Blockchain technology can be used to assist business relationships between two or more parties, without them having to rely on 3rd-party infrastructure to enforce a contract or provide a framework of trust. Such technology could diminish the need for lawyers, realtors and other professionals who provide the connective tissue in business and social relationships.
It is tempting to extend the argument further and suggest that blockchain enables relationships between parties without any need for governance or trust, but this is simply not true.
Let’s take the case of trust first: industrial mechanics worked fine on paper, but in actual implementations, equipment broke down, compounded by human error. Likewise, with blockchain or any technology that aims to provide security, identity or trust-based services, in theory it may be outstanding, but what protects you and your business is the implementation. You still need trust in the system, if only to the extent that you must trust the implementation of blockchain you are using. In fact, you need to have some trust in the other parties too. The immutability of records in a blockchain ledger is one of its selling points; however, under some implementations, previous ledger entries can be changed later if enough of the participants (or “nodes”) agree to the change. So, consider — who are those other participants, and what would happen if 51% of them got together and decided to rewrite history?
Second, let’s consider governance: what is the purpose of your blockchain, and how do you keep it on track? Anyone who has set up a public forum such as a message board or accepted comments on their blog knows that some participants might find alternative uses for the technology. And this isn’t just a technology issue. If you have a noticeboard in a coffee shop, then some notices pinned to the board may not be what you had hoped for. These matters are made worse when members of the forum are anonymous, and some blockchain implementations do allow for pseudo-anonymity – you may know the ID number of a participant but not their real name. For a real-world example, the blockchain that underpins Bitcoin has had wedding photos inserted into it. That scenario probably didn’t come up in the original Bitcoin design plans, but there you have it; some die-hard romantics have sealed their place in history. The photos are now part of the Bitcoin ledger – to remove them would involve recalculating over a year’s worth of transactions. We should also consider what the legal implications might be if the inserted photos had been copyrighted material – how would we remove it?
Blockchains don’t have to be open to the public like the Bitcoin blockchain. You could create a private blockchain solution within your organization to track documents and contracts with suppliers, for example. You would then be in charge and could limit access to the blockchain and define who can edit it, and who can only read data from it. When Maersk, the international shipping company, ran trials using blockchain to track goods, they found that it was necessary to involve the other businesses as much as possible in order to generate confidence and trust in the blockchain solution. So, in terms of governance and control, there can be a tension between making the system transparent and distributed to engender support and trust for the new technology, and needing to protect confidential business data, or perhaps to only sharing it with a subset of those involved in the project. You’ll find more information on industrial trials here.
There is exciting work going on in this field with new technology and new alliances. As the technology matures and evolves, further questions of governance may come to the surface. For example, if blockchain is going to allow people to take control of managing their own digital identity, then how do we educate people to make the choices that are in their own best interests? If such a solution is not effortless then it may prove to be a great technology that is not widely adopted, as for example was the case in the 1990’s with creation of PGP (Pretty Good Privacy) to encrypt emails.
So going forward, we should consider the following:
- Are we confident in our trust of the implementation of blockchain that we decide to deploy?
- We should expect that people will find ways to use it that had not been intended or conceived of.
- The immutability of a blockchain ledger can have costs as well as benefits, depending on the use case.
- There might be tension between making the system transparent and distributed to engender trust, and keeping some business data confidential.