Linking Up Blockchain and Cloud

As more industries are finding use cases for Blockchain in the public cloud, here's how you can take advantage of this technology.

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Blockchain is a public ledger system that can be used to record any kind of transaction. The ledgers are stored concurrently in multiple locations and communicate using a series of nodes, with entries that are cryptographically signed to prevent modification. Blockchain also provides an auditable trail of all transactions and removes the need for a trusted middleman to oversee them.

Bitcoin relies heavily on its underlying Blockchain technology. The Blockchain model illustrates the idea of not making a centralized authority responsible for saying what is true or what is false. Instead, multiple distributed parties come to consensus, and that consensus is stored in the ledger which thereafter can be accessed by anyone. It’s infeasible for a single entity (e.g., a business or person) to go back and modify history.

So, what are the use cases?

Real Estate

Real estate agents can work with businesses and people located thousands of miles away, even in other countries. The transitions would take place instantly, as if a team of lawyers were involved, and even more securely. The nature of Blockchain transactions could prevent real estate fraud and eliminate the need for third party escrow services.

Finance

Many use cases are found in the world of high finance. For example, transactions involving mega-trades for the purchase of a company could take place at the press of a button–again, with little risk around security or even legal issues.

Healthcare

Blockchain technology could also have a huge impact on the ability to track and protect personal healthcare data. Medical billing logs could approach the privacy issue from a financial angle. So not only will clinical data be protected, but the telling cost transactions as well, making it harder for insurance companies and healthcare institutions to make errors or commit fraud. Another use case could be consolidated medical records, or the ability to bring Electronic Health Records (EHR) to a centralized and secure place. Records could be created, shared and changed by multiple parties, creating complete transparency in one’s medical history. Prescription orders could also be verified by insurance providers and paid for through Blockchain; validating the type of drug and correct payment for the patient.

Music

The music industry is implementing Blockchain to take on problems regarding royalty and distribution rights. PeerTracks is a startup whose music streaming app will link all uploaded songs to Blockchain based smart contracts that designate payment to the lyricist, producer, performer, etc., based on the number of plays a song receives. PeerTracks also issues its own form of cryptocurrency called “artist tokens”. These are tokens artists can sell to early listeners to fund their hopeful rise to fame. A purchase of a token will link the listener to a smart contract that the artist can later pay out in perks, such as con- cert tickets. As the artist becomes more popular, the value of the token increases, incentivizing token holders to promote their favorite artists. Other startups like Ujo Music and Proof of Existence are also attempting to solve the age-old problem of protecting intellectual property, ensuring that creators get fair credit and value for their original works.

Many More

There are even applications that move beyond current ways of thinking. For example, after IBM purchased Weather.com, a weather data provider, they found that integrating weather data and forecasts with Blockchain technology could create an interesting new paradigm. According to IBM, more and more businesses are taking an interest in finding out more about the weather system. For instance, the ability to leverage weather data to determine its effects on the retail market, or the ability to get a humidity and temperature reading to determine the proper mix of chemicals for a manufacturing process. With Blockchain technology, IBM can offer different “tiers” of information, depending upon what consumers want. Blockchain is available at all times, to people all over the world, at no cost. Additionally, Blockchain can be used to store, transmit and share all types of data at a fraction of the cost of traditional solutions.

Blockchain and the Cloud

IBM has taken the lead in moving Blockchain applications to the cloud. Enterprises now have a secure IBM Cloud environment to develop Blockchain applications that will meet regulatory requirements.

IBM took elements of the Linux Foundation’s open source Hyperledger Project to develop this environment. Using these elements as the basis, they tested the code and certified the framework as secure.

Finally, IBM made all of it available in a dedicated environment within IBM’s Softlayer Cloud.

IBM’s approach to Blockchain leverages industry standards such as Federal Information Processing Standards (FIPS 140-2), Evaluation Assurance Levels (EAL), Sarbanes-Oxley(SOX) Act, Health Insurance Portability and Accountability Act (HIPAA), Gramm-Leach-Bliley Act, Federal Information Security Management Act (FISMA) and, finally, theEuropean Union Protection Directive. IBM met its objective to provide government, financial services and healthcare organizations with an environment to securely build and use Blockchain networks.

