'Blockchain' – game-changing tech with a Thai angle
Searching for discussion about blockchain technology on Google, you will find a great number of articles and video clips portraying uses imagined by organisations worldwide. Blockchain, also known as distributed ledger technology (DLT), is now being tested by organisations, particularly those in the fields of finance and banking.
But how does it work?
For almost 40 years, our data filing and security systems have been encoded onto “relational databases, where data records are organised and linked together as sets then stored as centralised databases under the supervision of responsible agencies. Given the centralisation process, “backup” processes are also required, to ensure data recovery in the event of system malfunction. Yet, databases stored at only one location are sensitive to security issues, and thus large investments are made protecting them against any untoward incidents.
That’s where “blockchain” technology comes in. The security and cost weakness inherent in traditional databases has been remarkably addressed through this new technology, which introduces changes to data recording and filing.
During the recording stage, the data is encrypted with a “private key” and a “public key”. The “cryptographic hash function” is employed for authentication of data. When there are data corrections, the changed data would be encrypted with security keys and a ‘hash value’ is added to define the change in data records, for authenticity. The “hash” is then a confirmation that the authenticity remains intact.
When new data is added, the hash value of the preceding data is encrypted onto the new data, again using the cryptographic hash function. A new hash value will then be added, again, to confirm the authenticity of the altered record. Such data is stored in blocks and thus the database constantly grows like new links in a chain, which is the origin of the name “blockchain”.
Transaction data filed in blockchains is stored on other computers in the networks involved. The entire system then audits and verifies the consistency of transaction data by broadcast, verifying with data stored in all computers in the network. Therefore, if there is any alteration to the data on any computer in the network, a verification will be made by the entire network. Modification to data only occurs when the entire network accepts the alteration, thus, this is called a “distributed ledger technology” (DLT).
All in all, blockchain and DLT are said to be the same technology. By design, blockchain is inherently resistant to unauthorised modification of data, given its encryption, and because of the way data records are added to blockchain and placed into distributed ledgers stored on many computers in a network. Data modifications can only be completed when changes to fields in old records (or new records) are added in an agreed upon consistency, which needs the collusion of the DLT network. In this way, data within a network is secure and can be verified retroactively. Also, verifications can be made on specific conditions within a workflow.
Progress with this blockchain technology has transformed digital transactions across many sectors. One widely known such transaction is the digital currency, Bitcoin, which is managed without any central authority. Bitcoin, using blockchain technology, was invented in 2008 and first implemented in January 2009 when the first Bitcoins were issued using a network of over 100,000 computers. Bitcoin has since been shown to be resistant to alteration or hacking for over eight years, proving that blockchain technology works.
Due to that outstanding security feature, public and private sectors have begun to use blockchain to improve their transactions mainly through reduced costs and operational time lags. The public sector now uses blockchain technology in registration work, such as for land ownership records that previously required a hardcopy document to identify the land owner. In the private sector, blockchain can be used in trade, import and export, settlements, cross-border money transfers, logistics supply chain management – and in capital market as ICO (initial coin offering).
In the third quarter of 2016, Kasikorn Business-Technology Group (KBTG) announced a partnership with IBM to develop blockchain technology, leading to their collaboration with private-sector entities and state enterprises early in 2017. KBank partners, including the Metropolitan Electricity Authority, Provincial Electricity Authority, PTT Global Chemical Public Company Limited and PTT Polymer Marketing Company Limited, participated in the testing of blockchain applications for the management of letters of guarantee (LG) in the Bank of Thailand’s “Regulatory Sandbox”.
Enterprise Letters of Guarantee on Blockchain thus emerged as the first of such services in the world. Customers can manage their LGs via the K Connect-LG Web Application, cutting the processing time – from LG request to the issuance of the LG to a beneficiary – from nine working days to less than half a day.
This highly secure blockchain technology greatly enhances the confidence of LG issuers and recipients. This platform for issuing LGs via electronic channels is the world’s first-ever service to apply blockchain technology to LG management.
Since the July 19 official announcement of this service, it has gained widespread attention globally with news of it translated into English, Russian and Chinese among other languages. The positive feedback proves that we, Thais and our country, can make it happen, setting a model for future applications in other areas to streamline business efficiency – and elevating Thailand’s competitiveness in the long term.
Silawat Santivisat is an executive vice-president of KASIKORNBANK.