WHEN TODD TAYLOR FIRST HEARD of blockchain technology, he was working for IBM China. It was around 2013, and Taylor was part of a team conducting lab research on new ways to connect devices across the Internet of Things (IoT). One of the team leaders had heard of blockchain, a new technology for recording transactions securely in public digital environments. He suggested that it might be worth exploring for the project.
“The computer code for blockchain is open source, so we took the code kernel and fine-tuned it to record transactions between appliances with sensors and other connected devices,” says Taylor. In one experiment, the team used blockchain to connect a washing machine to a device that would deliver more detergent to the machine when sensors indicated that its supply was running low.
Taylor is now a professor of practice at the W.P. Carey School of Business at Arizona State University in Tempe. As part of the ASU Blockchain Research Lab, he trains students to use the technology to automate any number of online transactions related to finance, government, healthcare, real estate, artwork, and, yes, IoT devices.
“Blockchain is still very new, and it’s changing rapidly at a pace we’ve never seen before,” says Taylor. “The students in our lab are working on how to scale blockchain in both public and private environments. They’re becoming familiar with the code bases, and some have now moved on to ask, ‘How would we do it differently?’ We’re trying to learn and absorb as much as we can.”
Blockchain originated with a 2008 white paper by an unknown author or authors using the pseudonym Satoshi Nakamoto. The paper outlined a way to create a new kind of distributed database—a digital ledger that stores information across a network of computer processors. IT experts previously had suggested that distributed databases, a technology that had been around for two decades, could potentially be used to support the exchange of digital currencies. However, many were concerned that hackers could infiltrate networked databases too easily and manipulate their computer code to spend the same digital tokens more than once.
But the white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” proposed a solution to this “double-spend” flaw. It outlined the design of blockchain, a unique type of distributed ledger technology (DLT) that uses a special form of complex encryption to verify and record peer-to-peer transactions. The paper explains that blockchain would provide a system in which the encryption of each transaction, or block, includes a permanent record of all the transactions that preceded it. Hackers would be unable to tamper with the code for one transaction without affecting the data of all others that preceded it. Moreover, the encryption would be visible to all users in the system. This combination of complexity and transparency would make it impossible for hackers to guess or manipulate the code. (See the sidebar "What Makes Blockchain Work?" at the end of this article.)
In 2009, the Nakamoto team built Bitcoin, the first public, decentralized blockchain database for the exchange of its new eponymous cryptocurrency. Once valued at less than US$1, a single bitcoin was worth a record-high $19,000 in December before falling to around $10,000 in January. In 2013, a new player entered the game: Canadian Vitalik Buterin. Buterin was previously a recipient of a $100,000 fellowship from Peter Thiel, who provides the funds to help innovative young people pursue alternative paths to traditional higher education. Buterin and his team wanted to take Bitcoin’s idea of a decentralized system for cryptocurrency one step further. They created blockchain code that would allow anyone to run self-executing contracts—so-called “smart contracts.” In 2014, Buterin and his team started a crowdfunding campaign to launch the Canadian startup Ethereum, an exchange for the cryptocurrency ether. When the first ether tokens were exchanged in 2015, each cost less than US$1; today an ether token is worth more than $1,000.
Together, Bitcoin and Ethereum have refined blockchain technology to the point that organizations in industries such as supply chain management, real estate, and healthcare have recognized its potential to support automated peer-to-peer transactions. At the same time, companies such as IBM, Ernst & Young, and Deloitte, as well as a host of small startups, have developed blockchain-as-a-service products, which enterprises can adopt to create and test their own private blockchain platforms.
Universities, too, are taking part in ongoing research efforts. For example, at the ASU Blockchain Research Lab, computer science students are incorporating blockchain in their capstone projects and working on scaling blockchain in both public and private digital environments. In one project, students are using blockchain to connect devices and appliances in ASU’s Sun Devil football stadium. The integration of the blockchain network could streamline the way fans buy tickets, automate the way they order food, and even direct them to cheer based on feedback from sensors measuring levels of noise in the stadium.
The University of Toronto in Ontario recently opened the Rotman Financial Innovation Hub in Advanced Analytics (Rotman FinHub), where educators and practitioners can address challenges presented by financial technologies, or fintech, explains Andreas Park, associate professor of finance at Rotman and the University of Toronto Mississauga.
“The impact of blockchain is causing multiple seismic shifts across many industries,” says Park. “It’s all happening so rapidly that we’re struggling to integrate it into the curriculum in real time.”
A PROLIFERATION OF COURSES
Blockchain’s wide-ranging applications make it an exciting testing ground for teaching and learning, says ASU’s Taylor. Students in disciplines ranging from computer science and engineering to law, medicine, and business have started their own blockchain and cryptocurrency clubs and even have worked with faculty on independent study projects.
Now, they also have opportunities to enroll in a growing number of formal courses in blockchain and DLT. One of the first was at Duke University’s Fuqua School of Business in Durham, North Carolina, which has offered Innovation and Cryptoventures for the last three years. Taught by finance professor Campbell Harvey, the course requires that students earn the entirety of their grades based on an idea they develop for applying blockchain technology.
In spring 2017, the Massachusetts Institute of Technology’s Sloan School of Management in Cambridge began offering an independent study and a revamped course in blockchain and DLT, on the heels of its own experiments with the technology. The school’s MIT Digital Currency Initiative is developing a range of research on technology driving cryptocurrency platforms.
New courses in blockchain have launched this spring at the Stanford Graduate School of Business in California, the Wharton School at the University of Pennsylvania in Philadelphia, the Saïd School of Business at the University of Oxford in the U.K., and the Haas School of Business at the University of California, Berkeley.
