Why blockchain isn’t magic and it won’t fix every problem you have
Blockchain

Why blockchain isn’t magic and it won’t fix every problem you have

Companies high and low are trialing blockchain technologies. According to Outlier Ventures, over 100 enterprises currently have proof of concept trials underway. As the technology and the companies that operate in the space mature and become more enterprise-friendly, companies’ understanding of what blockchain is and isn’t also needs to evolve.

Organizations need to learn what the value of blockchains is, the differences between each type -- federated, private, public etc. -- when it makes sense to actually use these technologies, and how to integrate those technologies within the business in a scalable and sustainable way.

 

Blockchain - what is it good for?

The main current uses cases for blockchain technology within enterprise spaces involve transactions; that could be the swapping of digital assets between two or more parties, tracking goods being moved from one place to another, or as a way to verify trust between two parties when assessing information.

“You have to go through a use case rationalization exercise to see if blockchain makes sense for a business,” says Adam Robyak, Field CTO, Dell ‎EMC.

“Do I require audibility in my business processes? Do I need traceability or to prove the source of origin? Do I need to see the chain of custody? Do I need to interact to multiple entities? Is there potential for different motivations between different parties involved? Those are the types of things you need to focus on when you think about different types of use cases.”

Organizations should be aware that there are many instances where blockchain doesn’t make good sense, or that simply adopting the technology to save face and be seen as innovative won’t help much.

“There's a lot of blockchain washing that is going on out there,” says Mike DiPetrillo, Senior Director at VMware. “If you're the only people using this blockchain, please save yourself the aggravation and just go get a database and write to that database. If you have just one more party in there, and they just need occasional reads or writes, put your database in a DMZ, give them some permissions.” 

Chris Trew, CEO of blockchain consultancy Stratis, says companies are often trying to use blockchains when a traditional centralized database could have done the job simply because they want to use the buzzword of the blockchain.

“There's a lot of misconceptions in the blockchain space, and it just dilutes the whole industry.

“Some people genuinely think it's a replacement for cloud storage. But it's really not, it's very expensive to store data in the blockchain. You should only store what you need to be independently verifiable.”

One example is around healthcare information. Traditional PACs imaging files are massive and would be inefficient to send or store via a blockchain, but linking medical records on a traditional centralized database and having the hash of the record stored on-chain to verify when it was last accessed and altered would make sense.

The WEF has released a paper to assist businesses in understanding whether blockchain is an appropriate and helpful tool for their business needs. It features an easy to follow framework which allows companies to see not only if blockchain is a useful fit, but which type of chain might make the most sense. Once companies understand where and when blockchain-based technologies can actually provide value, that’s when we might start to see companies move beyond mere trials and into full adoption.

“One of the things I think will be really interesting is watching established companies and seeing what business units they have that they tokenize,” says Galen Moore, Director of Market Research at blockchain advisory company New Alchemy. “Not necessarily tokenizing your entire business but some line of business or unit where the tokenizable opportunity may be present.”

 

Companies need to think beyond blockchain trials and day one

As well as a growing number of startups such as R3, Tymlez, Symbiont, and others that are looking to bring enterprise-grade capabilities to the blockchain, large tech incumbents are looking to establish themselves as major players in the space. Blockchain as a service (BaaS) offerings from industry giants AWS, Azure, IBM, and a host of others are offering a quick and easy way for companies to get started with the technology in a way that doesn’t involve a lot of upfront investment.

But while these services are great to get and up and running with, says VMware’s DiPetrillo, companies need to think more about ‘day 2’ operations and what happens after that, and how to make the blockchain part of any company as well-managed as any other part of the business.

“What happens when you need to do an audit on this thing? How do you see which nodes are touching your data? How do you see which nodes voted which way on your data? How do you see the transactional history of your blockchain?”

As an example, he explains how he’s seen cases where a company was unsure why its smart contracts were overloading its database, and it turns out the company didn’t realize these contracts execute on every node within a blockchain network, which meant hundreds of nodes trying to access millions of rows from one database all at the same time.

Companies should also be aware that blockchain, for all it’s interesting properties, won’t solve any ‘garbage in, garbage out’ problems. If you put bad data in, it's just going to replicate it and send it out to all of the nodes. However, what blockchains do create is a breadcrumb trail that means it can be easier to see the source of bad data.

“That interface between the physical and the digital is one that I think has not got enough attention among people who want to use blockchain for supply chain use cases,” says Dr. Zulfikar Ramzan, CTO of RSA.

“At some point someone takes a digital identifier of a physical good and enters it into the blockchain for the first time. You've got to make sure you protect the sanctity of that process; if somebody assigns a wrong identifier either on purpose or by accident that could be an issue. You'll do a great job of tracking things but you may be tracking the wrong things along the way.”

Security is another aspect that needs to be taken seriously. While the underlying blockchain platforms are yet to suffer any major hacks, the smart contracts developed on top of them have suffered numerous security SNAFUs, resulting in millions of dollars being lost.

“If you're implementing blockchain and something goes wrong, will you need somebody who's an expert in cryptographic implementations to come in and fix it, and if so, do you have access to that expertise?” asks Ramzan.

Companies should be wary of adopting a ‘blockchain uses encryption, ergo it’s totally secure’ mindset. Aside from the fact the underlying hardware needs to be secured the same as any other, it is also open to abuse if not monitored properly. In the same way that a company’s SQL admin could take over a company’s SQL database and change data, a company’s blockchain admin could in theory take over all the nodes within your own organization’s network (although not any nodes that are part of your blockchain but outside your company’s control) and make changes to the data on-chain (though these changes would be traceable).

 

Blockchain will come to the enterprise, in some form

Gartner’s most recent survey of CIOs suggests around a quarter of organizations have or are actively planning to implement or experiment with blockchain-based technologies. A study conducted by Juniper Research last year reported more than half of companies with over 20,000 employees were at least considering deployment. Given the excitement around the technology, it’s unlikely the blockchain is going to fade away any time soon.

“As far as I'm concerned, blockchain is no different from some of the other technical evolutions we've seen; the internet, virtualization, or cloud computing,” says Trew. “If we take virtualization for example - just from a cost-saving exercise you can't compete with your competition if they’re virtualizing their whole workloads. It will be the same with blockchain.”

But as private blockchains and more enterprise-specific blockchain platforms gain traction, their similarities to the original chain proposed by bitcoin creator Satoshi Nakamoto grower fainter.

“There's a lot of money being invested right now in this thing called ‘blockchain’,” says RSA’s Ramzan. “But nobody really knows what blockchain is. The definition is a moving target.

“I think something called blockchain will see large adoption, how much that thing ends up resembling what we started with is the open question in my mind.”

 

Also read:

Why finding blockchain talent is hard, and what to do about it

How blockchains can help build stronger software

Everything you need to know about... Blockchain

Q&A: How might blockchain 2.0 pan out?

Is Puerto Rico ready to be the next blockchain utopia?

Enterprise GitHub projects of the week: Blockchain special

Blockchain-based companies have finally joined the ‘Unicorn Club’

Are we overdue a Bitcoin Unicorn?

VCs share their perspectives on the Blockchain investment space

Blockchain For Dummies: What you really need to know

How to address the blockchain skills shortage

 

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Dan Swinhoe

Dan is Senior Staff Writer at IDG Connect. Writes about all manner of tech from driverless cars, AI, and Green IT to Cloudy stuff, security, and IoT. Dislikes autoplay ads/videos and garbage written about 'milliennials'.  

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