The Blockchain Revolution

The Blockchain Revolution

Show Video

(dramatic music) - [Narrator] Blockchain, the word seems to be on everyone's lips these days. It's the slightly mysterious techno wizardry behind cryptocurrencies you may have heard of, like Bitcoin. With near religious fervor, the blockchain believers say it's the biggest thing since the internet, a revolutionary technology that's going to remake the future. - This is one of those key technologies that is actually decentralizing and democratizing innovation itself. - [Narrator] They proclaim that it will make our food safe, our money secure, our medical records inviolable, our online identities truly ours.

- What blockchain does very, very well is manage transactions of information, and it does so by securing them as they occur. - [Narrator] It will bypass banks, lawyers, and a million other middlemen, along with their stiff fees, and bring the most disenfranchised people the world over into the global economy. - According IHS Markit, they expect 10% of the world's GDP to be stored on blockchains by the year 2025. - [Narrator] But is blockchain the game changer it's touted to be? And what does it mean for you? - It's alarming at the pace with which it's happening, and it's happening in virtually every single jurisdiction. (dramatic music) - [Narrator] Blockchain Revolution is made possible by support from B. Riley Financial.

B. Riley is uniquely positioned to provide full service collaborative solutions to clients at every stage of the business life cycle. (gentle music) Trust.

It's the thing that greases the wheels of civilization. If someone gives you a dollar, you trust that it's not a forgery, that a store will take it, a bank will honor it, the treasury department will guarantee it's worth. If you vote, you trust that your vote will be counted, or at least you used to. Buy an apple labeled organic, you trust that it will not be covered in pesticides. Try to think of any transaction, any interaction that doesn't require some level of trust. It's not easy, but the world is full of counterfeit bills and organic apples that are not remotely organic.

And as we learned so brutally in 2007 and 2008, the world is also full of banks that are corrupt, banks that can fail, banks that can take your trust, and your money with them. It's no coincidence that the blockchain concept appeared shortly after financial crash. In late 2008, a shadowy figure named Satoshi Nakamoto published a paper outlining how to get rid of the old trust system and replace it with a sort of trustless trust. - White paper in 2008 introduced Bitcoin, and Bitcoin was this concept of a decentralized ledger with a clear kind of financial currency focus. It's in a distributed ledger. And because of that distribution, no one person is in control of that record and doesn't have the opportunity to manipulate it.

And it was this system that created sort of a virtual currency. And blockchain is the technology that sort of underpins that. - [Narrator] To this day, no one knows who Nakamoto is, or even if he or she is just one person, but the blockchain idea proved to be a powerful one, and it works like this.

A block is simply a chunk of information, a record of something, like how much money you have. When it comes to money, that record is called a ledger. Let's say you have four coins.

If something happens to change that record or ledger, maybe you buy something that costs one coin, a new block is formed and linked to the first one, and the first one is locked, and so on, and so forth, as you earn or spend more coins. The blocks can't be opened and the links can't be broken because they're codes that are incredibly difficult to break. So that keeps the information safe, trustworthy you might say. But a blockchain includes yet another level of safekeeping. (electronic music) Instead of being tracked in one central place, like a bank, identical copies of the blockchain are stored on thousands or millions of independent computers, all of which can talk to each other.

It's called a decentralized network. And with each new block, the chain is updated in every single computer on the network. In money matters, this is referred to as a distributed ledger. Now, if someone wants to monkey with the information in the blockchain, they not only have to break these nearly impossible codes, they have to figure out a way to change the information in every computer in the network, almost instantaneously. So, were a bad bank employee could wreak havoc with your account, he or she couldn't tamper with your blockchain. The distributed ledger is theoretically both secure and transparent because everyone can see it, and presumably send out cyber howls of protest if anything unkosher is happening.

- Now you have hundreds, or thousands, or even millions of copies of that record. And as transactions are occurring, the updates are happening across all those copies. So I can't, for instance, dispute a record because that exchange was recorded in thousands of places. - [Narrator] Simple, right? Not for most of us. Even blockchain enthusiasts occasionally admit that they don't fully grasp it either. (electronic music) Fortunately and rather amazingly, these giant stones on the tiny Pacific Island of Yap can help us understand how blockchain and cryptocurrencies like Bitcoin work.

They're called rai, and they're a symbolic form of money that's been used here for centuries. The blockchain that makes them work, the distributed ledger, is actually in the minds and memories of the Yapese people. Their value is based not just on the size, but on the collective oral history that goes with each one. Because they can't be easily moved around from seller to buyer, the entire community keeps tabs on who owns what by memorizing the story of each stone and passing it down from generation to generation. There's no need for a middleman, like a centralized bank, because everyone knows who owns which stones and how much each is worth. - Really, all it is is a record of a thing, an asset moving around, and who owns it, so who has the rights to that asset? That thing moves around.