At Berkeley Haas, Blockchain and the Future of Technology, Business and Law looks at the technology’s potential impact on a range of industries. Co-taught by professors from the university’s business, law, and engineering schools, the course can enroll up to 20 students from each school, who form interdisciplinary teams to work on blockchain-driven business plans.
Taylor of ASU is now teaching his first formal course in blockchain and DLT. Students with backgrounds in computer science will work with the code that drives blockchain and smart contracts, as well as learn the basics of creating cryptocurrencies. Business students who aren’t trained as coders will advise the computer science students on when blockchain is—or is not—applicable to particular business database problems.
At Rotman, a new course on blockchain, taught by Park, will introduce students to the principles of blockchain and cryptography. Students in the course will use online blockchain simulators, which offer visual representations of blockchain transactions as they occur in real time.
They’ll also explore how the large amounts of data exchanged across blockchains will become sources of input for cloud computing, machine learning, and artificial intelligence.
“Blockchain will provide us with far more data that we can use to make better predictions about the future,” says Park.
In addition, Park will familiarize students with initial coin offerings, or ICOs, in which startups are raising funds through the creation and sale of new cryptocurrencies, bypassing centralized financial systems. “An ICO costs next to nothing and takes half an hour to set up. Small firms don’t need bankers, lawyers, or stacks of paperwork to be funded,” he explains. “ICOs will put direct pressure on financial institutions to use public blockchain technology. They could be the biggest trend to affect the career of anyone who plans to work in finance.”
BIGGER THAN FINTECH
Many view blockchain as primarily a financial technology, but its implications for sectors such as healthcare and government could be just as transformative. In healthcare, for example, blockchain could secure patients’ identities in ways that not only allow their records to be securely accessed by a range of providers, but also allow the data in those records to be donated to medical researchers to improve human health overall—all while protecting patient privacy.
Governments could use the technology to streamline their voting and benefit application processes. Countries such as China, Ecuador, Tunisia, and Senegal already have established their own national cryptocurrencies, with Russia, Sweden, Japan, and others announcing plans to launch their own. But perhaps no government has done more with blockchain than Estonia’s. The target of a countrywide cyberattack in April 2007, Estonia and its leaders now rely on blockchain to offer greater security for its systems, including those related to citizens’ identification, health, and voting records, as well as governance and small business registration. The country even has set up a system of “e-residency,” in which noncitizens—especially entrepreneurs—can be issued digital IDs that allow them access to a limited set of Estonian governmental services.
As more nations adopt blockchain, the global regulatory environment will change dramatically, says John Jacobs, a former NASDAQ executive who helped one bitcoin-based exchange-traded fund file for launch. He is now with the Center
for Financial Markets and Policy at Georgetown University’s McDonough School of Business in Washington, D.C. At Georgetown, Jacobs explains, faculty and students are studying blockchain not just from the perspective of financial professionals, but from that of policymakers and regulators.
The center has partnerships with the D.C.-based Chamber of Digital Commerce, whose mission is to drive regulatory policy related to blockchain and DLT. With the chamber’s participation, the center holds an annual national summit on blockchain. It also sponsors a blockchain incubator and works closely with Georgetown’s McCourt School of Public Policy and Georgetown Law on research projects that explore the implications of DLT to the regulatory environment. These projects are looking closely into social issues surrounding gender and poverty—how, for instance, distributed ledger technology could provide the world’s unbanked populations access to financial systems via mobile money platforms.
“When many people are first exposed to blockchain, the first thing they think of is bitcoin,” says Jacobs, who is teaching his first course in blockchain to undergraduates this spring. “But the applications for distributed ledger technology go far beyond financial services. That’s one reason we wanted to offer our first course at the undergraduate level, so we can explain what fintech, blockchain, and distributed ledgers are early on.”
Like Park, Jacobs is watching the ICO trend carefully. Currently, ICOs are unregulated, and many companies are making plans about ICOs based on the current regulatory environment. Those plans could be upended quickly once government steps in, Jacobs warns.
“Technology always moves faster than regulation and policy,” he says. “Our students need to anticipate what a future with regulation is going to look like.”
LIVING UP TO THE HYPE
With blockchain in such a state of flux, business schools can serve as hubs where organizations can access information, present problems for student projects, and exchange best practices in blockchain development and deployment, says Jacobs.
“Twenty-five years ago, many business leaders didn’t yet understand the internet. They would have benefited greatly if business schools had told them, ‘This is how the internet is going to affect your companies,’” says Jacobs. “That’s what we’re trying to do right now, especially through our exec ed programs. We’re telling companies, ‘This is how blockchain works, and this is how it’s going to affect your organizations.’”
Business schools, too, must help business students develop good instincts and judgment that will serve them in fast-moving technological environments, says Park. “Students don’t necessarily need to know how to do the programming, but they will need to understand the logic, strategy, and implementation of smart contracts and be able to ask coders to use the correct language for their enterprises.”
With so much attention being paid to blockchain by businesses and b-schools alike, many critics warn that the hype surrounding this emerging technology could be overblown. To them, however, Jacobs offers a nuanced response
“If people think of blockchain narrowly in terms of just bitcoin or cryptocurrency, then, yes, it’s overhyped. But if they think of the overall applications of this unique technology to challenges across different organizations in many different industries, then they’ll see its potential,” he says. “I’m 58, and I tell my kids that if I was 28, I’d be all into blockchain. I honestly believe that, over time, it’s going to be as impactful as the internet.”