Is Blockchain the Technology of the Future?
Ever since its inception with Bitcoin, blockchain technology has been evolving rapidly and voraciously, finding applications across every industry, and waiting to become the replacement to the centralized infrastructure of the past. Protocols in scalability, confidentiality, and security are constantly debated, tested, and cherry picked by projects within the private and public blockchain space where every project is trying to differentiate with each other.
With the development of protocols, many parts of the world will be permanently etched onto the blockchain(s). When identities, physical assets, relationships, and every recordable history of people’s lives get written into this private, resilient, and computationally interconnected environment, individuals, organizations, and government will be able to interact with each other much more openly, securely, and efficiently.
Blockchain Today: Public vs. Private
Today we see two types of blockchain-enabled applications, public blockchain and private blockchain. Public blockchain is a permission-less distributed computing environment that is created by the people and for the people. The most prominent public blockchain, Ethereum, allows anyone to publish decentralized applications (dApps) and everyone to interact with those dApps. In recent years, much efforts have been dedicated to research and development in scalability, privacy, and security protocols that will enable a broad range of large-scale applications.
The second category of blockchain is private blockchain, or permissioned blockchain, a technology that’s created by corporations and typically for those corporations or consortium of corporations themselves. Private blockchain allows corporations to rethink and redesign existing processes that are heavily cooperative, error prone, and fragmented. Organizations can use private blockchain to replace traditional trusted authorities responsible for inter-corporation communication, record reconciliation, and settlement. Furthermore, permissioned blockchain allows corporations to control who can interact with the blockchain, thereby not only does it enable corporations to achieve greater efficiency and cost saving, it also allow them to maintain established security measures on their users.
While public blockchain and private blockchain are wildly different in engineering architecture and target market segment, they both aim to achieve greater market efficiency and give more back to the users.
As with any new technology development, challenges and risks accompany the anticipated benefits. Follow our series this quarter as we examine the three prevalent risks of blockchain and their implications for financial crime: fragmentation, early adoption, and weak trust infrastructure.