In the first of a series of blogs addressing blockchain, I’m going to look at how companies might want to think about their approach to blockchain initiatives. And it may come as no surprise that it all starts with asking the ‘right’ question.
When SITA engages in discussions with customers and others in the air transport industry, we find a huge amount of interest in blockchain. But we also find that many people begin by asking: ‘Where does blockchain fit in my technology stack?’ In my experience, I’ve found this to be the ‘wrong’ question to start out with.
So what’s the right question to ask first?
I believe the first question should be this: ‘How do I need to re-engineer my business processes?’ Why do I think this? Well, broken down, the applied use of blockchain requires:
- First, gaining an understanding where data or information needs to be exchanged between parties and what information must be shared.
- And then next, defining and auditing that data. This will make sure it’s of adequate quality and that the relying party(ies) can depend on this data for operations.
Only then, after steps 1 and 2, can you begin to discuss where blockchain ‘fits’. So in undertaking any blockchain project, you must acknowledge that identifying and resolving gaps in existing data and processes is one of the most important due-diligence activities that you need to undertake.
What’s blockchain for, and how should we use it?
It’s important too for me to emphasize that we at SITA are in the exploratory stages of blockchain, supporting collaborative innovation and cross-industry research through SITA’s Aviation Blockchain Sandbox and our FlightChain initiative.
But we see blockchain as having huge potential. In short, it’s an ‘Enabler of Trust’. Through its ability to provide decentralization and disintermediation, blockchain enables trust among parties where trust might not have existed before.
By the way, by ‘decentralization’ we mean moving away from central user IDs and passwords to a decentralized identity solution; and by ‘disintermediation’ we mean blockchain will reduce the entities needed to validate id across the value chain (see below).
Other benefits of blockchain are that it:
- Creates a chain of custody, keeping a record of all transactions that take place on the peer-to-peer network.
- Creates trust among untrusted parties, encrypting and providing an immutable record that ensures information cannot be altered.
- Allows programmable, immediate and flexible exchange, to support transfer of currency, contracts, records, ownership, and more.
- Creates shared source of control, offering the sharing of information across multiple providers while also guaranteeing consistency of the data.
Gartner predicts blockchain technology maturity in 5+ years
Blockchain technology has clearly made its mark. Today, more than 2000 start-ups are working on blockchain related projects and services. Over 300 of these involve identity-based solutions. With all this activity, Gartner estimates more than US$3.1 trillion in value could be created by 2030 through blockchain technologies.
In the Gartner Technology Hype Cycle, blockchain is in the ‘trough of disillusionment’, where a convergence is expected to occur over the coming years as early entrants succeed or fail, cooperative consortiums form, and there becomes a focus on working together toward the creation of enterprise solutions.
The blockchain ecosystem
Today’s blockchain models are based on two implementation types:
- Public blockchain
- Private blockchain (aka ‘permissioned’)
Public blockchain resides on the principle of transparency among all participants: everyone can see what transactions occur. They cannot necessarily see the content of the transaction, but they know that a transaction occurred.
In many sectors, that’s less than ideal, of course. Visa wouldn’t want Mastercard to see its quantity of transactions, just like Delta or United wouldn’t want to provide that level of transparency.
This consideration gave rise to the Private blockchain model (also called the ‘permissioned’ model). Here, via a ‘smart contract’, participants agree a set of business rules setting out who has access to the network, who can write transactions, who can read data, and so on.
The need to understand governance
Some purists argue that this isn’t a ‘true’ blockchain model as a permissioned blockchain requires oversight, with a level of governance to establish and manage the rules and onboarding of new participants.
This creates a tension between public and private models and an important need to understand the role of governance and bodies such as ICAO, IATA, ACI, and SITA in the ecosystem. This will be an important consideration in how the technology gains adoption in the future.
Blockchain use cases for disintermediation
There are many examples of the evaluation of use cases with high potential for the application of blockchain in the value chain. They include flight and baggage information, identity information, aircraft parts records, registries, payment, loyalty, and cargo. The list grows and morphs as knowledge and interest grows as well.
What’s significant is that nearly all use cases can be classified as ‘next-generation data sharing’. And therein lies the crux of the matter. Blockchain will fundamentally change the way the air transport industry works and collaborates, providing a mechanism for moving from ‘copies of data’ to a ‘single source of truth’ across ‘shared infrastructure’.
This is the first in a series of blockchain blogs. Make sure you don't miss my next blog.