The Promise of the Blockchain

The Promise of the Blockchain

The blockchain could become one of the most disruptive technologies ever created. However, with sluggish uptake, what is preventing the blockchain from fulfilling its promise, and how can enterprises leverage the blockchain to deliver tangible change across their organizations?

As data security continues to occupy the time of CIOs and CTOs, adopting technology like the blockchain seems inevitable. The decentralized nature of the blockchain ledger is based upon, offers a new environment where data can be safe and secure.

However, the need for more openness, which forms the basis of the blockchain is proving a difficult sell, as businesses fear opening their secure networks could compromise their security. It seems the ideology that the blockchain is based on is not finding wholesale support across the business landscape yet.

Also, the developers of blockchain services come up against the current raft of legislation and regulation that governs how personal data can be stored and the right to be forgotten. As one of the central supports of the blockchain is once a transaction has been entered into the blockchain it can’t be altered, there is instant friction with GDPR for instance. Accenture has developed a mutable blockchain where changes can be made, leaving what ts calls a ‘scar’ to show where the data was altered, but this is just a short-term solution.

The blockchain has been on the distant horizon for CIOs for several years. A wait and see stance have been the mode most businesses have taken regarding the implementation of this technology. Gartner predicts the blockchain could generate $3 trillion in new business over the next decade.

“Blockchain technologies offer a set of capabilities that provide new economic, business and societal paradigms,” says David Furlonger, Distinguished Vice President Analyst, Gartner. “Exploiting blockchain will demand that enterprises be willing to embrace decentralization and strategic tokenization in their business models and processes — even if these strategies are not straightforward.”

Use cases for the blockchain have been in development for some time. The issue is whether the business community will adopt the cultural shift needed to implement the blockchain widely as a whole. No one is disputing that the blockchain – or more accurately the distributed ledger – would be transformative. No business as yet has been willing to take the step themselves without the full support of their market sector.

Richard Gendal Brown, Chief Technology Officer at blockchain firm R3, told Silicon: “A key challenge for senior technical leaders within firms is that it’s not enough to ‘want’ to use blockchain, there has to be a compelling business case, and the most compelling business cases operate at the level of markets. So, the CTOs and CIOs who are having the most impact are those who are well networked both within their firms with the relevant lines of business but also well networked with their peers across firms.”

Richard Gendal Brown, Chief Technology Officer, R3
Richard Gendal Brown, Chief Technology Officer, R3

In their report, Deloitte concludes: “Where enterprise organizations seek ways to integrate blockchain into their existing business models—or, more accurately, how to transform existing processes and systems to work with blockchain—emerging disruptors built their businesses around blockchain from the start. This makes them potentially more fluid and agile than competitors and less constrained by similar challenges that inhibit adoption among their more established competition.”

Speaking to Silicon, Dimitar Pavlov, Head of Development at Luckbox. Luckbox, an esports betting platform with its own native cryptocurrency, LuckCash said: “If we leave speculative trading and actual payments using crypto aside, I can’t name a business that is successfully using, say, smart contracts, or another blockchain tech at scale. Blockchain is great, and the applications are indeed limitless, and it has the power to transform the world that we live in. As a global development community of blockchain users, we all share the responsibility to advance the technology and make it truly accessible and usable for everyone.”

The potential the blockchain has is plain to see. However, the collaboration will be necessary for this technology to enter the mainstream. Detailed use cases have helped so far in specific sectors such as finance. But for a broader adoption to take place, CTOs and CIOs will need further convincing they can make practical use of the blockchain in targeted or wider areas of their businesses.

Not just cryptocurrency

The current link many CIOs make between the blockchain and cryptocurrencies is understandable. These new currencies have gained most of the news headlines over the last few years – often for less than positive reasons. Looking beyond what can seem like a clandestine world of legally dubious transactions, is only one way the blockchain can be applied.

Businesses then must ask whether they need to implement a blockchain. Often there will be confusion between the digitization already taking place across their companies and, what additional advantages the blockchain could deliver. There is interest in this technology, as, in the first half of 2019, $822 million was raised from VCs for blockchain-related initiatives. How this translates into more wide-spread applicable technologies CTOs can use, remains unclear.

