A much needed reality check about blockchain
Blockchain is often upheld as a disruptive revolution that will dramatically change the way we conduct transactions on the internet. Its rise has generated somewhat of a ‘buzz’ throughout the technological landscape and many claim it will transform the financial industry and potentially the world.
However, despite the hype, there hasn’t been much in terms of genuine risk-taking, nor have we seen much of the revolution that was promised. Blockchain’s popularity could be described as Abraham Maslow’s hammer; ‘if it’s the only tool you have, you have to treat everything as if it were a nail’. In this case, while blockchain is a new and unexplored territory, it’s wise to resist the urge to delve in head first. Instead, decision makers should carefully evaluate the potential capabilities of blockchain and decide if it’s the right ‘tool’ for the job.
With everyone eager to be a pioneer and an early adopter of blockchain, rollout pilots have been rushed and have developed from fear to necessity. While innovation shouldn’t be hindered, those who are eager to implement such technology should give themselves a much-needed reality check.
There is no denying that blockchain has enormous, transformative potential. It is currently shaking up the finance sector and multiple other industries ranging from healthcare, energy and automotive and has many benefits to businesses, such as:
A good example of a company reaping the benefits of blockchain is Belgium’s Port of Antwerp, who have recently teamed up with T-Mining on a pilot project. They are currently using blockchain technology to make container handling more efficient and secure.
By employing blockchain, they can securely digitise transactions between terminals, carriers, forwarders, shippers and drivers without interference from mediators. This is creating a much more streamline production system.
Furthermore, through replacing the paper-based system with blockchain, and using a distributed ledger model, transactions can proceed with only the agreement of all participating parties, resulting in the reduction of the need for redundant communications or documentation and diminishing the possibility of fraud or unauthorised handlings.
The reality of blockchain
While we acknowledge the evident benefits of blockchain technology businesses should keep in mind at its most basic, blockchain is an alternative application of .NET and not a ‘one fits all’ magic solution.
2018 will be a crucial year when determining blockchain’s future, development and longevity. Currently blockchain is the ‘hot topic’ of the moment and spending is high, with IDC calming there will be $2.1 billion spent globally on blockchain during the year. Moreover, LinkedIn is reporting a 3x rise in the number of blockchain job offers.
Furthermore, one Juniper Research survey that reached out to over 400 company founders, managers, executives, and other officials, discovered 6 out of 10 large corporations are considering employing blockchain technology and some are actively developing their own applications. But therein lies the problem, many blockchain journeys are in their infancies. This makes discussion about their benefits hypothetical and therefore hard to measure.
Tim Swanson, head of research at R3CEV points out further problems with blockchain technology. He recognises many companies are trying to create their own specific blockchains, thus defeating one of the key benefits of the technology; the decentralised network, “There have been a few different start-ups trying to create basically their own blockchains with specific use-cases. In our view we feel that kind of defeats the purpose of having a network itself because it just recreates silos.”
In saying that, an SAP survey of 200 senior business leaders, supply chain managers, innovation /strategy officers and business analysts, shows that demand for blockchain is high. According to the survey 92% view blockchain as a big opportunity and 96% believe blockchain will improve compliance of companies. However, the same survey revealed only 3% were currently using blockchain in a project today. This demonstrates how blockchain is viewed as a system of trust but currently there remains a great deal of caution and lack of pioneering.
No-one can deny the possibilities of blockchain. However, as with other forms of technology, it does come with its limitations. As well as this, lack of understanding of blockchain’s purpose outside of the banking industry impedes investment and explorations of ideas.
One of blockchain’s main downfalls is the lack of current scalability. The longer a specific blockchain is in use, the longer its chain gets. This leads to an increased need for storage infrastructure across its full network nodes that store a copy of the chain.
Furthermore, as blockchain is praised for its decentralised, peer-to-peer network, there are often complications that go alongside this structure. First, the blockchain network is only aware of what is inside the network itself, any outside information is not considered and would need to be manually integrated into the network. This leads to the issue of where responsibility lies for general maintenance of the network.
Another downside can be the implementation of blockchain and what the subsequent cultural implications could be. Estimations from William Mougayar suggest blockchain is about 80% business process change and 20% technology implementation. While most blockchain codes are open source and run on low-cost hardware and public clouds, the full integration of blockchains into existing environments requires both extensive resources and expertise.
This puts pressure on businesses to ask questions such as:
- Who is my thought leader?
- What does blockchain implementation mean culturally?
- How do I increase understanding on every tier?
- What are my contemporaries doing?
Blockchain technologies, like the systems and tools users need to interact with them, require IT maintenance and support. Therefore, seeking the support of a third party is recommended to alleviate some of the stresses and strains associated with adopting new technology.
There is no denying that blockchain is a game-changer for many industries, but it is easy to get caught up in the excitement of new technology. As highlighted in 3 W’s of digital readiness, it is paramount to ensure implementation is not solely, ‘technology for technology’s sake’.
Loan Pham, NashTech Technical Director gives her thoughts on the ‘hype’ surrounding blockchain, “Despite having attracted an enormous amount of attention during its past “hype” phase, practical applications of blockchain are still rather limited, because it is quite an overwhelming breakthrough to most, and there still are concerns about the existing Blockchain-based platforms that need to be addressed, such as those security issues that have been talked about lately.”
She goes on to encourage businesses to devote efforts to the development of blockchain, “Regardless, the Blockchain technology is undeniably the foundation for upcoming radical changes in different areas, from economy to society, thanks to its built-in quality of integrity, legitimacy and transparency. It is just a matter of time for the Blockchain-based platforms and implementations to get solidified, and for Blockchain’s nature of breakthrough becomes more comprehensible to, and eventually embraced by the majority. I believe that Blockchain-based applications will soon go full bloom in a year or two.”