Introduction to Blockchains & What It Means to Big Data
What is a Blockchain?
Blockchain is a distributed database system that acts as an “open ledger” to store and
manage transactions. Each record in the database is called a block and contains
details such as the transaction timestamp as well as a link to the previous
block. This makes it impossible for anyone to alter information about the records
retrospectively. Also, due to the fact that the same transaction is recorded
over multiple, distributed database systems, the technology is secure by
design.
With the above in mind, blockchain is immutable –
information remains in the same state for as long as the network exists.
Blockchain
and Big Data
When you talk about blockchain in the
context of Bitcoin, the connection to Big Data seems a little tenuous. What if,
instead of Bitcoin, the blockchain was a ledger for other financial
transactions? Or business contracts? Or stock trades?
The financial services industry is
starting to take a serious look at block chain technology. Citi, Nasdaq, and
Visa recently made significant , a Bitcoinblockchain service provider. And
Oliver Bussmann, CIO of UBS says that blockchain technology could “pare
transaction processing time from days to minutes.”
The business imperative in financial
services for blockchain is powerful. Imagine blockchains of that magnitude.
Huge data lakes of blocks that contain the full history of every financial
transaction, all available for analysis. Blockchain provides for the integrity
of the ledger, but not for the analysis. That’s where Big Data and accompanying
analysis tools will come into play.
OPPORTUNITIES FOR BIG DATA ANALYTICS
Recently, a consortium of 47 Japanese
banks signed up with a
blockchain startup called Ripple to facilitate money transfers between bank
accounts using blockchain. The main reason behind the move is to perform
real-time transfers at a significantly low cost. One of the reasons traditional
real-time transfers were expensive was because of the potential risk factors.
Double-spending (which is a form of transaction failure where the same security
token gets used twice) is a real problem with real-time transfers. With
blockchains, that risk is largely avoided. Big data analytics makes it possible
to identify patterns in consumer spending and identify risky transactions a lot
quicker than they can be done currently. This reduces the cost with real-time
transactions.
In Industries outside of banking too,
the main drive for adoption of Blockchain technologies has been security.
Across healthcare, retail and public administration, establishments have
started experimenting with blockchain to handle data to prevent hacking and
data leaks. In healthcare, a technology such as blockchain can make sure that
multiple “signatures” are sought at every level of data access. This can help
prevent a repeat of events such as the 2015 attack that led to the theft
of over 100
million patient
records.
POSSIBILITIES IN REAL-TIME ANALYTICS
Up until now, real-time fraud detection
has only been a pipe dream and banking institutions have always relied on using
technologies to identify fraudulent transactions retrospectively. Since the blockchain
has a database record for every single transaction, it provides a way for
institutions to mine for patterns in real-time, if need be.
But all of these possibilities also raise
questions about privacy and this is in direct contradiction to the reason why
blockchain and bitcoins became popular in the first place. Several industry
experts have expressed
concerns that
a technology that can provide a record of every transaction can be exploited
for everything “from customer profiling to other less benign reasons”.
From another perspective however,
blockchains greatly improve transparency in data analytics. Unlike previous
algorithms, the blockchain design rejects any input that it can’t verify and is
deemed suspicious. As a result, analysts in industries such as Retail only deal
with data that is completely transparent. In other words, the customer behavior
patterns that blockchain systems identify are likely to be a whole lot more
accurate than it is today.
Uncovering transactional data
The data within the blockchain is
predicted to be worth trillions of dollars as it continues to make its way into
banking, micropayments, remittances, and other financial services. In fact, the
blockchain ledger could be worth up to 20% of the total big data market by 2030,
producing up to $100 billion in annual revenue. To put this into perspective,
this potential revenue surpasses that of what Visa, Mastercard,
and PayPal currently generate combined. Big data analytics will be crucial in
tracking these activities and helping organizations using the blockchain make
more informed decisions.
Data intelligence services are emerging
to help financial institutions, governments, and all kinds of organizations
delve into who they might be interacting with on the blockchain and uncover
“hidden” patterns.
Uncovering social data
As the popularity of bitcoin advanced
in 2014 and 2015, the virtual currency began to fluctuate heavily as a result
of real-world events and the general public’s sentiment about the technology.
These fluctuations are proof that the virtual currency has several
characteristics that make it ideal for social data predictions.
According to Rick Burgess of Freshminds: “Using social
data to predict consumer behavior is nothing new, and many traders have been
looking to include social metrics into their trading algorithms. However,
because there are so many factors involved in pricing most financial
instruments, it can be extremely difficult to predict how markets will change.”
Fortunately, bitcoin users and social
media users tend to align quite well, and it may be beneficial to use them both
for data analysis, as he
further explains:
·
Bitcoin users tend to be in the same
demographic as social media users, and so their attitudes, opinions, and
sentiment towards bitcoin are well documented.
·
The value of bitcoins and other
cryptocurrencies are determined almost
solely by market demand because the number of coins on the market is
predictable and are not tied to any physical goods.
·
Bitcoins are predominantly traded by
individuals rather than large institutions.
·
Events that affect Bitcoin's value are
disseminated first and foremost on social media.
Data analysts are now mining social data for insights
into key cryptocurrency trends. This, in turn, helps organizations uncover
powerful demographic information and link bitcoin’s performance to world
events.
Uncovering new forms of data monetization
According to Bill
Schmarzo, CTO of Dell EMC Services, blockchain
technology also “has the potential to democratize the sharing and monetization
of data and analytics by removing the middleman from facilitating
transactions.” In the business world, this gives consumers stronger negotiating
powers over companies. It allows consumers to control who has access to their
data through the blockchain. They could then demand pricing discounts in
exchange for revealing data on their personal consumptions of a company’s
product or service.
Schmarzo also explains how the blockchain may lead to new forms of data
monetization because it has the following big data ramifications:
·
All parties involved in a transaction
have access to the same data. This accelerates data acquisition, sharing, the
quality of data and data analytics.
·
A detailed register of all transactions
is kept in a single “file” or blockchain. This provides a complete overview of
a transaction from start to finish, eliminating the needs for multiple systems.
·
Individuals can manage and control
their personal data without the need for a third-party intermediary or
centralized repository.
Ultimately, the blockchain could become
a key enabler of data monetization by creating new marketplaces where companies
and individuals can share, sell, and offer their data and analytical insights
directly with each other.
Spearheaded by the large scale adoption
of bitcoin, blockchain technologies are gaining ground throughout the business
and financial worlds. The fast and secure transactions it facilitates could
potentially revolutionize traditional data systems. According to a survey
by KPMG and
Forrester Consulting, one-third of decision makers trust their company’s data. But with
blockchain technologies, this trust can be considerably strengthened, and real
applications will become much more commonplace.
Comments
Post a Comment