>> Hi welcome to Wikibon's weekly Friday research meeting. Here on the queue. (tech music) >> I'm Peter Burris. We've assembled a gus team of analysts to discuss a very very important topic. Block chain. Now block chain means a lot of things to a lot of different people. Partly because there hasn't been a lot of practical utilization of it. We've talked a lot about bitcoin and ethereum and some other applications of block chain related technologies. But it's very clear that what block chain will become is more than what it is. And to try to unpack that and really understand block chain from the perspective of business decision makers, CIOs and IT. And the IT industry, we want to talk a little bit about what block chain is. What some of the key applications are. And what's it's going to mean from a technology design and investment standpoint over the next few years. Now to kick us off, we've asked David Floyer to start with a little observation on. Let's talk a bit about what is block chain David? >> Okay well block chain is a very exciting set of new technologies. But at heart it's the shared immutable ledger. So lets us go down one level from that. It allows consensus, it allows all of the participants to agree on its validity. It allows provenance to know exactly what has happened. The history of what's happened. It allows immutability so that no participant can tamper with a transaction or an asset value. And is now allows finality. A single shared ledger provided in one place. So that they can track the ownership of an asset or the completion of transaction. So the second concept's really important. Where are we applying this? And where need to apply this in any sort of business network. Assets can be real or they can be virtual. They can be widgets that you count or they can be IP for example. So the core of it is a business network. So what's the problem that it solves? The key problem that it solves is that in order to have those characteristics. Of consensus, provenance, immutability, finality. You, society had to put together very complex systems indeed. So give a few example of those, stock exchanges need to be created. Around the value of stocks then they were sold and the transactions. Credit card companies, the Swift banking system. Diamond dealers for example have to had a system by which they could know the provenance and value of these assets. These systems were essentially centralized. They were centralized and controlled centrally. Or there was a very very sophisticated complex trust and honor system. Some of the systems that have been put in place particularly in the Middle East. And they're expensive. The transaction cost is high for doing that. And companies that have allowed themselves to be in control of these, can take a high percentage. A large amount of money out of this. But they make a lot of money by owning this right to manage. This provenance, this immutable ledger. So the value of block chain is that we can cut down that cost and we can create many more smaller business networks. Which can us focus on a small area and get the same result as this big complex thing we had before. >> But a crucial feature is that David, is going to be the question of design. We're going to have to set these things up and design them right. And that's going to have a lot of implications for how businesses work. So John if I take a look at some of the applications of this. David talked about immutability, finality, provenance etc. And how it's going to take transaction costs out of the system. Where do we envision block chain's going to end up within the application framework? >> I think the key thing that on the application. There's a many series of use. Cause there's low hanging fruit today and then ones that people are connecting the dots in the future. The fundamental application impact really comes down to. Where the confusion and clarity come from. The difference between decentralized and distributed. That's often confused and I think applications purpose. The outcome of applications is really how people work and engage and create value. And the measure of that is how authority and control are provisioned. Distributed and decentralized has a unique difference there. That's a fundamental architectural thing that David pointed out. When it comes to block chain people get confused. They think bitcoin, they think ethereum. That's kind of on the currency side and the crypto side. But the momentum around decentralization goes much farther than that. So you're seeing things like energy systems. Grid Plus had a presale that was over $40 million. They're changing the game on how energy may be used and managed. The government, political sovereignty is changing. A breakthrough in science for instance. Crypser and other labs make opportunities for decentralized labs. Crowdfunding is an obvious one. You see that really get a lot of traction. Space exploration is one. Open source software, you're going to see a lot of activity there. Personal health monitoring, online educational systems, security. These are tell signs that the game will shift in terms of the new architecture. And then the impact will be the creative destruction around that. And how things are done so we were talking before we went on. About the role of horse and buggy verses a car. A mechanic on a car is not the same person managing the horse and buggy. That's the role of the service provider market. A lawyer is going to be very instrumental or legal but in new context. So the applications are going to morph around that, you're going to see people who deal with. Used cases like tokens, example that's hence the token sale. But applications that are already solving some of these problems with their business. Block chain opens up the door for a lot more head room for competitive advantage and value creation. I think that's where the action is. >> So Dave Valente, I want to bring you into this conversation very quickly. And try to build upon what John just talked about, this notion of the difference between distributed and decentralized. Distributed is kind of where things are. Decentralized is more of a state about authority. What kind of observations do we initially make about how block chain is going to impact the whole concept of authority within communities and markets? >> I think that's right I do think there are some subtle but important differences between distributed and decentralized. If you look at the internet initially and today. It's distributed but power increasingly has become centralized and that's problematic. Because it exposes us to a number of things. High value