Bitcoin and other cryptocurrencies that enable transactions outside the regulated financial sector have attracted the attention of regulators worldwide and, at times, drawn the scorn of luminaries such as investor Warren Buffett and JPMorgan Chase CEO Jamie Dimon. Some countries have banned cryptocurrencies and the exchanges that trade them, some have offered support, while others such as South Korea have been mercurial first threatening to ban trading in digital currencies, then changing their tack.
The ambivalence, however, does not extend to distributed ledger technology, the platform commonly known as blockchain that underpins and enables cryptocurrencies. Blockchain, essentially a chain of encrypted records of transactions, is a new, rapidly evolving use of existing technologies that promises to make a wide array of industries and government functions more efficient. Ahead of regulators, the likes of the Big Four accounting firms, Microsoft and Amazon have embraced the technology and offered blockchain services.
And on July 19, the Telecom Regulatory Authority of India became the first regulator in the world to harness blockchain technology to curb what it called the “menace” of spam calls and unwanted messages, which plagues phone users from Delhi to Detroit.
Organisations should not blindly retrofit their existing, often centralised database systems with blockchain technology. Just as most people have not abandoned their familiar paid version of Microsoft Word in favour of a free Google word processor, IT managers are unlikely to switch from what they are used to unless they see benefits by orders of magnitude: revenues that are 10 times higher or costs that are 10 times lower. But when blockchain can speed things up dramatically – reducing a process that once took days to a matter of minutes – it may be time to consider a change.
Still, one must also determine whether the adoption of blockchain technology makes sense for a particular use. In the case of India’s unsolicited telemarketing calls and messages, the country’s telecoms regulator seems to have recognised the three factors that make blockchain the preferred solution. Firstly, multiple untrusting parties can write to the same database. Secondly, the regulator does not want a third-party intermediary to manage the interactions. Thirdly, data entries in the database cannot be independent of each other; any change to one record will affect other records or applications using them.