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Blockchain Gains Ground, But Hurdles Remain

6 minute read
David Roe avatar
Some say we'll see more blockchain initiatives go into production in 2019. Others say it's the year when orgs realize it isn't what they need. Who's right?

PwC’s 2018 survey on blockchain adoption in the enterprise revealed the technology was slowly gathering momentum. However, significant hurdles remain, mainly how enterprises can turn a technology that was essentially designed for financial transactions into a tool that could be used to manage the nightmare of organizational data security.

The survey, which was conducted across 600 enterprises, found 84 percent said their organizations had at least some involvement with blockchain technology, but only 15 percent have gone live with it. The report, Blockchain Is Here. What’s Your Next Move?, also pointed to a number of shifts in the blockchain landscape, notably:

  • Tokenization: This is the representation of real or virtual assets on a blockchain, which is spreading to raw materials, finished goods, income-producing securities, membership rights and more.
  • Initial coin offerings (ICOs): This is where a company sells a predefined number of digital tokens to the public, which are funneling billions of dollars into blockchain platforms.
  • Enterprise software platforms: These are the engines for company operations such as finance, human resources and customer relationship management that are beginning to integrate blockchain.

2018, Year of Blockchain Pilots. 2019, Year of Blockchain Production

Ilya Pupko, chief architect at API integration platform provider Jitterbit, said 2018 was the year of blockchain “pilots.” He argues we will see more of the following as the technology evolves:

  • More blockchain projects going into production.
  • More use cases in nonfinancial industries like manufacturing, healthcare and food safety.

But, in order for any of that to happen, companies will need to deploy technology to connect the new blockchain solutions to existing live production systems. For blockchain, this means the APIs that serve as the universal interface to legacy systems.

There is an analogy with Bitcoin here. Even though the technology, the code, and everything required has been available for a long time, and people could find ways to interact with it, Bitcoin didn’t take off until an established and open marketplace emerged.

“Now that there are exchanges that make it easy to buy and sell Bitcoin, it opened the gates to much greater adoption — and a volatile price, of course. Users can visit a website, register, provide their banking info and buy," Pupko said. “That’s generally what an API does for existing systems — it provides a consumable interface that businesses can use to blend existing production systems with innovative new blockchain solutions that are coming out of the pilot phase.”

Blockchain holds potential for a number of industries. Pupko offered two examples of where he believes it will be of particular use.

1. Manufacturing

Manufacturers are considering blockchain as a way of providing easier and safer ways to collaborate on research and product development. They have long viewed the current patent system as broken and outdated, and while blockchain won’t be able to replace it, it has the potential to smooth over many of the obstacles companies face when working on products that involve intellectual property issues.

2. Food safety

As food safety lands in the headlines more and more frequently (case and point: E. coli outbreaks in the US at the end of 2018), the ability to track food sources is becoming a publicly visible concern. It took the FDA literally weeks to pinpoint the source of the E. coli outbreak. Following the confirmation, it was impossible for many retailers to confirm their source, preventing them from properly taking action on the advice of the FDA.

“There are a number of startups already trying to make a name for themselves in this space, and it would make sense for them to be able to ride this wave, possibly partner with bigger enterprises, to offer a set of solutions and literally create a completely new market,” he said.

Related Article: Blockchain for Business: Ready or Not, Here it Comes

Why Blockchain Adoption Might Be Slow

Paul Magel, president of the business applications and technology outsourcing division at CGS, said that while blockchain has become popular in certain industries including financial services, the adoption of digital ledger technology has been slower for others like apparel manufacturers. For blockchain to succeed in this sector, all partners within the supply chain must be on the blockchain ledger. “Apparel and consumer goods that rely on factories in emerging countries are at a disadvantage because they often lack the technical infrastructure resources to support this technology," he said. 

"And, this is further complicated by how much energy is expended on blockchain. Blockchain must become more accessible, utilized and energy-efficient to have widespread industry appeal. Blockchain is not going to be significant in this sector this year,” Magel said.

Learning Opportunities

Related Article: Blockchain's Role in the Enterprise in 2019

Is Trust the Big Blockchain Problem?

Blockchain remains one of the most buzzed-about new technologies. Beyond the mania around speculation, its deeper potential may lie in its promise to establish trust among multiple parties that don't necessarily have any reason to trust each other.

Debo Olaosebikan, co-founder and CTO of Gigster, said that by having a ledger that no one owns and which is secured by math (cryptography), everyone can trust the account of events stored in the ledger without anyone having to trust any other party.

Enterprise supply chains are filled with a huge number of vendors and participants, so something like a blockchain appears to be valuable for understanding how food (for example) makes its way through a supply chain. In the case of food, understanding how outbreaks emerge and how to minimize waste are critical problems worth billions of dollars to the industry — and blockchain products have been built around these challenges.

There are a few issues though. These blockchain systems require a critical mass of trusted participants and in many cases require people to enter information honestly at various points in the supply chain. “The very fact that there is trust required anywhere in these permissioned blockchains hints at the fact that the decentralized feature of blockchains is not critical. Instead what's needed is essentially an append-only immutable ledger that is cryptographically secure and owned by the enterprise itself,” he said.

Related Article: Amazon Quantum Ledger Database Fits a Nice Niche

Maybe Blockchain Isn't the Answer?

In 2019, many enterprises will realize this and find that what they are truly craving is a database that implements immutable ledger functionality. Many ongoing explorations into blockchain will be revisited and solutions like the recently announced Amazon Quantum Ledger Database will catch on for most enterprise use cases.

This also implies that every other major managed blockchain service provider will start working on a competing ledger database offering. It's unlikely anyone will release something within the year, so Amazon will take the lead in the space.

About the author

David Roe

David is a full-time journalist based in Paris, who spends his time working between Ireland, the UK and France. A partisan of ‘green’ living and conservation, he is particularly interested in information managementand how enterprise content management, analytics, big data and cloud computing impact on it.

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