breaches if that power is centralized. Manipulation, surveillance risks, etc. I think there are you know some characteristics to look at that are relevant here. The distributive nature of that block chain, the immutability, and the lack of need or no need for single trusted third parties. So the distributed nature of the block chain verses that decentralized internet if you will. To use that as an analogy dramatically decreases those exposures. And it's much more inclusive. >> So when you think about that notion of inclusivity. We do have to come back to the idea that, we have certain ways. David you mentioned about how we're doing things today. Relatively high transaction cost but a few parties making an enormous amount of money but administering those transaction costs. And now we're talking about going to something that does inherently look more like a peer to peer but requires an enormous amount of upfront design. James Kobielus, talk a little bit about how we envision the transition. From where we are today to where certain attributes of these applications are going to be in the future. Are we going to need things like PKI? What is going to be the near term implications at a business level? >> Yeah. You know I agree with everything that Dave and John said about the business environment. Word going is that, what's fundamentally innovative about block chain. The evolution of distributive collaboration is a really clever commerce. It builds upon immutable distributive public identity. PKI, that's what PKI is all about. PKI has been around for a while. And adds to it an immutable distributed public ledger. And in the public ledger itself then the block chain becomes the foundation for distributed decentralized market places. With that said. Where it's going is that, increasingly there will be. Layered onto block chain, more standard interchange formats to enable various types of collaboration or interaction amongst various types of entity. And various types of business networks. I guess it's just the foundation for really a truly distributed peer to peer environment. At it's very heart there is still. As it were more centralized infrastructure called PKI with certification authorities and root CAs. That's not going away. That's becoming ever more fundamental the whole PKI infrastructure that's been build up. >> So David Foyer if I were to listen to this conversation as a CIO. I might think that this is going to be somebody else's problem. Lets take this down inside the business. What is it that a CIO needs to think about? This notion of distributed networks of data that both represent data and it can represent other assets? And what're some of the things that I need to start thinking about, inside my business? Is block chain really just at an economy level? Or is it going to have an impact on how I think about architecting, building, conceiving, deploying, and managing systems? >> So there's no shortcut to good systems design. People design very complex centralized systems. And they're going to need to design systems that work together. Especially when you go real time. So it's relatively simple to have batch systems which can catch up and things like that. But if you want to get the real value of block chain, it's going to be doing things in real time. So it's for example, if you're in a car and you want to get data from other cars. And you want to be able to feed data into that, to optimize on where you should have lunch or the best route to take. All of that data has to be done in real time. So what needs to be done is to make sure. As in any design of system that you have sufficient power, you have the network which is fast enough. And these types of systems because of their encryption because there's a lot of work that needs to be done to make them immutable and all the other characteristics. These systems take a lot more power to drive. >> David let me, let me jump in for a second. So one of the key differences just so we're clear. Is that we build these centralized systems and historically we've created a data store. That in a centralized system is under centralized control. And we serialize all access to that data through that centralized control. Fundamentally what we're talking, and that creates latency. Both on what's on the wire but also latency in terms of the path link. Of handling that serialization software through the system. What we're fundamentally talking about here is decentralizing that control. Putting the data everywhere but decentralizing that control. So we're not serializing anything through a central authority. That's fundamentally what we're doing right? >> Yes but a little caution there. You still got to have processed it in all of the nodes and for you to be able to get it. And you still got to make sure that all of that work's been done. >> That's all decentralized. >> It is decentralized but you still if people aren't keeping up to date up to time. You will still have a serialization impact. Eventually yes. >> So George think about from a peer to peer standpoint. What does this mean from thinking not just about designing systems at a grand scale but on a smaller scale. Can envision how block chain might be used to better marry identity, authority, and incentives as we think about building systems within a business? >> Well you had talked about the upfront design requirements. You talked about the upfront design requirements in organizational design enabled by this. At the risk of sounding big picture, this technology makes it easier to have an ecosystem of peer to peer companies that cooperate. Typically in the past we've had like supply chain masters. And they've sort of disseminated demand signals and collective supply signals. That was the central coordination, central trust sort of clearing house. And having the data distributed. The data distributed but this one system of record which essentially is logically centralized. Makes it easier to have a new sort of a new ecosystem design. >> So fundamentally we're talking about the idea of design very very large. In the sene of the degree to which we have to diminish the expectation that we'll fix design problems later on. We're going to have to do a lot of design work upfront. So David I want to close this conversation by bringing it down to the middle so to speak. Because when we think about unigrid and the idea of highly elastic, highly plastic systems. Where data's flying around and five milliseconds away from any other data kind of thing. There's going to be a need to envision how we can manage all of those applications or user problems within a system. In a way that