Blockchain’s Big Innovation: Trust

Would you get a cat that doesn’t even purr? 

I might, as an investment. After all, one changed hands for approximately US$170,000 in September 2018. Perhaps I could snap up the cheapest, which is going for US$2.31. Let me make myself clear—I’m referring to static, digital pictures of adorable cartoon cats called CryptoKitties, which you can trade as part of a blockchain-based virtual game. 

Before you diss it, consider that venture studio Axiom Zen managed to raise US$12 million in a span of just four months to develop the game, which, according to the company, allows users to purchase and “breed your rarest cats to create the purrfect furry friend”.

CryptoKitties are but one of the myriad applications that have sprung up from amidst the hype around blockchain—a technology I’d heard described as a ‘trusted distributed ledger’ and touted as a revolutionary new phenomenon that will shake up industries across the board. But like many people, I only had a very basic understanding of how the technology actually works. 

Hence, I jumped at the chance to attend SGInnovate’s Blockchain Research and Industry Introduction Workshop, held as part of Deep Tech Summit 2018. I joined about 50 other participants—mostly from the venture capital or fintech industries—for an information-packed, full-day session that provided a detailed overview of blockchain, its applications and most interestingly, its complications. 

Blockchain 101

In 2008, inventor Satoshi Nakamoto designed blockchain to act as a public transaction ledger behind the Bitcoin cryptocurrency. The idea was to create a world without central authorities such as banks controlling all the money—which was what precipitated the financial crisis of 2008. Since then, blockchain has gone beyond Bitcoin to be used in a variety of applications that require trust, ranging from verifying drug supply chains to internet ad-tracking. 

At a panel discussion held during the workshop, Professor Ooi Beng Chin, distinguished professor, and Dr Tien Tuan Anh Dinh, senior research fellow—both of the National University of Singapore’s School of Computing—went into the technology in detail, helping me wrap my mind around the fundamentals.

“Blockchain is made up of a distributed network of computers or nodes, where each will contain a chain of blocks,” said Professor Ooi, “Each block then contains a ledger with a list of transactions that are incorruptible, and which is linked to the previous transactions of the same resource.”

Prof Ooi Beng Chin speaking at the panel discussion. Seated on his right is Dr Tien Tuan Anh Dinh 

The blocks are also chained together using cryptographic hash pointers—data structures that store the address of where each value is in a computer’s memory. So, if someone intends to tamper with the data at any point in the entire chain, they will need to tamper with all the hash points until the first data input is reached, which is prohibitively tedious. 

This results in greater transparency, enhanced security, improved traceability, increased efficiency and reduced costs for storing information—akin to a very secure Google Docs where many users can share and edit one document.

Putting trust in technology

It struck me that blockchain really boils down to addressing the issue of societal trust, or rather, the lack of it—the technology is used to create a shared sense of trust among a group of disparate participants. 

Building services on the blockchain also requires a certain level of trust, said SGInnovate CEO Mr Steve Leonard, who moderated the panel. “You have to believe in the service that is being built, that it will evolve into an ecosystem; believe in how many people are likely to adopt the service based on the constraint on the supply of tokens—then that service goes on to become valuable,” he said.   

Steve Leonard moderating the panel discussion held during the workshop

My fellow participants were especially interested in issues of governance and regulation—for example, who governs the developers of a blockchain? They hold the power to ‘fork’ a blockchain—which essentially means introducing a new software upgrade that is not compatible with the original software or that alters the original software. Here, trust comes into play yet again. 

“Ultimately, you have to trust the developers, as they are the centralised party that has the ability to decide whether a blockchain will be forked or not,” Dr Dinh said. “That is the problem with an open software where, even though it is contributed by the community, there is still one guy who makes the final decision.” 

Unsurprisingly, one of the most active areas of research in blockchain is security—designing new blockchains which are more secure, for example, or identifying new attacks to existing blockchains. Dr Dinh, for his part, is working to make blockchains more suitable for enterprise settings.  

“Our group is looking at permissioned blockchains and their application limits,” he shared, explaining that permissioned blockchains, as opposed to public ones, require participants within a blockchain network to identify themselves. They are also restricted to performing only a few activities, thereby implementing another layer of control on the network.

Hype or hope? 

The big names are devoting attention and resources to blockchain—tech giant IBM has set up a whole division on blockchain, and consultancies such as PricewaterhouseCoopers and Accenture have followed suit. And much like the early years of the internet, investors are pouring billions into blockchain ventures, despite the technology’s nascent stage and underlying problems. 

But Dr Dinh thinks the path to adoption must be driven by businesses themselves, as that is where the demand lies. That said, depending on your industry and individual business needs, blockchain could either be a transformative technological innovation on par with the internet, or just a solution looking for a problem. 

“I am aware of several companies in Singapore that are trying to improve their workflows or processes [with blockchain],” Dr Dinh said. “Some might succeed, while others may have just bought into the hype of blockchain, but we need to let the businesses to try it out for themselves. If they are successful, they will be an example to other businesses to adopt the technology.”

As more companies jump on the bandwagon, the biggest questions lie in whether blockchain projects like CryptoKitties will end ‘purrfectly’ or disastrously—either instilling or undermining our trust in this emerging technology.

Brenda Lau

The Blockchain Research and Industry Introduction workshop was held as a side event for the inaugural Deep Tech Summit. We hold many AI-related and blockchain workshops throughout the year as we believe that such workshops help to build deep tech talent capabilities through world-class learning opportunities.