Could the Blockchain Challenge the Cloud as the Next Big Thing?

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I have, in the past, voiced skepticism about the idea of separating the technology behind Bitcoin, specifically the blockchain, from the currency itself. It seems that every day another large firm, and in some cases even government agencies, invests in an idea based on that blockchain or talks vaguely of plans to do just that. I still believe that some kind of virtual currency that can be freely transferred within a peer to peer network is required to make the idea work, but with this increasing level of interest it is possible that somebody will find a way to effectively separate the two. Given that, it is worth taking some time to consider why that quest may have become so urgent.

The important point to consider here is that the original Bitcoin protocol and its subsequent practical applications are based on one overriding principle: decentralization. Rather than there being one central store of records and source of verification for transactions in bitcoin those roles are fulfilled by the entire network of users and miners. That provides for the hardware required, while removing the need to trust one central authority. That is why Bitcoin is known among other things as a trustless record system.

What is interesting is that that move towards decentralization has been occurring, almost on the fringes, as the mainstream corporate world is hurtling headlong in the opposite direction. “The cloud,” with the ensuing practical applications dubbed “The internet of things” is all the rage; both have become buzzwords for investors looking at a long term strategy. What the cloud is, though, is a massive move towards the centralization of computing power and data management.

There is no doubt that that offers some major advantages, both to corporations and consumers, in some ways. The aggregation of data enables companies to make informed decisions based on consumer behavior in order to both better serve those consumers and increase profits for shareholders. Recent events, however, have highlighted the fact that it also brings potential problems beyond the obvious privacy concerns.

A couple of weeks ago first United Airlines and then the Wall Street Journal suffered computer problems that caused flight chaos in the former case and shut down a website in the second. When the NYSE computer system failed later that same morning resulting in a closure of the exchange, many began to get worried. It all looked like too much of a coincidence and the idea that this was part of a concerted cyber-attack quickly began to spread. As it turned out it was no such thing. The events of that morning were unrelated and simply an unfortunate coincidence, but for many it highlighted the dangers and vulnerability of centralized computer networks.

A decentralized network that removes the need for trust, however, would be a harder thing against which to launch an attack. The need to trust whoever controls the network is another concern. There is the question of trust in terms of not using it for fraudulent purposes, but also trust that the owner will provide for adequate security. I understand that the blockchain is not a data storage and analysis system in the way that cloud computing is, but the idea of decentralizing some of the modern day computer functions is an intriguing one that addresses these problems to some extent.

Unlike many in the Bitcoin community, my preference for a decentralized, distributed ledger system of accounting in certain circumstances doesn’t stem from ideology; rather it comes from practicality. In an age when there is a tendency towards rapid centralization of computer functions, it is telling that many companies are looking at the principles behind Bitcoin as the way forward. That in turn raises the interesting question, could the blockchain ultimately be the undoing of the cloud?

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: News Headlines , Technology , Business , Forex and Currencies

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Martin Tillier

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