Chain reaction: How to succeed in the blockchain economy

You’ve probably heard a lot in the media about blockchain – and particularly cryptocurrencies. Retailers are already seeing the benefit of blockchain technologies through the rise of cryptocurrencies. Microsoft and Subway have started to offer payment by bitcoin. But they’re just two examples, there are many more ways that blockchain can add value and security to your business – right now.

Blockchain can help you reduce costs and improve certain processes, for example, better product and customer data tracking and security, and reducing the risks of fraud or product counterfeiting.

Blockchain technology is fast becoming integrated into business processes in its customized form for enterprises, commonly called Distributed Ledger Technology (DLT). It’s used to do things like verify transactions and control deliveries. More organizations are joining the blockchain economy: According to Gartner’s June 2019 CIO Agenda: Blockchain’s Emergency Depends on Use Cases (report available to Gartner subscribers), in the 2019 Gartner CIO survey, 57 percent of typical performing enterprises plan to start deploying blockchain services within the next one to three years; it’s even greater (64 percent) in developing economies. Further, according to Gartner, financial services, services and transportation are the industries who have already deployed or will deploy blockchain services in the next twelve months.

But beyond financial services and cryptocurrency exchanges, how else could blockchain benefit business?

Blockchain for logistics and manufacturing

Blockchain is a popular topic for many new international research and development collaborations. Many of our customers at Kaspersky are now part of bigger international blockchain projects, with companies from the same industries in Germany, China and USA, for example, working on the same project together.

One area of international collaboration is in logistics. Blockchain technologies can help track an item in a supply chain, for example, to verify the authenticity of a product to prevent fake medicines entering a pharmaceutical supply chain, or track its movement to ensure vital supplies in a humanitarian emergency safely reach their destination. It’s already being used today: Walmart is tracking the movement and origins of pork in China. At the other end of the luxury product scale, De Beers is developing a diamond-tracking platform to improve supply chain transparency and traceability.

Verifying authenticity and ownership

In our Innovation Hub at Kaspersky, we support several companies that are using blockchain in ingenious ways relating to verification. Verisium is working with manufacturers to verify the authenticity of products using NFC (near-field communications) tags embedded in products that can be scanned by the customer’s mobile phone to activate exclusive content and services. It’s a great way to reward your most loyal or high-value customers. In all types of manufacturing, blockchain will have a big impact on how customers interact with vendors to verify what they are buying and where it is in transit – benefiting any purchase from specialist car parts to ordering a tailor-made suit.

Polys, another Innovation Hub start-up, is using blockchain to allow people to securely vote online while using authentication to check if they’re entitled to vote. This could revolutionize the exchange of information between organizations and their stakeholders and customers, and potentially shape new forms of digital democracy between citizens and governments. This year, they’ve already achieved the biggest voter turnout in the world using blockchain; more than 80,000 citizens cast a digital vote to support their preferred municipal funding project in the Volgograd region in South Russia.

Important transactions for goods could also become more secure. For example, when people buy and sell expensive artwork, they don’t always exchange the objects, just the certificate proving the authenticity of its ownership. Blockchain can secure this valuable information by creating a token for the object that you own. You can then assign the ownership and rights to another person.

Investing in new technologies always carries a risk, but blockchain technology itself can be as safe as houses. In Malta – the country dubbed “blockchain island” thanks to its tech-friendly policies – ownership rights for properties are stored in a blockchain registry.

Blockchain can make your data immutable

Blockchain is a perfect tool to support data immunity through the distributed registry of data. There’s nothing particularly cool about the blockchain itself – it’s basically just distributed data storage. But what’s really interesting is how the data is synchronized, so all nodes have the same data-testing mechanism. This ensures it stays intact. It’s a literal chain: every transaction is linked to the previous one, and the next one. Whoever is working in the blockchain ecosystem – whether they read or feed the data – their changes are recorded. This helps to distribute, ensure consistency and makes the data immutable – virtually impossible to hack, manipulate or steal. Although blockchain guarantees a secure process, it can never guarantee the security of your decentralized applications. And the risk of mistakes made by people and logic errors in the blockchain code can still cause vulnerabilities that can lead to an attack.

How to solve the security risks of blockchain

Although it’s a new technology, the security issues remain the same for blockchain as other IT systems. The use of DLTs for enterprises combines the risks of being a large business with the vulnerabilities of a blockchain. For example, logic errors and bugs in smart contracts can lead to vulnerabilities in the blockchain process, and DDoS (denial of service) attacks could bring down the DLT’s infrastructure by consuming all of its processing resources.

Organizations should concentrate on ensuring their own infrastructure is safe and secure, so you’re well protected if others with weaker security join the blockchain. Implementing this technology requires careful protection. Blockchain technology itself is usually the strongest link in the chain: the weakest ones are every system that the company builds on top of the blockchain; these must be protected.

The consequences of a successful attack can also be far more serious for blockchain that with other data systems; if attackers decide to target an enterprise blockchain project, huge quantities of data could be exposed. Disruptions to supplies, manufacturing or maintenance can threaten trading, as well as consumer convenience and safety.

You will still need to invest in cybersecurity services like security audits, penetration testing and an incident response strategy. It will provide protection for decentralized applications and enterprise blockchain infrastructure. In DLT, each endpoint should be secured against breaches, while applications and smart contracts are thoroughly analyzed for vulnerabilities.

Don’t worry, it’s not as complex or costly as it may sound – some elements like the blockchain application security assessment are a one-off charge, tiny in comparison with the overall investment in new technologies. And, of course, the high costs of what a data breach could cost your business and reputation, particularly if legislation like GDPR applies to you.

The power of disruption

Blockchain has the potential to change how people interact with businesses and improve the customer experience, making exchanges of information and services frictionless and transparent. In the future, I think fewer companies will emphasize they’re using blockchain, it will simply become a hygiene factor as a more secure way of doing business rather than a novel technology.

There’s no denying it: blockchain is a disruptor. But disruptive technologies help us review and improve what’s gone before, and create new-use cases and benefits for the future. There are already many positive opportunities for businesses. Now’s the time to make your mark and join the blockchain economy.