By Pam Brodsack
Can blockchain technology really change the world? Truth is, the world is already changing. While blockchain alone will not tip the planet on its axis, it may very well accelerate change by helping leaders reimagine business models, processes and solutions.
Blockchain is a mash-up of other technologies, including distributed database, cryptography and proof of work. Its essence is an unchangeable, shared ledger. Transactions are recorded chronologically and shared publicly.
Blockchain solutions can have one of two configurations:
- PERMISSIONED: someone or something controls access
- PERMISSIONLESS: completely open; no control over access
Much of the reason the technology has people so excited is because of its promise to inject transparency and immutability into any situation, project or process it’s tracking. These qualities make it possible for us to imagine a single source of truth – one ultra-secure system that stores every piece of data we will ever need, never forgets it and makes it available to everyone.
How Will We Use Blockchain?
At this early stage, it seems blockchain technology’s greatest contribution to the financial industry will be around transparency and security.
Blockchain lends security because it stores precious digital cargo in blocks that are digitally stamped and distributed across multiple sites. If a block is altered by a malicious node, it is immediately detected, and an unaltered version is retrieved from other, intact nodes.
As people, businesses and all manner of things become more connected to one another in the digital space, there is an emerging need to maintain our individuality — or more to the point, protect our identities.
The idea of relying on a blockchain as the single source of truth for identity management is compelling. Blockchain technology may be an answer to how we can, as consumers, finally
own our digital identities. No one could sell it, steal it or duplicate it without our permission —
or rather, without the right security key. Blockchain technology relies on the use of security keys — more specifically, public and private key pairs.
Blockchain could no doubt have a dramatic impact on the way we authorize everyday financial transactions. I emphasize the word could because the manner in which a public ledger, which is accessible to everyone, will truly protect our identities has not yet been developed.
What Are The Hurdles Facing Blockchain?
There are essentially four challenges blockchain developers must overcome if they are to see the technology reach its potential. They are interoperability, ownership, its complicated history, and integration. Reference the full white paper for further explanation.
Blockchain is likely capable of advancing the goals of the world’s community financial institutions and the consumers they serve. If the opportunities are out there, TMG intends to find them. Stay tuned as we explore the business problems that can be solved by blockchain and create a strategic decision framework on which credit unions and community banks can rely.
Pam Brodsack is chief technology officer with TMG.