Why Enterprises Love Blockchain Technology

Mark Mueller-Eberstein

CIOs of large organizations have a track record of being a little late in embracing new technologies when they come around. From PCs to Open-source to Cloud Computing… none of them found broad adoption without serious push back from ‘the establishment’. Despite the competitive advantage of early and fast technology adoption we outlined in the 2010 book Agility and McKinsey just again reaffirmed in 2020. Why then do enterprises implement thousands of blockchain-technology-based projects over the last few years? Not only IT companies like Amazon, Microsoft and IBM are providing technologies and services, also accounting firms, financial institutions and even logistic providers are fully engaged. Consortiums like the enterprise Ethereum Alliance (EEA) and r3 (with their Corda platform) create standards and reference implementations and winning new members from across all industries.

In simple terms:

• Businesses are networks
• Companies need to manage and track assets and complex interactions across large business ecosystems
• Databases make organizations far more efficient
• Trusted, shared databases create more value faster
• Within a trusted environment centrally managed databases are still the most efficient implementation
• Creating and managing shared databased between entities that don’t fully trust each other (or their people and security) and incompatible data sets are complicated and take a long time.
• Blockchain solutions can:

1. Be implemented very quickly
2. Don’t require ‘trust’ of the participants
3. Provide an immutable and auditable record

• Blockchains will do for networks of enterprises and business ecosystems what enterprise resource planning (ERP) did for the single company

Good CEOs learn fast

Between the FinTech Ideas Festivals of 2017 and 2019 (200+ meetups of the ‘CEOs +1’ of the largest financial institutions in the US), Blockchain technology implementations went from “how do I spell it” (and IBM promoting Hyperledger) to “we have hundreds of projects live in our organization”.

In January 2018, the CEO of EY told the CEOs of his customers in Davos that blockchain and crypto were overhyped and then in May 2020, at the EY Blockchain Summit, more than 800 of their customers using blockchain solutions implemented by EY and Microsoft witnessed the announcing of a full embrace of Open-source and public blockchain Ethereum as the future of enterprise IT with their ‘baseline protocol’.

Based on “State of Enterprise Blockchain 2020” by Wipro:

• 75% of the enterprises surveyed consider blockchain a strategic priority, with 14% of blockchain POCs reaching production stage in 2019 (compared to less than 1% in 2017).
• Nearly 65% of the 940 blockchain projects that researchers reviewed are using smart contract functionality, but also 80% of current enterprise projects are running on private-permissioned or private-permissioned blockchains.
• WIPRO researchers found the top focus areas for enterprise blockchain projects are identity, digital currencies, trade, payments, supply chain, fraud prevention, compliance, and finance.

We know from our work with IT giants, industry organizations and CIOs, that the measurable impact in enterprises spreads over all business functions, rom accounting — where smart contracts can encode complex accounting rules to supply chain management with auditable and authenticated trail of shipments without a need to trust 3rd parties — to marketing — where tokens can represent club membership, loyalty points or benefits with complex rules (as implemented in Qantas and Singapore Airlines and the AAA in the USA) and multiple companies can share loyalty tokens with full visibility and real time accounting. In addition, in the manufacturing sector, the embedding of “Crypto-anchors” into products helps combat counterfeits, helping to preserve brand value.

How the heck, did that adoption happen so fast?

Because the value proposition delivered of blockchain technology translates into economic and efficiency gains. Fast. Increasing concerns about counterparty risk with financial assets, supply chain lines, data exchanges, and many other common business transactions are accelerating interest in decentralized transformation.

In 2016, I met the development team of Disney, and they were excited about a long list of internal use case of their “Dragonchain Technology.” This innovation would allow for private corporate processes from royalty payments to theme park rewards to food safety of their cruise ships to be streamlined confidentially and internally with trust ‘validated’ by the public Bitcoin and Ethereum blockchains while still maintaining and support transaction privacy. It was probably ahead of their time, but also the beginning of the end for balkanized, bespoke, and brittle B2B system integration. https://www.linkedin.com/pulse/12-facts-dragonchain-disney-mark-mueller-eberstein/?published=t

Today, EY, Microsoft, RedHat, and a host of other organizations apply the same thinking across industries and business functions. The Baseline Protocol is an Open-source initiative that combines advances in cryptography, messaging, and blockchain to deliver secure and private business processes at a low cost via the public Ethereum Blockchain. Based on EY’s Paul Brody, “The protocol will enable confidential and complex collaboration between enterprises without leaving any sensitive data on-chain”.

It has been said, “Bitcoin was designed to be a trustless ideology,” and yet the Big 4 are getting involved with the hopes of providing auditing services. Seems to me these guys are playing the role of the cops who do not outwardly like the hero but deep down know he’s a good guy!

Private vs. Public? Why not both? As the innovation leaders from both Barclay’s bank and the Royal Bank of Scotland said on stage in London in 2018, “we are building our initial solutions on private blockchains to learn, but the innovation is happening in the public blockchain space and we know that we have to embrace it.

