Blockchain is a technology that operates outside legal, accounting and institutional governance frameworks. It represents a radical departure from conventional transactional, record-keeping mechanisms, and is the foundation for disruptive digital business, both for enterprises and start-ups. This technology has effectively brought about a radical shift in society and business, and is a true game changer. Consultants of EY have written on how this technology has the potential to universally reshape how business transacts across almost every industry in the global economy. On the other hand, few similar technologies have sparked as much as debate as blockchain has, so is there cause for concern in 2018?
A few years ago, blockchain became known as an alternate computing model that uses distributed and decentralized computing networks to potentially offer greater levels of security and lower costs. It’s ability to support an immutable record of transactions has made it a new vehicle for creating trust between diverse parties. Blockchain provides greater levels of security, creating new forms of assets, yet Gartner predicted last year that the technology is set to significantly increase operational risk levels over the next five years. It is time for a clear vision on blockchain and the integration of that vision into the long-term roadmap.
CIO’s: time for clear, strategic foresight on blockchain
CIO’s have a clear role to play in the development of a technology such as blockchain by providing guidance in business language, and therefore a proper understanding of the related risks and opportunities. Gartner points out that CIO’s who invest in study and experimentation with this technology will be better placed to address their boards on it, having greater clarity and a stronger base of facts to work from. It is not necessary to undertake large investments in the initial investigation into blockchain, involvement in various consortia will already provide a general grounding in the concepts and technology.
Start exploring to experience the benefits of blockchain
There are four easy ways to start exploring blockchain technology, as explained by Smith + Crown (a group that conducts blockchain-based research).
- Blockchain-as-a-service is already offered by cloud providers such as Amazon Web Services and Microsoft Azure. Essentially, they provide a sandbox in which you can begin building applications to see how they might work for your organization. There is limited commitment in taking the technology for a test drive. If, however you decide to get serious about blockchain, this approach will most likely no longer suffice.
- Public blockchain platforms are available. These are open to anyone and companies can use them to host transactions and applications. The openness of these platforms means that anyone can interact with your application without your network being open to the outside world. With this experiment, every transaction involves a small cost, as transactions run on a distributed platform.
- It’s also possible to use an open-source platform on your own servers, by taking code from a blockchain project and tweaking it. For authentication and collaboration this is the perfect solution and it is possible to modify the blockchain.
- The fourth option is to build a blockchain protocol from scratch. In this way, the design is an exact fit with the intended functionalities. As this blockchain is not open to the public, you do not however benefit from the brainpower inherent in the public blockchain, or the ongoing debugging that is done by the community.
Blockchain and its platform
As Blockchain is a data based solution, in a business context there are different architecture styles to be considered. CIO’s must evaluate the criteria surrounding public (permissionless) and private (permissioned) deployment styles, as Gartner explains. Failure to incorporate the right architectural approach could lead to operational risk issues, loss of intellectual property and missed business opportunities, all of which could affect business. At the same time, Blockchain can also offer revolutionary levels of safety and security. Since every member of the network has the same data, along with a complete record of any changes made to that data, falsification of data is impossible.
The expectations for 2018
Today a growing number of companies are already testing with blockchain. As noted by EY consultants, they are testing out its power to facilitate transactions and assets. As these pilots and proof-of-concepts mature, many will be abandoned while others will advance towards production systems. This shakeout is necessary to determine which elements of blockchain truly add value and which are just hype. If companies gain the ability to conduct private business over a public shared infrastructure, the long-term future for blockchain will be secured.
A key challenge that will need to be addressed in 2018 will be that of regulation, as also noted by EY. This is due to a lack of clarity on how to implement and enforce rules in the event of a dispute, even though participants in blockchain networks generally agree to be bound by certain rules before joining. With the emergence of blockchain technology, the related hype tends to drive excitement and therefore investment. Eventually something will arise to burst that early-stage bubble. From there on, blockchain will become an innovative, secure technology as opposed to merely a hype.