and controlled by the same people who are creating the value. All revenues for services, minus overheads, would go to members, who also control the platform and make decisions. Trust is not established by third parties, but rather through an encrypted consensus enabled by smart coding.

The transformation has already begun

We already have examples of this technology in action. Arcade City, a global community of peer-to-peer services, is planning to offer a ride-sharing service on the blockchain. To catch a ride, the user buys digital currency (known as tokens), creates an offer and commits funds for the ride. A driver claims the offer, matches the funds to signal their commitment to provide the service, and picks up the passenger. The blockchain releases the funds as soon as the user acknowledges completing the ride. Arcade City has a city council, which will overlook the system for three years until it is fully decentralised and up and running.

The same concept of using distributed public record technology can be applied to a wide range of urban applications. For example, an energy startup in Perth is looking to trial a peer-to-peer technology solution that would allow consumers to offer excess energy, available through their solar panels, on the blockchain. A clever code matches the suppliers with consumers without the need to go through the energy provider.

Still more questions than answers

The blockchain technology and ecosystem around it are evolving rapidly, and are probably raising more questions than answers. How do we establish a system of transparent governance to ensure the longevity of the blockchain? What about security, speed, cost and, more importantly, regulations? As with other disruptive technologies, there will be winners and losers. If the technology is successfully managed for scalable growth, it could very well disrupt established norms and transform our societies. Large layers of data generated by consumers today, which are controlled by hubs, can become public. In a world driven by blockchain, consumers can monetize their own data to derive greater value.

By knowing when and how to take advantage of this technology, we have an opportunity to transform the digital platforms for tomorrow’s cities. The blockchain becomes the city’s operating system, invisible yet ubiquitous, improving citizens’ access to services, goods and economic opportunities. Today, the technology is yet to mature. It remains to be seen if the expectations can live up to reality. But, in many ways, this is quite reminiscent of the internet in the mid-1990s. Not many people would have predicted its significance back then. Had we understood the impacts of the internet 20 years ago, what could we have done differently to create more value?

That is where we stand today with blockchain. The power of this transformation will become more compelling as the hype settles down and we begin to unleash the possibilities.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

A new bill filed in the Nevada Senate would, if passed, prevent local authorities from imposing fees or taxes on the use of a blockchain. Nevada Senate Bill 398, filed yesterday and introduced by Senator Ben Kieckhefer, seeks in part to create a legal basis under state law for the use of blockchain-based records and contracts. Notably, the bill would also prohibit local governments from taxing the use of the tech or requiring the use of a licensure for that purpose.

The proposed legislation states:

"A local governmental entity shall not: (a) Impose any tax or fee on the use of a blockchain or smart contract by any person or entity; (b) Require any person or entity to obtain from the local governmental entity any certificate, license or permit to use a blockchain or smart contract; or (c) Impose any other requirement relating to the use of a blockchain or smart contract by any person or entity."

The bill’s impact wouldn’t be limited to those potential economic costs, however. Kieckhefer's proposal would prohibit the exclusion of blockchain records in "proceedings", noting at one point that "if a law requires a record to be in writing, submission of a blockchain which electronically contains the record satisfies the law".

"A smart contract, record or signature may not be denied legal effect or enforceability solely because a blockchain was used to create, store or verify the smart contract, record or signature," the bill goes on to state. "In a proceeding, evidence of a smart contract, record or signature must not be excluded solely because a blockchain was used to create, store or verify the smart contract, record or signature." The proposal is similar to a bill put forward in Arizona last month, constituting a further move to legitimize the use of blockchain records at the state level, with a previous effort also being pursued last year in Vermont.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member