The blockchain technology experiments from 2018, where as an example BP and Bitfury implemented distribution solutions and Coca Cola managed sub-contractor labor law compliance, resulted in measurable impacts quickly crossing organizational and functional barriers. In 2019, most organizations and governments had some kind of blockchain technology-based project underway. From finance to logistics, from Starbucks Coffee to community trading of electric energy in Thailand, and even to the identity management of 500,000 refugees in Jordan. In parallel, the crypto community overall showed what exponentially more efficient collaboration and value creation models became possible using Open-source blockchain technologies.

Until the ‘move to remote work’ that was forced by the Covid-19 crisis, in my nearly 30 years in the IT industry, I have never seen any technology adoption move as fast in the enterprise space as the “blockchain revolution”. And the powerful combination of enterprise level expertise tools (e.g. BlockApps) and decentralized global Open-source community are creating new innovations and models every day.

The key areas where individuals, organizations and governments using blockchain technology are finding value in implementations today:

• The benefits of shared databases with increased efficiency, transparency, and security where multiple “islands of trust” are involved
• Lower cost, especially in systems requiring lots of intermediaries and information exchange
• Transparency and auditability leading to less graft, less tax evasion and reduced fraud
• Increased scrutiny of supply chains and provenance of good and finances
• Increased compliance and ability to prove ‘doing the right thing’
• Creating and managing Digital Identities (of people and things) — from refugee camps to shipment containers and solar cells

Some people say, we are in the ‘3rd wave of connection’ and should expect the same kind of radical transformation.

1. Electricity = energy over the wire
2. Telephone = communication over the wire
3. Blockchain = consensus (or agreement) over the wire

For organizations the expected and realized benefits of successful blockchain implementations include economic payoffs that range from increased revenue, efficiency, productivity, and improved effectiveness to reduced costs. They see also an increase in security, system robustness, and a reduced likelihood of system failure.

In our “2019 CES Highlight” book The Trust Technology , we stated that Blockchain technology is as fundamental as the internet and the invention of governance and documentation of property. It combines these together and makes global, transparent ledgers possible. Ledgers have been a key enabler for economic advancement in human history. Blockchain is (simply) a better ledger. The technology of Blockchain enables the third wave of trust management scaling. This is accomplished through what is known as ‘Triple Entry Accounting’ and was described by Prof. Yuji Ijiri; 1989 and Ian Grigg; 2005.

You have three entries (credit, debit, receipt) for every transaction and with blockchain technology all 3 are finalized at the same time, allowing completely new economic models. In ‘Triple Entry Accounting’, the signed ‘Receipt’ (the cryptographically signed acknowledgement of the transaction, verified by the crowd) is the transaction. The increase in speed and the ability to scale trust(-less) networks are as revolutionary as the previous accounting revolutions that gave us “states” 5,000 years ago and “modern commerce” 500 years ago.

Blockchain across Industries

Blockchain is making strong headway across many business and government sectors far beyond the technology sector. Transportation, financial services and insurance, health care, document management, real estate and property management, industrial operations, resource extraction, farming, retail operations are industries embracing blockchain technology today. Confidentiality and privacy, previously only solvable by “private blockchains” are possible with public blockchain implementations. The speed at which blockchain privacy technology is improving is dizzying. Multiple organizations from companies to universities are pushing the envelope of a specialized form of math known as a zero-knowledge proof (ZKP) that is central to this technology. In 2020, EY released the “Nightfall technology” as Open-source available not only to their customers but the ecosystem to build with.

As the Nobel Prize Winner, Muhamad Yunus said, “technology designed for the social purpose, to begin with, would be more powerful and would create its own exponential expanding positive force.” We are now moving into a world of decentralization. Blockchain is “decentralized cloud services” for decentralized human coordination.

The Covid-19 Crisis likely will accelerate the requirements for a global, decentralized, and resilient infrastructure to manage trust and collaboration, along with censorship resistant wealth storage and transfer. Over the next decades, there will be changes to social structures, education, global and local networks, and politics when blockchain technology becomes the scaffolding of transparency, accountability, and efficiency for small and complex systems.

About the author

Mark Mueller-Eberstein is one of the world’s leading experts on leveraging key technology trends for competitive advantage; an internationally renowned business leader, entrepreneur, investor, best-selling author, and teacher (at Rutgers University’s Business School). Mark is the founder of Adgetec Corporation and is a manager of the Codex3 blockchain investor partnership.
Mark wrote the CES2019 highlighted book “The Trust Technology”, is an advisor, investor and board member to selected companies in the blockchain space for over 5 years (helping teams like PundiX, Dragonchain, CoinStats, Signkeys, CryptoSlate; Investment Funds e.g. http://www.bloccelerate.vc, REDDS and global initiatives.