Opinion Blockchain has been one of the most widely discussed technologies in recent years, since its first application acting as a platform for the transaction of Bitcoin. Since then, the revolutionary technology that touts decentralisation of data has been applied to a number of industries for its element of trust as it is not native to one location or computer, exists publicly and each transaction is verifiable.
Despite a prediction from Global Analyst House Forrester in 2018, that the end of the year would see the demise of blockchain as a technology ‘hype’, a recent report from Deloitte concludes otherwise. The analyst firm highlights the emergence of a shared recognition that blockchain has been shown to serve as a pragmatic solution to business problems across many industries this year.
Particularly for the financial sector, blockchain, has the potential to transform well-established institutions and bring lower costs, faster execution of transactions, improved transparency, auditability of operations, and many other benefits.
So, what does blockchain actually do?
Ultimately, blockchain records sequences of events. By hash coding each event with the previous one and distributing the hash codes to ledgers in many places, the sequence cannot be re-ordered. This allows blockchain to be used for applications such as digital currencies, smart contracts, and tamper-proof evidence.
However, blockchain has its limitations, that can cause issues for many industries, specifically organisations within the financial sector, that manage very time sensitive and critical data.
Blockchain only records the sequence of events rather than the actual time of events. Worse still, the recorded time will be different at each ledger unless they are all synchronized. The ultimate goal for organisations is to have databases that everyone can trust.
Universal Time (UTC) and hash ledgers
Developing hash ledgers that are immutable in sequence, time and place is of utmost importance. This creates documents watermarks that not only guarantee the document is genuine, but also where and when it was created.
This is done by providing APIs that synchronize the clocks on participating devices to Universal Time (UTC). Watermarking time is achieved by weaving the timestamps generated by these APIs into the ledger. The latency signatures between the ledgers and the edge devices they are communicating with likewise allows location to be estimated by triangulation. This all works without relying on the edge device’s clock being right. We can’t trust the edge device, but we can measure and record its clock’s offset from UTC.
None of this is possible, of course, without access to UTC, which is a slippery customer. The clocks being used on the ledgers can easily drift, creating chasms of doubt in the data. What is needed is traceability, i.e. for the clocks to be synchronized using an unbroken chain of comparisons back to the 70 national physical standards institutes that collectively agree on UTC time.
That is achieved using a network of timing hubs based in London, New York and Tokyo that can traceably synchronize server clocks worldwide to an accuracy of 100 millionths of a second, often far better. We obtain our time from GPS, Glonass and BeiDou navigational satellites, which in turn synchronize to the 70 standards institutes. We also have a direct connection to the RISE standards institute of Sweden.
Watermarking in time and place solves a lot of trust problems associated with the virtualization of processes that regular blockchain can’t quite achieve:
- How can I be confident that the transaction I am conducting is with the person I think it is?
- How do I prove the data purportedly generated by this IoT device is genuine, and where and when it claims it is?
- How can I be confident that I understand the sequence of events, when virtual processes have real-world consequences, for which I am responsible?
Traceable ledgers unlock business value where there is a need to understand causality, behaviour, and creating trust in data:
Knowing exactly when events happened allows us to detect their likely causes by examining the events immediately prior. For instance, the following use cases could be applied:
- Financial markets: Identifying the causes of flash crashes
- Cybersecurity: Identifying the weak point that caused of an attack
- Automated systems: Identifying the causes of complex systems failure
- Insurance: Identifying the causes of an event resulting in a claim
Understanding characteristic timing signatures of sequences of events allows us to predict the outcomes of the underlying processes.
- Fraud Detection: Identifying events inconsistent with normal behaviours
- Intelligence: Identifying timing signatures that can predict material outcomes
Being confident that your time is correct, and being able to prove that to others, is vital when virtual events have physical outcomes for which someone must take responsibility.
- GDPR, PECR: Proving that private data was used as agreed
- Data validation: Proving that data is valid and was not manipulated
- Cryptography: Generating cryptographic keys that cannot be used at a later date
The leverage traceable timing offers blockchain and the way it reconciles virtual events with the physical world, greatly increases the scope of blockchain within fintech. It creates a new class of data that can be verified and trusted.
While blockchain technology certainly has a place in the mainstream and is poised for largescale adoption by enterprises, there are a number of trust issues that traditional blockchain does not solve yet. The combination of blockchain technology and accurate UTC that is traceable, we believe, can bridge the small but crucial gap that blockchain cannot currently fill on its own.
Interested in hearing more in person? Find out more at the Blockchain Expo World Series, Global, Europe and North America.