For CIOs seeing how blockchain could enhance processes across their business will also mean choosing the right implementation of the technology. Blockchain Research Institute report explained the current options:

Unlike the original Bitcoin blockchain, which was designed solely to enable the exchange of crypto tokens, these platforms are designed for general-purpose use. In many cases, they can be designed to cater specifically to the needs of businesses. Of these platforms, three are of particular interest to CIOs for their potential in the enterprise setting:

  • Ethereum is a generic, fully-programmable public blockchain platform that is designed to be able to handle all possible use cases. Like Bitcoin, Ethereum is “permissionless,” which means anyone can use it to execute blockchain-facilitated smart contracts. There are efforts to build an enterprise version of Ethereum, under the aegis of the Enterprise Ethereum Alliance, that CIOs could use to create robust, large-scale private blockchain implementations in almost any industry for almost any purpose.
  • Hyperledger Fabric is a cross-industry modular blockchain platform that is private and restrictive (a.k.a. “permissioned”). It is a public cloud service created by the Linux Foundation and used to build secure blockchain networks. The platform allows private companies or government agencies to set-up a trusted network and to share information freely; only members can see this information and cannot alter it once it has been entered. Hyperledger gives enterprise-level customers the option of building scalable, commercial businesses.
  • R3 Corda is a private and permissioned distributed ledger platform for the financial services industry. Corda is designed to handle complex transactions and restricts access to transaction data. However, while it is geared for financial markets, Corda is applicable to any commercial scenario.

Says Nick Fulton, head of partnerships, Paybase: “Although blockchain solutions are being applied to streamline back-office processes, they really come into their own when multiple parties are interacting in the same network or ecosystem. An example of this could be an entire supply chain (such as the beef industry) operating on a blockchain to improve the efficiency and transparency of their transactions.

“This, however, requires collaboration between parties to overcome the initial chicken and egg problem that comes from building that network. Clear market leaders are more likely to take the lead in adoption in a B2B setting; however, they often have the greatest vested interest to maintain the status quo.”

A blockchain future?

Could the blockchain hold the key to the new business architectures that are needed to move cybersecurity to the next level? IBM dubbed those businesses looking closely at blockchain technologies as ‘explorers.’ This is perhaps an apt description of the general attitude towards the blockchain at the moment.

Because of its early link to cyber currencies, the focus of the blockchain has been in the financial sector. The expanding FinTech sector illustrates how new businesses and services can be built using the blockchain as its foundation. Other burgeoning industries, such as IoT, could also see a massive expansion in the application of blockchain principles. Where smart environments exist, highly personalized and sensitive information will be collected and transmitted – a scenario the blockchain is eminently capable of securing.

The Blockchain Research Institute explains: “Now we shift from blockchain’s impact on enterprise architecture and industry structure to its effect on the role of the CIO and what CIOs can do to navigate and thrive in the blockchain era. The CIO’s changing role is an important subject. New technologies do not deploy themselves. Organizations wanting to exploit new technological capabilities need talented individuals and teams to develop the vision and then build, test and implement it. As ‘chief technologist’ of the enterprise, the CIO plays a crucial role in this process.”

R3’s Richard Gendal Brown sees a general evolution of the blockchain taking place: “Mainstream adoption won’t come in a ‘big bang’ moment and companies have to proceed in a careful, proportionate manner in moving towards this. This is particularly important when there are so many regulatory, compliance and legislative factors at play in ensuring blockchain is adopted sustainably.”

With John Connolly, Chief Product Officer, Receipt Bank concluding: “I think once skill-sets become more widely available, and once the areas of application are appropriate rather than overkill – or rather, once the hype gives way to some real applications – we will (as always) see those who are happy to be on the leading edge than on the bleeding edge. Right now, it feels like the bleeding edge. Few can make decisions on behalf of their respective companies.”

John Connolly, Chief Product Officer, Receipt Bank
John Connolly, Chief Product Officer, Receipt Bank

Sectors such as finance and healthcare are prime candidates for blockchain transformation. Logistics and supply chain management could also be radically altered if the promises made by blockchain technology could be implemented with practical systems. Removing a central data controller is such a radical change to how security has been traditionally handled, it’s challenging to see businesses moving wholesale to these platforms anytime soon. The blockchain is coming; its arrival is just delayed.