sustains integrity of the data. Does block chain have a role to play inside the system and how we allocate resources? How we allocate data? What do you think? >> I think that's a very astute observation because one of the issues at heart here is ensuring that the system itself is not tampered with. The chips or the any part of it. So there is a role here potentially for block chain to be the arbiter of truth within the system itself. Or within the systems themselves. Now that is not here yet and that's got to be something which works super suer fast. It has to work in a way which allows the rest of the system to do its work. So it's going to be extremely interesting technology change to put it in there. But the value of it would be enormous. If you can trust then that the system itself. The chips, all of the. Everything within that system. For example you can take a snapshot these days which are very quick indeed. And if you can track that track all of the activities. You will have much greater confidence in the system itself. But that's not here yet and I suspect that's going to be quite a few years before those are put into the microcode etc. >> So John Furrier. That has an implication where we start thinking about control, authority. What's this going to mean? >> I mean David talks about the network aspect in the system's level. >> The systems of control you guys are getting at. But the edge of the network is where the action is, if you look at all the accessible block chain. You're seeing the edge of the network really be the economies of scale. And that's where, people call this the future of work. All this nonsense out there is true but the action for the people getting value are the ones that have economies of scale that go beyond their current economies of scale centralized systems. So you're seeing edge of the network type things. Crowdsourcing, edge of the network, of autonomous vehicles. You mentioned that used case. So the edge of the network paradigm that we've been researching at Wikibon. In covering on SiliconANGLE and on the cube of the events. Fundamental in this new exploration area. So for CIOs and for businesses trying to grab block chain. Which is different than the crypto currency piece, working together with tokens and block chain, is an edge of the network value proposition. As you go beyond centralization. Hence decentralization and distributed working together that's where the action is. The people that are realizing the benefits there and so companies that are evaluating their position. These of the block chain and crypto should be evaluating. Our we exploring these kinds of things? And that's where the filter is. >> Yeah so I'd say here's what I'd say just before I summarize gentlemen. I think you're right, I think that block chain that we as we've written on our Wikibon research. Folks have to design around the edge whether block chain's there or not. But block chain is going to ultimately make it easier to enact those designs over a period of time. Okay let me summarize guys. Great conversation today about block chain and our objective here is to bring it down from the level of magic, the level of potential. The level of someday into the level of practical. And I think what we've done is we've talked about block chain in a couple of different ways. First off, block chain is an immutable ledger that is decentralized in the sense that. A lot of different agents can gain control of a piece of data in a way that everybody else knows where it is and who has it. And that opens up an enormous amount of new application forms. We talked about what some of those application forms are. They can be open source software having an enormous new way of thinking about it. How they monetize work day performed. We've talked about how business networks can be established at a large and small scale That are capable of now but having a centralized authority that becomes the clearing house but rather reduce the transaction cost of deploying and running those networks. However all this means ultimately that the issue of design becomes that much more important. Block chain is not a magic technology. You just don't establish a block chain. It absolutely requires upfront thinking about what is it that you're trying to perform what is the work, what is the context that the block chain is trying to manage from an overall security standpoint? That's going to require a lot of very collaborative work between the CIO, the IT organization, the business and very importantly the lawyers. And that's not going to go away. We will see near term a number of interesting efforts from existing authorities. Folks who are handling public infrastructure, Swift and other types of networks try to use block chain as a mechanism. And that's likely to have some important queues as to how this is going to play out. But ultimately what CIOs need to do is they need to turn to somebody and they need to say, go understand block chain in an architectural level. So we can think about how we're going to build applications for communities that operate differently. Now the final point that I want to make here is that it's likely that we will block chain or block chain like technologies. Actually go deeper into systems as a way of arbitrating access to data and other resources within some of these highly elastic very a large scale unigrid like systems that we're talking about building. Definitely something to watch, not here today but likely something that's going to start hitting the market next few years. What's the action item? CIOs need to understand that block chain is not magic, it's not something that somebody else is going to do. You have to get someone on the issue of block chain architecture right now. Understand block chain design issues right now so that you can deploy block chain in small ways. But absolutely participate in the process of your business starting to enter into business networks that are likely to be mediated by block chain like technologies. Don't worry so much about bitcoin or ethereum. Watch those currencies, they're going to be important. But that's not really where the action is going to be over the next few years. The action is going to be how we think about bringing data and authority and identity closer to the work that's going to be performed increasingly at the edge. Utilizing a decentralized authority mechanism. And block chain right now is the best option we have. Thanks very much for observing us once again have an open conversation about a crucial research matter. This is Wikibon's research meeting on the cube. Until next time. (techy music)