Finding Real Value: Blockchain as the Engine of Transaction Governance
The noise and hype around blockchain as the silver bullet of software has given the technology an unwarranted mythical status, and naturally there is a backlash: Blockchain’s slide down the hype curve is plain to see.
Following the trend makes it easy for us to forget blockchain’s true value: blockchain allows multiple parties to participate in a transaction, without having to rely on, or trust, a central authority to enact it.
Working with Trimble and IBM, Ordnance Survey has been looking to establish the true value of blockchain technologies in the geospatial sector.
The simplest case of blockchain is its use to enable cryptocurrencies, where two parties can exchange tokens of value without requiring them to either trust each other or have a trusted central authority—such as a bank—to carry out the transaction.
The characteristic of reaching consensus across multiple copies of the blockchain without a central trusted authority, has been extended to create the “Smart Contract”
The blockchain acts as a decentralised and immutable ledger. The outcome of the transaction is recorded across numerous copies of the blockchain, with all parties running software that enables them to reach a consensus on the outcome of the transaction without requiring a trusted central authority. The record is made on the ledger in a manner that ensures that once recorded, it is essentially impossible to tamper with the record.
This characteristic of reaching consensus across multiple copies of the blockchain without a central trusted authority, has been extended to create the “Smart Contract”. Here the rules of a transaction are codified into software, with that software executing on the multiple copies of the blockchain, with consensus reached about the outcome.
The Smart Contract thus presents an opportunity to have a transaction defined between multiple parties and the ability to execute that transaction without any of the participants having to trust each other or the need for a trusted central authority. The Smart Contract itself becomes the engine of transaction governance.
It would be valuable to consider how this may work in a real-life use-case.
Well known for its production of high detail mapping of Great Britain, Ordnance Survey and their partner Trimble are packaging their great spatial capability as managed services offered on a global basis, including services in the land administration space, where blockchain technologies are of interest.
Within this domain of land administration, the issue of trust in the land authority has proven to be a significant problem. There are many jurisdictions where a history of corruption has led to citizens being unwilling to trust their government to properly record land ownership.
Can blockchain technologies be of value here? It appears so. There are opportunities for improving the visibility of a transaction and the trust that can be placed in it for all participants—the buyer and seller, their lenders and other interested parties (such as tax authorities).
There is much discussion that is outside the scope of this article about public vs private blockchains—and that discussion could be seen to be comparable to the “open source” vs “closed source” discussion of some years ago. So saying, early enterprise grade government implementations seem likely to adopt private blockchain technologies to create the “land authority” blockchain over public blockchains such as Ethereum.
Such a blockchain requires a network of hosts to operate the copies of the blockchain, and this network would likely include entities such as government departments, banks, and perhaps large real-estate agents. It is further possible that third parties such as the World Bank may be a host of a copy of the blockchain.
To enable a land transaction to take place, a Smart Contract would be used to define the rules of the transaction between the buyer and seller and other interested parties such as their lenders and the tax authority; and this Smart Contract would be executed on a blockchain.
It is here that the key value of blockchain technologies is realised. Rather than the transaction taking place behind the closed doors of the Land Authority, the Smart Contract executes visibly and transparently on the multiple copies of the blockchain, with all hosts of the blockchain reaching consensus on the result: the buyer receives title to the land, the seller receives their payment, the seller’s lender is paid off and so on.
The outcome of the transaction will be recorded on the blockchain, and again the visibility and immutability of these transactions would enable the state of the register of land ownership to be validated from the transaction history held on the blockchain.
This brief outline shows blockchain providing real value–and there is utilisation potential across a number of other domains outside the land administration example above.
Despite the hype, there is value to be found.