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Technology
PUTTING SKIING & SNOWBOARDING

ON THE BLOCKCHAIN

New Technology Could Revolutionize Traditional Commerce

BY PAUL BRODY, PRINCIPAL, GLOBAL INNOVATION LEADER BLOCKCHAIN, EY

IF YOU KNOW AND UNDERSTAND how blockchains work, you With smart contracts, you can specify business rules or
start seeing good applications for the technology in every algorithms that apply to the underlying data in the ledger.
industry. If you don’t quite grasp the concept, it’s hard to In the case of procurement, for example, you can have mul-
imagine what all the fuss is about. Blockchains, which got tiple companies share a single procurement agreement. The
their start in industries with Bitcoin, have become famous rules of that agreement might specify that pricing is based
as secure payment mechanisms, but they are not well under- on total volume purchased across all the partners. The logic
stood even by many of those who use them. Contrary to is straightforward, but traditionally it has often been hard
common belief, for example, while they are indeed very to apply because nobody knows how much has been pro-
secure, they are neither anonymous nor private—and there’s cured. With a blockchain, you can have both a shared set of
more than one convicted criminal who probably wishes they data (the distributed ledger, in this case keeping track of how
had understood that better. much each resort has purchased) and shared rules (calculat-
While Bitcoin may not seem very useful to the skiing ing the discount.)
industry, the underlying technology has significant potential Finally, blockchains get a significant part of their
to revolutionize traditional methods of commerce. At their high security from something called a CONSENSUS
foundation, blockchains are just transaction processing data- ALGORITHM, the third important attribute of this technol-
bases, but with three special attributes that make them both ogy. Transactions are approved in batches by consensus in
exceptionally secure and useful for enabling collaboration the network, and while the math of these reviews is complex,
across many parties. the principle is simple: You cannot seize control of a network
The first attribute of a blockchain is the DISTRIBUTED unless you hack into and take control of more than half the
LEDGER, which enables all parties to work off the same computing of the network. And for a large network, that is
information at the same time. Practically speaking, this very difficult. Even if a single node had their password com-
means all transactions that are processed in a blockchain are promised, the network as a whole would continue to func-
shared to all the other entities in the network. A mathemati- tion with integrity.
cal tool called “hashing” allows network participants to ver- This last component is especially important because
ify that they all have the exact same copy of the ledger. blockchains are missing one thing that has defined (and
For almost any business application that requires collab- plagued) other transactional systems: central authorities.
oration across company or organization boundaries, just get- Central authorities are useful because they are efficient, but
ting to a shared, consistent understanding of anything from they are also risky. Central authorities not only represent a
inventory levels to account balances is very useful. If you single point of failure in the network, they are also “all see-
imagine setting up a single account for each skier or snow- ing.” In other words, a central transactional approval author-
boarder shared across multiple resorts, a blockchain would ity means that one party has access to more data than all
make sure that each purchase or activity by that individual the others. This last feature of centralized systems is one
is reflected in his or her account balance on every copy of of the reasons why many centralized systems don’t work
the ledger. well, because nobody wants to put one party in charge of
On top of the shared information enabled by the dis- all the data.
tributed ledger, blockchains can also allow multi-enter- None of this means that blockchains are hackerproof
prise networks to have shared business processes. This comes (nothing is) but they are exceptionally resilient in the face of
from the second important attribute, the PROGRAMMABLE attack, and when combined with the ability to share infor-
LEDGER, which simply means that we can write complex busi- mation and process securely, they seem like an ideal tool for
ness rules around transactions that are shared with all the par- enabling collaboration between businesses.
ties. These are also often referred to as “smart contracts.” The most common industrial applications we are seeing

10 | NSAA JOURNAL | SUMMER 2018