Blockchain has been called ‘the next generation of the internet’, a powerful set of technologies forecasted to disrupt centuries-old systems of record-keeping. But what is it, how will it change the way we interact, and what does Airbus contribute to the new conversation in which the word on everyone’s lips is ‘trust’?
In a New York Times article titled Why Bitcoin Matters, venture capitalist and Netscape founder Marc Andreessen wrote, “Bitcoin gives us, for the first time, a way for one internet user to transfer a unique piece of digital property to another internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.” The underlying technology of this cryptocurrency? Blockchain.
Stefan Hopf, a blockchain technology researcher at Ludwig-Maximilians-Universität in Munich, contributed to an initial blockchain market study commissioned by Airbus in 2016. He explains that before blockchain, it had been hard to turn digital information into the kind of trusted, unique commodity that Andreessen describes. “If I have a car, you can’t have it; if I give it to you, I don’t have it anymore. By its very nature, it is scarce,” he says. “But, if I give you a digital file or digital information, I may still retain a copy of it. And this is why it is so difficult to make information into property: it doesn’t have that intrinsic scarcity attribute.”
Secured, unique, peer-to-peer transactions in which the transaction activity is immutably recorded on a distributed ledger for everyone to see: this is blockchain, or what is referred to as the internet of value. In fact, there are many versions of blockchain technology out there, modified to adapt to the requirements of the industry or consumers who use it. So the bitcoin blockchain? That’s just the beginning.
Broadly, blockchain is a trusted ledger shared between multiple parties in a decentralised way. According to digital strategist Don Tapscott’s TED Talk on the subject, trust is established by collaboration, cryptography and clever code, and is native to blockchain technology – that is, blockchain simply doesn’t function without it. Tapscott calls it the ‘trust protocol’.
In simple terms, it works like this: digital assets – cryptocurrency, property titles, identities, contracts – are recorded on a ledger. The ledger can be global as with bitcoin, a public blockchain accessible by anyone with an internet connection; local, a private blockchain on an intranet network of select participants or some hybrid of the two, depending on information sensitivity and access permissions. When a transaction is conducted, it is recorded in a ‘block’, essentially a discrete bundle of information.
The ledger is a chain of validated blocks, i.e., a set of immutable data. In order for a new block to be added to this chain, it must be verified by the participants using a pre-agreed consensus mechanism. This security measure ensures the integrity of the data contained in the new block and that it matches what the existing chain trusts to be true. Once the new block has been objectively and collectively verified via a set of complex computing criteria, it is added to the blockchain with a time stamp.
“Blockchain is basically a way of guaranteeing trust,” says Ajit Krishnamohan, innovation manager at Airbus in Bangalore. “You can compare it to protocols we have today for exchanging value between people. If I pay you cash for services, and you and I don’t necessarily trust each other, we’ll look to a third party to provide that trust.
Blockchain replaces that third party with an algorithm.” With the third party gone, individuals can transact directly with the same level of trust were they to go through a reliable authority like a certificate provider, a bank, Airbnb, Uber and so on. “While this is still a nascent technology, it has the potential to revolutionise a lot of things,” Krishnamohan says.
“Trust: how you frame it to others and how you use it, are business questions,” says Rob Thompson, a technology strategy consultant at Booz Allen Hamilton who also worked on Airbus’ blockchain study.
Laurent Peirone, head of corporate and extended enterprise transformation at Airbus’ information communication and technology organisation (ICT), concurs. “Tech for the sake of tech without cracking a business problem doesn’t create any value.” He compares blockchain today to what the internet was in the 1990s. In the ’90s, Amazon founder Jeff Bezos saw the web grow by 2,300% in one year. Though he might not have understood HTTPS and reverse proxies, he knew he wanted to create a business model in which people bought his products via the internet. “Bezos hadn’t mastered the technology, nor have we completely mastered blockchain. But like him, we are already thinking about new business models that take advantage of its capabilities.”
Teams across the company have aligned to position Airbus as an early adopter. In January 2017, data science strategist Leon Zucchini and data-driven technologies VP Ronny Fehling ran a blockchain workshop in Toulouse, designed to pick up where their blockchain market study left off. Open to anyone with use-case ideas and an interest in learning more, over 35 participants attended, eager for the opportunity to collaborate.
One idea that emerged centred on 3D printing and the applicability of blockchain to distributed manufacturing at a local level. Thompson explains: “Sensitive design data could be sent to any 3D printer in any country that wants to build Airbus’ 3D-printed parts, as long as it guarantees the quality and security standards as verified by the embedded smart contract. The same contract could enforce the immediate deletion of the data upon printing.”
Airbus has been working to identify several business challenges worth addressing with blockchain. These include instances of a high cost of trust, a slow process but time-sensitive interactions, compliance issues, high overhead cost for data reconciliation and multiple parties with whom to share data.
Applying the technology to pilot diplomas tackles exactly this. "The identity, achievements and certificates attached to each pilot is immutable data and thus can be trusted", says Peirone.
Air traffic will double in the next 20 years, and the aviation industry has to train more than 500,000 pilots to meet the demand. Currently, when pilot training certificates are issued, there is no universal system in which every pilot’s data and qualifications are accessible and verifiable by every airline. “A proof of concept we ran this February shows that the blockchain fulfils the criteria we set out,” says Peirone.
