Look at any major tech news site and you’ll see blockchain listed as a top emerging technology. However, blockchain is likely a technological mystery for those of us who don’t live in R&D or the Office of the CTO. We get that we should pay attention to it, but … why? What is blockchain? How do we “do” blockchain? Which industries are impacted? And, finally, how will blockchain impact our businesses and customers in the future?
To help answer these big questions (in the simplest way), I reached out to Michael DiPetrillo, senior director of blockchain at VMware. Like his title says, DiPetrillo is solely focused on blockchain technology and enabling successful enterprise usage. He’s also a down-to-earth guy who specializes in turning the coolest emerging tech ideas into real, usable solutions.
What Is Blockchain?
RADIUS: Mike, I’m hoping you can help us understand this new big emerging tech everyone’s talking about. In the simplest terms, what is blockchain?
DiPetrillo: Blockchain creates something called a distributed ledger. It’s very similar to a ledger used in the financial industry or like your personal checkbook. Minus in this column, and plus in that column. It’s distributed to all parties involved in the transaction, so everybody gets a copy. What blockchain technology does is make sure no one changes data without everyone else’s permission. And once all parties agree, everyone’s ledger is updated with that change.
Here’s a simple example on how it differs from today’s technology. If you forget to write down that you charged $100 at the grocery store, you’ll look at your credit card statement at the end of the month and think the bank lost $100. Your ledger is different than the bank’s ledger. This old way of doing things causes big problems, especially when you look at multi-million dollar financial or supply chain systems. If everyone’s records are different, it’s chaos. To fix the problem, all parties involved—you, the bank, the grocery store—must figure out what went wrong separately and then agree on a solution.
You might also be interested in Blockchain and Distributed Ledgers: Going Beyond Cryptocurrency.
RADIUS: I’ve heard the phrase “distributed trust infrastructure” used to describe enterprise blockchain. What is that?
DiPetrillo: Let’s use the Visa example. Visa was created because a bank was like, “Hey, I’m going to create this credit card thing. But when someone charges to the credit card, I have to go to a bunch of different banks to honor the payments and get credits.” But the banks didn’t all trust each other to keep accurate records and make the right transfers. So, that’s how Visa was created. They needed a centralized third party to keep the records for credit card processing.
What blockchain technology has the potential to do is eliminate the third party. Blockchain creates and distributes trust among all parties for a transaction, powered by a distributed trust infrastructure. It simplifies processes and establishes seamless trust by guaranteeing that everyone’s ledgers are the same. No one can make changes unless everyone agrees. When agreement is reached, everyone’s ledgers are updated with the exact same information at the exact same time.
Blockchain: Emerging Technology or Solution for Today?
RADIUS: Is blockchain an emerging technology that’s still in the research phase? Or is it actively used by businesses today?
DiPetrillo: A recent IDC study projects that worldwide spending on blockchain could reach $11.7 billion by 2022. It’s super hyped. It’s early on. It is an emerging technology. And that’s one of the challenges.
RADIUS: How so?
DiPetrillo: We’re dealing with a new technology, and that means standards haven’t been developed. What’s hard is interoperability between chains. Vendors like Microsoft and Oracle are coming out with blockchain solutions, but companies don’t want to get locked into a single vendor. You don’t do blockchain alone, so interoperability is vital. And if one vendor’s running a different software than another, you have a major compatibility issue. That’s why we need independent standards to solve the compatibility hurdle. And that’s what we’re working hard to solve here at VMware.
How Can Business Leaders Use Blockchain Technology?
RADIUS: So, now that we understand a bit more about the technology itself, why are businesses so interested? What are the use cases?
DiPetrillo: Today, I’m seeing a lot of the blockchain interest driven from the top down into IT. CEOs, CFOs, CTOs and boards are incredibly interested in blockchain. Distributed trust infrastructure could solve business problems that haven’t been solved by other technologies or processes. Ultimately, blockchain’s real benefit for businesses is helping them build a more secure, fast way to get products and services to customers—and gain direct visibility into those customers.
We’re looking at taking manual or digitally disparate processes and streamlining those significantly. Financial services, with all the different data sets and records, is perhaps the most used example. Warranty claims are also very manual processes with multiple parties: buyer, manufacturer, distributor and claims department. All have disparate data sets, rules and processes that often conflict today. This could be quickly streamlined by a chain of records that all match perfectly for everyone in the blockchain consortium. The same concept applies to insurance, government, online retailers, hospitals and transportation, for example.
Basically, any service that requires multiple parties—and that’s pretty much every business today in our digital world—can and eventually will benefit significantly from blockchain.
VMware and Blockchain
RADIUS: What is your team working on specific to blockchain? How does VMware fit in?
DiPetrillo: When businesses are ready to build that consortium, that federated trust infrastructure, they first agree upon a business idea that blockchain solves. Then, they need to get other consortium members to go down this path with them, such as other banks or vendors in the supply chain.
Next, you figure out the technical side on how to build the blockchain solution. They’ll try options, build their pilot and design the application. The real hurdle after that is trying to jump from pilot to production. And that’s really where we’re heavily focused on helping customers. Very few people make that leap. They get stuck, especially on the performance and scalability side. That why we’re open sourcing Project Concord, to help businesses make that leap successfully.
RADIUS: Why choose open source as VMware’s first public step?
DiPetrillo: We’ve been working on blockchain internally for a few years, understanding what our customers need and where we believe the technology needs to progress. Like I mentioned early, the most important step now is building consistent standards to help solve the compatibility issues. We believe that open source is the core of making real-world blockchain successful. We want to have a lot of eyes and a lot of discussion on this. That’s one of the reasons we put Project Concord out there.
We want to have a lot of eyes and a lot of discussion on this. The ecosystem is quickly evolving. The more people we can get involved in moving blockchain forward the better.
As a company, we’re also very focused on sustainability. Most of the blockchain solutions out there today are very wasteful. It uses a ton of energy, and a ton of CPU cycles produce way too much carbon. We have an algorithm that uses very little energy with a very small carbon footprint. So, our focus is about putting a better foundation out there for a more scalable, more secure and eco-friendlier blockchain solution.