In the previous article, we looked at some of the basic features of blockchain technology. While Bitcoin and blockchain have made a splash in the payments space, many investors and futurists also herald blockchain technology’s potential to reshape other business and economic sectors. The value of blockchain’s immutable, uninterruptible, incorruptible framework doesn’t end with payment transactions. There are many potential uses in other applications that rely on trust, security, and auditability of data. Entrepreneurs have proposed applying the technology to everything from proxy voting in shareholder meetings to managing globally distributed supercomputing. Ideas even include a “smart grid” to allow for peer-to-peer transmission of renewable green electricity.
Information Governance (IG) and records management are a natural fit for blockchain technology because these fields value data based on its authenticity, integrity, and reliability. However, any potential blockchain application would need to be flexible enough to meet the needs of enterprise users. In addition to managing records through their lifecycle, a blockchain solution for IG would need to be economically feasible and integrate with normal business operations and existing systems. It would also need to be secure against cyber threats, particularly in light of recent major heists at Japanese cryptocurrency exchanges Mt. Gox and Coincheck.
One of the central features an IG blockchain solution would need is the ability to track changes to records through their lifecycle. In IG, the issue of whether a document is an original or an altered version can be crucially important. Uncertainty often leads to business disputes or litigation. Forensic techniques can be used for paper records, but proving that an electronic document is an authentic, unaltered original presents an even greater challenge. Blockchain provides the solution.
Blockchain can provide absolute proof that a digital transaction is authentic and unaltered via cryptographic mathematical algorithms. Bitcoin trailblazed blockchain payment transactions, but blockchain transactions in other types of information are also possible. For example, “transactions” on a document could track incremental changes and revisions. Every time new information is added, it forms a new block in the chain of custody. Once entered onto a blockchain ledger, transactions become irreversible and indisputable, and so do the records to which they relate. This renders it impossible to tamper with or make secret alterations to the records.
As an example, consider a firm that is contracting to procure goods and services from a vendor. The process involves numerous people drafting a variety of records—e.g., term sheets, purchase orders, statements of work—and then making incremental revisions. If there is a dispute over the details, the records created during each stage of the process are key to resolving the disagreement. In an adversarial dispute, trust is in short supply, and the documents each side presents often paint ambiguous or competing narratives of what happened. But if the records are captured on a blockchain ledger, both parties have a time-stamped audit trail that can reconstruct the entire transaction, and both parties can rely on its accuracy and completeness with certainty. Neither party needs to trust that the other side hasn’t falsified records—blockchain intrinsically guarantees it.
Although the usefulness of incorporating the auditability and security features of blockchain into is apparent, we are still far from a workable solution. Designing technology that meets the rigorous IG standards of enterprise users presents several significant challenges to resolve and questions to answer. Many startup companies have already started working on applying blockchain technologies to records management. However, no major vendor is currently offering a fully functional blockchain records management software for mainstream use. The blockchain community is still searching for solutions to these challenges. Although the broad understanding of the goals a blockchain records management software must achieve is becoming clearer, there are still many technical and practical challenges to overcome.
In the next article of this series, we will survey some of the key technical hurdles that a workable blockchain solution for IG would need to overcome to be ready for enterprise use. We will also touch on a few of the challenges and pitfalls this technology might face.