Blockchain explained: it’s not just about money

One uncomfortable fact you find out as you learn about the internet is that that every financial transaction, everything you do on the web, goes through a centralized authority to manage your transactions. Not everyone is okay with that, and some even believe it has a high chance for cyber theft. If you’re not paying attention by now, you will be after you we talk with our next guest, Peter Rogers. He is the CEO of Welford Management, and he is a consultant in blockchain, an emerging technology that is poised, in Peter’s opinion and many others, to change the world.

ABERMAN: Peter, thanks for joining us.

ROGERS: Thank you, Jonathan, it’s great to be here.

ABERMAN: Let’s start with this. Blockchain: What is it?

ROGERS: What is it? Well, blockchain is, essentially a network of computers, a distributed database, if you like, which enables information to be stored and transacted across the network, as opposed to storing information in a centralized database, such as a bank, or a large organization. Blockchain enables a trustless environment, and what I mean by that is, if I’m going to do business around the world, if I’m going to transact with somebody, I don’t know them, and therefore don’t trust them, obviously, that’s human nature. So, we employ very large organizations and institutions to create trust in the network. These are banks, and credit card companies, social media companies, Uber, AirBnB and many others that we all know and sometimes love. And they create trust, and they enable us to do business without actually being in the same room as somebody.

Subscribe to the What’s Working in Washington podcast on iTunes.

If I’m going to buy a book from you with cash, I’ll pay you ten dollars, you give me a book, we walk away, we’re done. But if I’m going to do business with you around the world, that’s not quite the same. So, what the blockchain does is, it creates trust. It develops a trustless network so that we can do business peer-to-peer, directly, without those central authorities, those intermediaries that currently and have traditionally and historically created that trust. You may ask, why is that a bad thing? The problem with those centralized authorities is that they’re centralized. They hold information on you, me, and everybody else in in a central database, and that makes them a target for hackers. J.P. Morgan and Target and Home Depot, and recently Equifax have learned that the hard way, of course.

The second thing is that they slow things down. When we’re trying to transact, having those centralized authorities, if you put your credit card into a swipe machine, it goes through goodness knows how many banks, and goodness knows how different things happen to actually make that transaction occur, and several days later, there’s a settlement and the deal is done. But the blockchain enables those transactions to happen instantaneously, so they greatly speed up financial transactions of course, in terms of stocks, and shares, and dealing, and certain things you would want to make that transaction happen very quickly.

ABERMAN: Now the key here is, as I understand it from talking with you and other experts, is that blockchain is a distributed data technology that has a wide range of applications, but at its core, is very, very sound, from the standpoint of how it’s encrypted, and how it’s utilized. It basically almost self-heals. It is revolutionary, and a lot of people are excited about it. Peter, in your work, you’re starting to work with various businesses around how to use blockchain to change their business models. Give us some examples of where you’re seeing companies look at how they’re managing data and networks in new ways because of this enablement.

ROGERS: Sure. Well, the obvious ones, the industries that people quote, are financial services and health. There are use cases, and a quick one in the financial services industry is international remittances. At the moment, it costs you anywhere from ten to twenty percent to send money overseas, a good chunk of change if you’re going to send 200 dollars to a family member in Africa that they need to support themselves. Using the blockchain, or blockchain-based financial services, enables an immediate transaction, instantaneous, at very, very low cost.

So, there are obvious use cases along the lines of many, many companies, Ripple and many others are working on applications in that space. But here’s one that you might not have thought of, or might not think is so obvious, and we’re working with a client at the moment in the recruitment industry. They’re a recruitment consultant, and thy deal with other recruitment consultants as well, and employers. They came to us a while back and they said, we’ve heard about this blockchain thing, and we think it’s going to disrupt our industry.

Now, I’ll freely admit, I was not an expert on the recruitment industry, at that time, other than as a CEO in the past, I’ve hired people and been charged twenty percent of first-year’s salary by recruiters, and never thought that was particularly fair, but never really understood the industry, and therefore coughed the money up. So, we got into a conversation with this client, and talked about how blockchain might disrupt the industry. Once we started to investigate, of course, we found out that there is a significant potential disruption here. And the reason is, one of the reasons that recruitment consultants charge high fees is that, when I send you my resume, what’s the guarantee that that resume is accurate?

We’ve seen many very high-profile instances of people putting an illegitimate degree on their resume, or an employment history that wasn’t actually there, or some project they ran that they didn’t really run. And so, the recruitment consultant is really forced to check every resume that lands on their desk before they present that resume to their client, the employer. Because if they present an incorrect resume, and that person turns out not to be who they say they are, of course, the consultant’s reputation is then degraded. And so, they take great care to check every resume.

ABERMAN: How does the blockchain solve that problem?

ROGERS: So, the blockchain enables information to be placed on a network, which is then immutable, and that means that it can’t be changed, it can’t be tampered with. If anyone does try to tamper with it, it becomes immediately obvious. So, if I’m able to post my resume information, my academic qualifications, my employment history, if I’m able to post that to the blockchain, and have that verified absolutely by the institution for which I used to work, or where I went to school, then that information can be guaranteed to be accurate.

ABERMAN: So, you can no longer monkey with your LinkedIn profile. That’s a very interesting use case. The biggest use case I think people are most familiar with right now, which I think may be the biggest risk for people understanding blockchain, is Bitcoin. Really quickly here, Bitcoin has gotten people’s tension, it’s a financial bubble, perhaps, people are trading it, making money, not making money. Do you think that the Bitcoin situation patient helps blockchain adoption, or may harm it?

ROGERS: Interesting question. I think the situation with Bitcoin brings to the attention of the wider population blockchain. And what I mean by that is, Bitcoin or may not be a bubble, but bubbles aren’t a bad thing. There was a bubble during the internet period, which led to a lot of innovation, and a lot of money being invested, and out all of that we get Facebook, Google, Amazon and so on. So, bubbles are not necessarily a bad thing, in my opinion, but yeah, I think Bitcoin has done a lot to drive the understanding of what blockchain is, because people will, before they invest, should take a look at Bitcoin, do your own research, and understand what it is, and why it has the potential to increase in value and then drop back.

And if you look at the underlying technology, you come back to blockchain. So, I think think from that sense, it’s driven an understanding of blockchain. On a negative side, of course, it has negative connotations, We see it go to almost 20,000 dollars in September, and come back to where it is now, which is six or seven thousand or whatever it is. So, of course people are wary about that. But, I still think that Bitcoin is a tremendous opportunity, and I go back to the fact that, as a currency, as a cryptocurrency, or as a network, it has never been hacked. It’s never been hacked.

ABERMAN: The underlying blockchain has never been hacked, people have been hacked losing their wallets and so forth.

ROGERS: Absolutely.

ABERMAN: That’s a very big point. And with that, Peter, I want to thank you for taking the time to talk with us about what, frankly, may be the biggest industrial opportunity currently available to the D.C. region. That was was Peter Rogers, thanks for joining us.

ROGERS: Thanks very much, Jonathan.