Blockchain 101: is the Philippines Ready for Another Disruptive Technology?

THE digital age has brought hope to peoples and countries to enable them to pursue greater transparency and better governance. Moreover, the development of the Internet has opened many possibilities to make life easier for people in almost every facet of their lives.

Twenty-plus years later, blockchain came into the picture. How it can impact the Philippines and businesses, like the Internet, remains a conundrum.

Blockchain technologies are in the early stages of a 20-year, if not a 50-year, adoption and maturation cycle. Many compare blockchain today with 1995 when Tim Berners-Lee gave the world the Web.

'[The] Internet at that time was more decentralized than it is today and built primarily with open source,' Brian Behlendorf, executive director of Hyperledger, told the BusinessMirror. 'The technology is ripe with promise.'

Hyperledger (or the Hyperledger Project) is an umbrella project of open-source blockchains and related tools, started in December 2015 by the Linux Foundation, to support the collaborative development of blockchain-based distributed ledgers, according to a Wikipedia entry.

Applications

BLOCKCHAIN became a byword among techies (persons considered experts in or enthusiastic about technology, especially computing) because it is often discussed in similar context with cryptocurrencies, such as Bitcoin and Ethereum.

'However, they [blockchain and cryptocurrencies] are not one and the same,' Behlendorf explained. 'Distributed ledgers do not require a cryptocurrency to work. A cryptocurrency is an application that sits on top of a blockchain and not the other way around.'

Currently, there are wide adoptions of blockchain technology in commercial applications and production.

Blockchain, also known as 'distributed ledger,' can be used to record promises, trades, transactions or simple items that need to be preserved. To ensure the records do not disappear, the data are mirrored or encoded across all nodes in a given network. This allows everyone in an ecosystem to keep a copy of the common system of record.

'Nothing can ever be erased or edited,' Behlendorf said.

Being a multiparty database, he said a distributed ledger has no central trusted authority. This means that when transactions are processed in blocks according to an ordering of a blockchain, this will form a distributed ledger.

Bitcoins

CARLOS Korten, the CEO of Pasig-Hudson Consulting, said a blockchain operates on a network of independently owned computers that are joined together to form a trustless community, where every node serves as the watchdog for the others.

Korten points out that the fierce independence of each processing node is critical to the security and reliability of the blockchain network. By design, none of these computer nodes is 'the hub'. He adds the community is designed as a voluntary collection of independent peers in a decentralized network that may grow or shrink in size, as members join and drop from the coalition.

Together, the University of Chicago-educated Korten said, the network establishes a 'record of truth' through consensus within the community-formally, 'truth' is defined by whatever 51 percent of the network agrees to be true.

For Bitcoin, a cryptocurrency launched in 2009, the first and most famous implementation of blockchain, he said the computing power of the network is provided by companies and individuals (called 'miners' in Bitcoin lingo), who receive a financial incentive for participating.

Other blockchain networks may be 'private', where the computing power is supplied on a voluntary basis by the members of the community who have an interest in overseeing the integrity of the blockchain-banks, institutions, businesses or even private individuals.

Formidability

DEVELOPED to be a formidable system, Korten said blockchain technology uses advanced cryptography to prove that every document is an honest and true representation of the original.

Blockchain holds an advantage over paper contracts because it can be stored on the nodes: paper contracts can be altered, lost or destroyed. Moreover, each document is encrypted, time-stamped and locked using a digital signature.

'Next, blockchain uses a decentralized data storage scheme instead of a single data repository,' Korten said. 'This means that to alter the 'record of truth', a hacker would need to simultaneously attack the network at multiple processing nodes scattered all across the country and around the world.'

If a criminal element decides to enter and hack the information on the blockchain, Korten said the 'bad guy will need strong [computing] power to corrupt a well-implemented blockchain.'

'In structure, the blockchain can be imagined to be a massive encrypted ledger: a comprehensive list of all transactions that have ever occurred in the...