We just keep tracking where it's been. The challenge with that is who keeps that record. So if I'm the one with the asset, do you want to trust me to also keep the record about that asset? And then now we get back to the concept of, do we need to put somebody in the middle, a trusted intermediary to maintain that ledger for us. And that's where we get to the issue of trust or the lack of trust and how you overcome that.

- [Narrator] And this is another profound advantage of the blockchain in theory. You cut out the bank along with the time, trouble, and fees that go with trusting your important records to middlemen like bankers and lawyers. Add all of this up, security, efficiency, transparency, and economy, and the blockchain might really be bigger than the internet, because the promise of blockchain technology goes far, far beyond finance and law. - We're starting to see a shift beyond kind of the obvious initial applications of blockchain technology, which has been the cryptocurrencies, and really looking at what is the impact of these decentralized operating environments in other industries.

So supply chain, healthcare, security. And so I think people's understanding and acknowledgement of what it is is evolving. - [Narrator] If blockchains can't be opened or tampered with, they could keep all of your medical records safe, they could count your votes reliably, they could guarantee that money you donate to a charity gets to the people who need it, or that the diamond you're buying isn't financing war crimes. They could save money and they could save lives.

(electronic music) Take for example how that so-called organic apple gets to you. It goes through a lot of hands, creating a lot of records, each of which can be misread, misfiled, or outright falsified. There's the farm, the pickers, the shipping, the processing, the packaging, the labeling, and then your grocery store. That's a lot of trust. But what if you could tag that apple at the farm and create a blockchain tracking it? As it passes through all of those hands, a new block would lock in the information about where it came from, where it's been, and how it got to you. You could track backwards through the blockchain to guarantee that the farm it came from is organic.

Same for things like fair trade coffee and chocolate. - If it's organic coffee, you can trace that it came from this farm, at this elevation, this time of year, and on this day. And then as that's fed into the supply chain, you're carrying all of that provenance with it.

So that when it finally gets to the package if there's ever a question, you're looking at that package, take the identifying information off of it, you can quickly compare it back through that path to verify that it is what somebody says. - [Narrator] And if something goes terribly wrong, like people getting sick from eating lettuce that carries deadly bacteria, the blockchain record of that lettuce would lead directly and immediately to the source of the disease. There would be no need for widespread panic, along with the waste and financial devastation of having to pull all the romaine in the country from the shelves.

- One of the easiest places to look is from the idea of food safety. Recently, executives from Walmart were talking about this as it applied to mangoes, and challenged their people, with their existing technologies, how long is it gonna take you to take this package of mangoes off the shelf and tell me where they came from? And I believe the number that came out was over six days to trace it all the way back through their suppliers, and handlers, and processors, and everything to get back to the farm it came from. And through a blockchain pilot, it took 2.2 seconds. And what that allows is if we had a contamination issue to react to it with much more speed, but also much more precision. Because if you know that that package came from a specific farm and maybe through specific processors and handlers, that means, one, you can target those for the remediation, but two, the rest of the supply was unaffected.

And we saw with romaine lettuce and other things recently that if you can't react to that speed, because the public health consequences are so big, the reaction is usually to just wipe out the supply. - [Narrator] Beyond the supply chain, transportation is another industry where blockchain technology can be of huge advantage. - Autonomous vehicles is an innovation that is here to stay. (electronic music) We know that vehicle-to-vehicle communication occurs. So there are standards and protocols in place that allows one autonomous vehicle to communicate with another autonomous vehicle, so that if an autonomous vehicle is braking, the vehicle behind it receives a message that says, "I'm braking. You need to break as well."

The challenge though is how does that autonomous vehicles see around the corner? How does it see beyond its direct line of sight? And how does it trust any information that it actually is being told? So the new scenario that we're seeing is vehicle-to-vehicle and vehicle-to-infrastructure, where the city infrastructure can now be leveraged to inform an autonomous vehicle compute platform to make a decision one way or another. But why should that vehicle who is today classically making decisions on its own with the data that it's seeing from its direct line of sight, why should it trust anything that it's seeing from infrastructure? We think that blockchain is a unique opportunity where if you can actually create a route of trust and a chain of trust from the entire infrastructure, which includes the supply chain, the manufacturer of how that infrastructure was built, how it's operated, and the applications that's currently running on it, to make those recommendations to autonomous vehicles. With blockchain, we think that now there's a unique opportunity where an autonomous vehicle can now trust data that it's seeing from outside of its sphere of influence. (electronic music) - [Narrator] And that sphere is growing. Blockchain can influence the trading of renewable energies as well. - There's a project out there referred out there referred to as Brooklyn Microgrid.