According to an InfoWorld article on the topic: “The cloud services have been optimized for cloud-based Blockchain networks by providing an auditable operating environment with the comprehensive log data necessary for forensics and compliance. Cryptographic keys are secured in tamper-resistant storage. The modules also detect and respond to unauthorized attempts to access the keys. Members in a Blockchain network do not share any aspect of the operating environment, such as memory, disk drives or hardware, to prevent data or memory leakage.”

IBM is not the only Cloud/Blockchain game in town. Microsoft has been adding Blockchain as a Service (BaaS) offerings to the Azure marketplace. Microsoft also has a partnership with a consortium of more than 40 banks, including Goldman Sachs. These institutions have been granted open access to Azure and dedicated Microsoft staff to build their Blockchain applications. Microsoft has also worked with Ripple, a cryptographic ledger software vendor, and other startups to develop new Blockchain applications.

Why Cloud-Based Blockchain?

Core to the questions out there is that, if Blockchain needs the ultimate in security, why is public cloud a fit, such as the IBM and Microsoft solutions mentioned above?

There are a few key reasons why public cloud is the preferred platform:

• High performance computing and I/O is needed to manage the security processing requirements of Blockchain. Public clouds allow you to allocate as many instances as you like from a public cloud provider, and this elastic approach to scaling and de-scaling to support a secure translation is ideal for a Blockchain transaction.
• The pervasiveness of public cloud computing means that the node of a Blockchain system can be supported outside of the enterprise by a neutral third party, the public cloud provider. Moreover, this means that access is just as easy from a small business as a large one, because you’re only paying for the infrastructure by usage. This makes the costs of moving to Blockchain affordable, and thus removes budgetary barriers to entry.
• Access to Blockchain enabled applications and data are largely identity- and role-based. The use of public cloud has become the proving ground for identity- and access-based management approaches, such as those provided by Microsoft, Google and AWS. These services are already native on these cloud providers; you don’t have to integrate them yourself.
• The use of intensive transaction logging, with both distributed and I/O-intensive impacts, is perfect for cloud computing. Logging operations can be spun off on new machine instances and storage instances without impacting the core application. These are launched, used to support the Blockchain processes and then de-provisioned.

So, Now What?

Your interest in Blockchain really depends upon the vertical market you’re in. Operations that drive many financial transactions, trading something that costs money, will find huge promise in this technology.

However, even organizations that are not big money shops like banks, can find value in Blockchain. Consider the applications available to purchase and track materials and inventory, as well as applications for retail organizations that can sell merchandise via Blockchain. Healthcare payers and providers can find applications for Blockchain, to reduce the cost of dealing with large transactions, and for the secure storage and dissemination of patient data.

Moreover, IoT technology providers could find that, as with the Weather.com applications we mentioned above, they can use Blockchain as a way to push data from device sensors to the database. For instance, when tracking a tanker and all its systems across the ocean, in the event of an incident (e.g., a storm), you can understand what went right and wrong, with a clear understanding that neither the company nor the crew have the ability to change that data once it’s brought into the Blockchain network edge.

So, what do you do, specifically, to take advantage of Blockchain? There are a few steps we suggest:

1. Look at the core systems and systems requirements that may benefit from Blockchain within your organization or company. What are the core business benefits that you’re seeking? required ROI from the Blockchain? What would be the implementation of Blockchain?
2. Look at your current cloud strategy, and the best way to support any new Blockchain applications. This means, understand how existing cloud end-points map into (or don’t work with) a Blockchain implementation and/or applications. A Blockchain strategy may also affect the public clouds that you chose. Right now, each vendor is off in its own direction for supporting Blockchain.
3. Identify the tactical use cases for Blockchain. Understand the general requirements we covered in the first point. But also define the existing use cases and break them down into their sub-parts, so you understand how they must be built. You can work up from the use cases, to the applications and then to the technology solution that you’ll need to support Blockchain.

If you follow these steps, the path to Blockchain via the cloud should be a short one, and not at all complex. The complexity does come in when dealing with the maturity of a technology that has not yet established itself. Time will solve that problem, and the cloud should be able to do the rest.

David Linthicum

David is a SVP at Cloud Technology Partners and an internationally recognized cloud computing expert and thought leader. With more than 13 books on computing, 3,000 published articles, 500 conference presentations and numerous appearances on radio and TV programs, David has spent the last 30 years teaching businesses how to use resources more productively.