What exactly is blockchain? It’s a subject of interest to Kevin D. Mentzer, an assistant professor of information systems and analytics at Bryant University. He took some time out to help PBN examine the potentially good and bad aspects of the technology.
PBN: What is the best way to describe blockchain?
MENTZER: You can think of blockchain as a ledger that records transactions. When a transaction occurs, the community confirms that it is a valid transaction and everyone in the community records that transaction. This results in everyone in the community having a record of every single transaction. These transactions may be in the form of currency exchange – such as Bitcoin or Ether – but they don’t have to be. The transactions could be a transfer of tokens or coins, a transfer of a property deed, or the recording of a vote in an election. Transactions are confirmed and put into a block of transactions. When the block is full, a new block is formed, which is linked to the prior block, this is the chain.
PBN: Blockchain’s been called a “new type of internet.” Do you find that an accurate description?
MENTZER: There are certainly many who believe that the blockchain technology will be the underlying technology that drives the next iteration of the internet. For most of us, this will be an invisible layer, which we can remain oblivious about, just like we may not know much about the technology that drives a website. The general idea behind this is that the power – which resides in the hands of a few corporate giants – will transfer back to the general population.
No longer will internet service providers be able to track our virtual movement; individuals will now control their own data and decide who will have access to that data, the internet of things will mean that many more devices will be linked, and hacking will become much harder because of the distributed nature inherent in blockchain.
The problem with this forecast is that the general public continues to show that it simply doesn’t care about these issues. When I poll my current students, the general consensus is that privacy is dead, time to move on.
PBN: Is blockchain more secure against hackers, and if so, why?
MENTZER: Yes and no. On the one hand, the blockchain is fairly hack-proof. Once a transaction is recorded, it cannot be changed without a majority agreement in the community. To put this in perspective, there are approximately 17,000 nodes worldwide managing the Ethereum blockchain, one of which is running in our data science lab at Bryant. In order to hack the blockchain, you would have to manipulate at least 50 percent of these nodes.
While it is extremely difficult to manipulate the technology, we humans are much more fallible. Because blockchain is a new technology, with it comes quite a bit of confusion. This has allowed certain people to take advantage of others … people have believed they were purchasing one type of token/coin/currency when in fact, they were buying something worthless.
PBN: Are there areas of industry where you see blockchain use holding the most promise?
MENTZER: The area that has received the most attention has been in the financial arena. Historically, we have relied on financial companies to tell a merchant that the buyer has adequate money to make a purchase, and as such, the financial institution charges a small fee. With blockchain, the entire community knows the available balance of each account on the blockchain.
One area that will be getting a lot of press over the next few years is the idea of blockchain voting. If each of us can confirm our individual votes, and collectively we could all add up the total number of votes, then there would be a layer of transparency in voting that we do not have today. We wouldn’t have to wonder whether certain votes weren’t counted or others counted twice.
PBN: Are there areas where there might be controversy or concern about blockchain?
MENTZER: Silk Road was an online marketplace launched in 2011. The majority of products listed for sale on the marketplace were illegal drugs and all transactions were done using Bitcoin, which offered a layer of anonymity. The arrests started in 2013. The top 10 cryptocurrencies have a market value of roughly $183 billion, so to think that these are going to simply disappear is foolish.
It isn’t just illegal drugs being traded, but also illegal weapons, terrorist support and ransomware. There is also significant fraud taking place. Governments are playing catch-up with regard to these technologies in order to help protect consumers. For example, the U.S. Securities and Exchange Commission is imposing tighter regulations on initial coin offerings and is now treating cryptocurrencies as securities. However, this is also a very promising technology that has the potential to be a high-value public good. … Blockchain is approaching the trough of disillusionment. This means that the hype around the technology has passed and savvy companies will be looking in the ruins for those gems of opportunity.
Susan Shalhoub is a PBN contributing writer.