It's a network of homes that have, some number of them have solar panels. And rather than being reliant on the utility, it's allowing neighbors to transact directly with one another. - [Narrator] When a home with solar panels collects more energy than it needs, the excess energy has traditionally been sent back to the energy company for a credit to the homeowner. In a network of homes, however, blockchain would, in essence, create and manage the necessary transactional data and decisions to purchase and sell the excess energy between the participating homes.

- As renewables are being deployed much more broadly, it's becoming challenging for the utility to take all that back in and then to sell it back out because it doesn't store, I mean, outside of batteries and other things where... That technology is not really mature enough yet. Electricity has to be used as it's generated. And by allowing neighbors to transact directly with one another and to use it, that offers a lot more value potentially to these deployments above and beyond just what is being offered from the utility. - [Narrator] This versatile technology is also fast at work and solving problems in another major area.

Personal identity. (electronic music) - The problem with identity now is you have a lot of people in this world today that do not have a formal piece of identification. So who are they, where they come from, where are they going, that's a big challenge today. In developed nations, not so much of a problem.

- The idea of digital identity has more value potentially to a population in a place that doesn't have all of the entrenched components the United States does. We have social security numbers, addresses. We have bank accounts. It helps identify us. Blockchain is offering value if we are able to establish somebody or something as unique.

There are some blockchain-based solutions that are allowing these individuals to access financial institutions, like a card that has a digital identifier on it. And going up and swiping this card, they're able to open up banking to these villages that have not had that experience, and then access their financial resources through a blockchain-driven network. - This is one of those key technologies that is actually decentralizing and democratizing innovation itself.

Innovation is happening at the consensus layer, and innovation is happening at the smart contracts layer within the blockchain space. It's happening most certainly at the business layer. It's happening at a global scale and at a pace that we haven't seen in a very, very long time. (electronic music) - [Narrator] To listen to some people, blockchain has the potential to fix pretty much anything that ails the world. But as usual, all that glitters is not gold. Blockchain's got baggage, serious baggage.

To begin with, the software behind a blockchain has to be written perfectly. And we know how often that happens. Like never. A coding error could allow someone to make off with millions of dollars worth of cryptocurrency, which has actually happened.

- Referred too often as the castle walls problem. It doesn't matter how high you build your castle wall if you leave the door open, and that's the nature of all of these security incidents, is someone has capitalized upon a vulnerability, a backdoor that was left open if you will. - While yes it's true that blockchain networks are immutable, the data that is within them can't be changed, can't be modified, the fact of the matter is that if you don't leverage and employ best practices in enterprise security, you can actually compromise entire blockchain ecosystems. - And it wasn't a compromise of sort of the blockchain encryption methodology itself. It was compromising the participants in this network, and then using the rules of the network against itself. - [Narrator] And big blockchains are cumbersome energy hogs.

Updating all of the records that are distributed on thousands or millions of computers takes time and eats up power. By some estimates, the energy that goes into generating new Bitcoins, a massively complex computation called mining now consumes more energy than some countries do. Experts worry that Bitcoin is becoming a significant contributor to climate change.

And of course there are just plain scams. Recently, a so-called cryptocurrency named OneCoin turned out to be a simple Ponzi scheme in which people lost millions. It had never been based on a blockchain to begin with. So depending on who you ask, blockchain may be all promise and profit or failure and fiasco. The reality is somewhere in between.

- I do think it's a revolutionary technology or technology that offers a lot of revolutionary promise. I don't know that it's just gonna magically unseat all of our legacy technologies, but I think it is an interesting tool to have in our bag, and it offers a lot of value to a lot of different industries, which makes it unique. (somber music) - [Narrator] And until the wrinkles are ironed out, well, blockchain has yet to fulfill its most basic potential, a revolutionary solution to questions that have played humanity since our beginnings.

Who can you trust? What can you trust? Can we really eliminate trust from how we interact? And would we really want to? Blockchain Revolution is made possible by support from B. Riley Financial by leveraging cross-platform expertise and assets. B. Riley is uniquely positioned to provide full service collaborative solutions to clients at every stage of the business life cycle and in all market conditions.

Visit for more information.

2020-12-21 13:19

Show Video

Other news