While the crypto market has experienced volatility and skepticism, the underlying blockchain technology has continually evolved since the introduction of Bitcoin in 2009. Though Bitcoin has doubled since last year, the focus has shifted to non-fungible tokens (NFTs) and infrastructure protocols like Chainlink and Graph.
Yet, there is widespread confusion about blockchain’s potential in sectors beyond financial services. Our recent research positions blockchain as a transformative technology that offers a secure foundation for digitizing and automating business processes, enabling efficient collaboration, and establishing robust digital infrastructures. Embracing blockchain paves the way for new disruptive opportunities, aligning digitalization with values like security, reliability, privacy, and trust.
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Blockchain: beyond the hype to practical applications
The literature on blockchain has expanded exponentially in recent years, with the technology being proclaimed as the backbone of Web 3.0. Understanding blockchain’s key characteristics is essential to move beyond the hype. Based on workshops and interviews with large firms from various sectors like Novartis and Generali, the Kantonsspital Baden or smaller firms like Green or Axedras among others, we found practical applications in areas such as self-sovereign identities, product tracking along supply chains, and sensitive data management. By grasping the true potential of blockchain and addressing its challenges, leaders can unlock its benefits and foster a more trustworthy and efficient digital ecosystem. Thus, we need first to demystify blockchain by exploring its core features:
- Decentralization: Blockchain operates as a distributed ledger system (DLT), facilitating decentralized transactions without central control, reducing fraud and hacking risks.
- Transparency: Transactions on the blockchain are transparent, allowing all network participants to view them, thereby increasing accountability and reducing fraud risks.
- Security: Advanced cryptographic algorithms secure blockchain transactions, making data alteration or hacking nearly impossible.
- Efficiency: Blockchain processes transactions faster and more efficiently than traditional systems, reducing costs and improving transaction speed.
- Traceability: Every transaction on the blockchain is permanently recorded and tamper-proof, facilitating easy transaction history tracing.
Data on the blockchain
Unlike conventional data management where companies often centralize and silo data, blockchain takes a different approach. Copies of the entire database are stored across nodes, each independently managed by individuals in a global network. Blockchain offers two options for data storage: on-chain and off-chain. On-chain storage encodes data into transactions on the blockchain itself, suitable for small data sets like simple messages or files. Off-chain storage, on the other hand, uses decentralized systems, such as company data centers or the cloud, with blockchain verifying data integrity and controlling access. A unique digital fingerprint (hash) of the off-chain data is included in blockchain transactions, ensuring the integrity of the data stored off-chain. This approach suits larger files and enables smart contracts to manage data access, beneficial for sensitive information like medical records or financial data.
For instance, in the healthcare sector, patient data and its secure storage in the electronic patient dossier (EPD) are at the heart of digitalisation. By distributing the operation of a digital application across the systems of several participants in a healthcare ecosystem, blockchain increases the tamper resistance and availability of applications. This type of identification can be used for digital vaccination certificates, digital medication prescriptions or the EPD. In addition, every patient can participate in the exchange of information in a self-determined manner and decide which data is made available to whom. Laboratory results, X-ray images and vital signs are not stored in the blockchain, but remain in the service providers’ databases. As we learned, only references to the storage locations of the data and access conditions are stored on the blockchain itself.
Conclusively, blockchain for data storage and management provides a flexible, scalable solution, maintaining the inherent benefits of security, immutability, and decentralized control. Whether storing data on-chain or off-chain, businesses can leverage blockchain for secure, large-scale data management while ensuring integrity and accessibility.
Hurdles and risks
Remaining in the healthcare sector, key political initiatives in Switzerland, formulated in a Petition (18.2005, 19 February 2018) and a Motion (19.3955, 4 July 2019) highlight the importance towards digital healthcare. Since then, almost nothing has happened and progress faces delays. Technological challenges are not the hurdle as the example of Estonia shows. In 2008, E-Estonia was launched, embracing blockchain technology to enforce the integrity of government data and systems. Selected state registries backed by blockchain technology, include healthcare, property, business, succession, digital court, voting and many more. E-ID and EPD are standard applications, used by all Estonians.
In Switzerland, blockchain encounters rejections with arguments that storing sensitive data on the blockchain poses issues regarding privacy and regulatory compliance. In fact, the technology’s transparency and immutability can compromise confidentiality, necessitating careful data protection considerations. However, evolving regulatory frameworks and interoperability issues between different blockchains add complexity to the adoption process, requiring businesses to navigate legal and technical landscapes.
Outlook
While challenges exist, the transformative potential of blockchain is undeniable. As the technology evolves and converges with other disruptive technologies, groundbreaking applications and new business models are anticipated. The future of blockchain lies in ongoing innovation and collaboration, leading to a decentralized and secure digital infrastructure.
We need a comprehensive understanding about the technology and what is more an attitude that embraces continuous innovation, collaboration, and experimentation. Revising myths and establishing regulations takes time and remember, just as the ARPANET developed in the 1960s and the World Wide Web emerged in the 1990s, the real value of the Internet unfolded over time.
