10 avoidable Blockchain mistakes every company makes
The Blockchain is being implemented in many companies recently promising lots of potential, but at the end of the day, many projects do not get past the production stage. Current use cases being implemented are related to land title systems, trade finance and a variety of settlements or payments. However many of these projects can be successful without the use of the Blockchain, or the company is using too narrow of a prototype in implementation for the project to succeed.
Many companies are using decentralized or distributed architecture, but enterprises looking to use the Blockchain in daily business should keep in mind a few basic rules to avoid common mistakes implementing the Blockchain. Check out the basic ways companies hit pitfalls when implementing the Blockchain in business and how to avoid them.
1. Misunderstanding or ignoring the purpose of Blockchain technology
Companies enter in a Blockchain project as it is trending to do so, it is important to take the core intention of Blockchain in mind when creating a project implementing the Blockchain. In order to get the most benefit from the Blockchain, the technology must add trust to an untrusted environment. Connor Svensson, founder of blk.io, a provider of enterprise Blockchain platform based on Ethereum believes the privacy implications of the Blockchain are significant. He stated:
“We currently live in a world where companies have become custodians of personal data. Public Blockchains allow individuals to have a secure trusted identity, where they can control how much information about themselves to make available to others. This enables you to control what information you are willing to share with other parties, helping retain control over your information.”
Accordingly, businesses should identify the trusted and untrusted areas related to their business and then apply the Blockchain to the vulnerable areas.
2. Assuming that current technology is ready for production use
Some enterprises are ensuring Blockchain as a mature technology; however, only Bitcoin and Ethereum are proven at any kind of scale. Although businesses are implementing many different Blockchain platform technologies, Gartner predicts that 90 percent of enterprise Blockchain projects launched in 2016 and the first half of 2017 will meet a premature end within 24 months. Currently, multi ledger experimentation and proofs of concept based on “test and learn” outcomes are the way to go.
3. Confusing future Blockchain technology with the present-day generation
It is important for businesses to make sure that their plan for Blockchain correlates with the evolving capabilities of the technology and maturity of it. As of now, the Blockchain is limited in scope and cannot be enabled in a regional or global scale platform economy. Many influencers have formed opinions on the potential uses of the evolving Blockchain. Perianne Boring, founder and president of the Chamber of Digital Commerce, was asked if she thinks Blockchains value has been fully tapped. She responded:
“Absolutely not, we’re just getting started. Much R&D is needed to realize the potential of Blockchain technology and find more synergies, efficiencies, and uses. Governments, academic institutions, enterprises, NGOs — all should be investing resources into the Blockchain.”
4. Confusing a limited, foundation-level protocol with a complete business solution
Blockchain may not always live up to the hype. What is available and what is promised may not always match. The Blockchain still needs to evolve from a foundational level to a full application stack or solution. CIO’s should view the Blockchain portion to be less than five percent of the total project development effort.
5. Viewing Blockchain technology purely as a database or storage mechanism
The Blockchain offers limited data management capabilities in exchange for a decentralized service, as well as a way to avoid trusting a single central organization. It is essential to understand that a distributed ledger is not a distributed management system. IBM’s Jerry Cuomo believes that using Blockchain to replaces a distributed database is a terrible idea. Businesses should determine if Blockchain is a good solution for them and how it will be relevant to their information management needs. Dawn Newton, co-founder and COO of Netki, a Blockchain solutions provider focused on digital identity and regulatory compliance, suggests that strategic analysis should be done to determine what is the right Blockchain, the right project, the right team and the right partners to ensure that the chosen endeavor successfully goes to market.
6. Assuming interoperability among ledgers and platforms that don’t exist yet
Blockchain technologies are still in the development stage and lack specific technology models to provide a road map for businesses. Blockchain standards do not exist yet meaning that aside from assuming potential interoperability at the most basic levels, companies should be cautious about interoperability discussions and take it with a grain of salt. Interoperability can’t yet be assured despite the fact that there are multiple competing suppliers out there. There could be integration challenges between Blockchain technologies and legacy environments.
7. Assuming that today’s leading platforms will still be dominant tomorrow
Businesses should not assume that Blockchain will offer longevity on their project. The most effective technology hasn’t even been created yet. Blockchain is constantly evolving both in technology and application. Thus it is important to keep up with new application be sure that it is the perfect fit for your business needs. While Blockchain options may offer a solution, it should be considered as a short-term option on an experimental basis.
8. Assuming that smart contract technology is a solved problem
While smart contracts, which are computer protocols facilitating and enforcing contracts, have the potential to enable the programmable economy, at the moment they still lack scalability, auditability, manageability and verifiability. There is also a lack of legal framework in existence for their application. It is important to be cautious while using smart contracts in business. Enterprises should ensure that the legal team provides policy and operational risk oversight through the process.
9. Ignoring funding and governance issues for a peer-to-peer distributed network
Blockchain may seem less expensive than other options, but the costs will still be significant particularly supplementing legacy systems. Who will pay for what when there are multiple parties still remains unanswered. Additionally, the Blockchain raises many questions about governance, political, societal and organizational issues and could bring significant extra costs to businesses. According to Tapscott Group CEO Don Tapscott:
“The biggest problems, though, have to do with governance. Any controversy that you read about today is going to revolve around these governance issues. This new community is in its infancy. Unlike the Internet, which has a sophisticated governance ecosystem, the whole world of Blockchain and digital currencies is the Wild West.”
Companies should consider all possible scenarios and plan in advance.
10. Failure to incorporate a learning process
Businesses should make sure to take a hands-on approach to all Blockchain projects they take on. Lessons learned from experimenting with the Blockchain are vital to the future successes of the company. Projects that are contracted out should equally heavily involve the IT department and ensure that all knowledge and skills learned through the project are passed on to the rest of the team involved. Knowledge may very well be the only value delivered from Blockchain projects thus it is essential to record all information and communicate it to senior executives as well. Knowledge is power, and the same applies to Blockchain implementation in business.