Peirone and his team are now investigating how to deliver this concept to the worldwide aerospace and defence market.
Other viable use cases include dispute management, in which complex transactions can obscure the fact that money is unnecessarily blocked; and quality process tracking, which would benefit from greater transparency and an early-warning trigger system.
Related to process tracking is the idea of smart contracts – also called automated contracts – that are more responsive to how people actually work in the real world. Most contracts are used for litigation purposes, wherein a supplier is either within the bounds or in breach of a contract. Smart contracts could not only pre-flag potential problems, but also enable greater plasticity. "For example, you could schedule a three-week breach of contract in order to accomplish another task and only pay a small penalty or receive a performance downgrade that is still within the realm of security. From this, new business models may emerge", says Data-driven technologies VP Ronny Fehling.
“Automated contracts are essentially a piece of code that gets executed if certain conditions are met,” says Zucchini. Beyond contracts, this automation can simplify other processes. “In a situation where we need to have X information in order to trigger the next step, we can simply code for that, and in this way help drive efficiency.”
Airbus ICT business development manager Masatake Toyota explains that in order to look at simplifying industrial processes at scale, the team must initially learn how to deploy the technology. “We’re addressing pilot flight certificates as one of the first use cases because it’s an entry-level blockchain vision that capitalises on the technology pretty much in the way it exists right now,” he says.
Scalability is a concern with blockchain. While certificate-issuing cases don’t require a large number of transactions per minute, payments do. Bitcoin currently processes about seven transactions per second at best, compared to MasterCard’s 2,000 per second. “Current blockchain throughput is very slow,” says Toyota, “so when deploying a real use case, we consider: how many feasible transactions does that particular business require?”
The supply chain, says Fehling, seems like a natural fit for blockchain because it’s also about a trust relationship. Blockchain could improve the tracking of goods and become a compliment to, not a wholesale replacement of, suppliers’ procurement software.
But, says Zucchini, a crucial barrier that has to be considered is the physical/digital interface. “One of the reasons why bitcoin was so successful is because the transactions were purely digital. There are many cases where it would be enormously valuable to link this to the internet of things and get objects to register themselves in blockchain, but the physical/digital interface is really the crux in that.”
Fehling sees the handover of physical to digital assets and vice versa as the single biggest weak point for blockchain, and notes a parallel in the difficulties RFID technology faced, in which high instances of interference and blockage prevented the technology from wider adoption.
Hopf notes that accessibility is a considerable target of criticism in blockchain right now. “In order to directly participate in the public bitcoin network, for instance, you have to know some programming and follow several tutorials – there are some costs for you as a user associated with getting involved with the network.”
"The bitcoin blockchain is maintained by a community of developers. No single person controls the system, but no industry has control over changes to the protocol, either. This obviously makes people afraid, because they can’t control what will happen to the system. I think this is one reason why private and hybrid blockchains – like the Hyperledger project – emerged."
Service providers have emerged that handle the complexity of accessing the network while simplifying it for the user via smartphone apps or other portals. But it’s these points of protocol – external services that go on top of blockchain networks – that have been subjects of attacks in the past.
“The majority of hacks you’ve read about, the Bitfinex hack being the most recent, happened because an external service that interacts with the bitcoin blockchain was insecure. The actual protocol and the blockchain itself were secure,” Hopf emphasises, “but the interface providers to the blockchain were insecure.”
Some blame the programming community for the continued difficulty of native access to and secure interactions with the bitcoin blockchain, essentially driving users to use external services with little understanding of how they work and how secure they are. “So, those hacks happen. Which is sad, because the actual technology works. The interface is the problem.” Another limitation that Hopf points out is the governance of the protocol.
Airbus’ Krishnamohan and Thierry Chevalier have spearheaded the company’s membership in the Linux Foundation-backed Hyperledger project. Hyperledger is a consortium of industry partners, including IBM, Samsung and Fujitsu, who are jointly working on the protocol level, shaping it with their feedback, use cases and expertise. "Rather than develop things in isolation and competing silos, it seems more logical to collaborate and build something that could benefit the industry as a whole", says Krishnamohan.
Governance can be based on a consensus of changes that should be implemented in the protocol, giving partners who want to use the blockchain a direct voice in what will happen to the system. “Companies like us share some unique problems because of the nature of the business,” says Krishnamohan.
Chevalier notes that several new applications of blockchain are already emerging. “The ASX Australian stock exchange will go live this year on the Digital Assets blockchain, which is based on Hyperledger. Their solution has been extensively prototyped up to last autumn, when the decision to go live was taken.”
As Zucchini points out, a clue to moving forward with blockchain exploration can be gleaned from the technology itself. “Blockchain is, in essence, a trust-building technology that facilitates exchanges and trust between parties, so it’s natural to be collaborative in the way we work on problem-solving and adoption.” To this end, Airbus’ chief technical organisation (CTO), digital transformation organisation (DTO) and ICT have formed a blockchain working group within the company.
Collaboration both inside Airbus and with external partners on building a blockchain business strategy is key in order to avoid reinventing the wheel in disparate locations. “Well beyond our company, trust is imperative – economically, socially and geopolitically,” says Peirone. “In order to move blockchain forward, we are tackling one of the most exciting challenges of the modern era: how to create and maintain trust in an increasingly digital economy.”