On the chopping blockchain: Where does the ledger technology go from here?
National Cybersecurity Awareness Month
As 2017 enters its fourth quarter, some experts who predicted this would be the year of blockchain may be disappointed that the technology did not sweep through industries quite as thoroughly as many expected.
Blockchain was among the top tech trends for 2017 and sits on the precipice of the "trough of disillusionment" on Gartner's hype cycle, waiting to sink or swim based on the success of the early adopters of the technology.
The technology has seen a handful of high-profile use cases and well-known applications in financial services, but experts maintain in coming years and decades blockchain will hit its stride in supply chains, data management and cybersecurity.
A bitcoin for your thoughts
Cryptocurrencies remain the predominant blockchain application. Bitcoin and Ethereum may get all the attention, but hundreds of other strains find a home on the ledger platform, competing with new currencies popping up weekly to test the waters.
Yet just because cryptocurrencies are established on blockchain does not mean they are the future of the technology. Current trends see industries steadily realizing the use of the tech outside of financial services, especially in security and supply chains, according to Martha Bennett, principal analyst for Forrester.
IBM and Microsoft have steadily established a presence in the blockchain sphere, but large-scale projects applying the ledger to cyber insurance or food safety are still in early stages of experimentation and implementation.
"CIOs need to convince themselves that what they're getting is what they actually want at a price point, not just immediately, but over the longer term."
VP and Gartner fellow
EY and Guardtime launched the first maritime insurance blockchain platform in September, which links clients, brokers, insurers and third parties together on the platform for smart contracts. Maersk Line and IBM partnered in March to bring blockchain to supply chains to digitize paper trails, track containers and reduce fraud between links.
"Customers want to be able to automate transactions around data. They don't want to share their data with everyone, they just want to share the necessary data with counterparties, and they want to have an official guarantee they are looking at the correct data," said Mike Gault, founder and CEO of Guardtime.
As blockchain pioneers gear up for what lies ahead, the enterprise must first turn an eye towards barriers to implementation.
Back to the building block[chain]s
The technology is still in its infancy, and industry executives need to capitalize upon this window of opportunity. "What the forward looking CIOs realize is that, yes, this is a very immature technology, but this actually a point at which you can still influence how that technology gets developed," said Bennett.
The nature of blockchain — especially its decentralization, incorruptibility and anonymity — makes the technology at odds with many status quo systems. As companies work to implement the "relevant underpinnings" of blockchain, reassessment and retooling of established systems may be necessary.
Besides replacing legacy systems, widespread implementation would likely incur tremendous revision of regulations, tax guidelines, code and business practices. How society operates and norms of transactions may stand in the way, according David Furlonger, VP and fellow at Gartner.
"Are we prepared to have a societies that operate where you don't pay central issue or currency? Are we prepared to have platforms that are fully decentralized?" asked Furlonger. "There is no central authority that is determining price or determining conditions of doing business."
"Blockchain is just plumbing — it's what you use to build applications to solve customer problems."
CEO and Founder of Guardtime
The potential benefits of blockchain implementation are high, but cultural and legacy thinking and operation methods have to be addressed over the next decade. The present or coming years are unlikely to be the "year of blockchain," according to Furlonger, who predicts the 2030s will be more conducive to widespread blockchain optimization.
"Many of the use cases are just not transitioning beyond the pilot phase, simply because people haven't thought about what [blockchain use cases] means end-to-end and how everybody will work together on this network," said Bennett.
Changing cultures is a commitment CIOs and other tech executives need to make for their companies. Choosing to invest in blockchain for the application worth and not the hype poses challenges, as IT leaders must also figure out if accomplishing goals can be done with other digital technologies that do not require development from the ground up.
"I'm not convinced that many of the architectures that are being put forward provide significant value there because they're not decentralized, they don't use tokens, they don't have some kind of external consensus mechanism," Furlonger said. "CIOs need to convince themselves that what they're getting is what they actually want at a price point, not just immediately, but over the longer term."
A blockchain is only as strong as its weakest link
If companies take nothing else from the list of blockchain's potential benefits, they should give the cybersecurity, data verification and identity management implications serious consideration.
As the fallout from Equifax's breach — and another recently disclosed earlier breach — mounts, companies are turning eyes inward to make sure bugs are patched and website vulnerabilities strengthened so as not to suffer the same fate. But no matter how secure a company thinks it is, human error and savvy third parties can almost always find a way in.
Companies can implement a private blockchain for commercial enterprise applications, which would allow leadership to restrict access to the ledger to designated employees and offer more control over chain development than a public chain. Many experts have reservations about private blockchains though.
Private company blockchains are likely to be industrialized and offered as a service, according to Gault.
"Ultimately, blockchain will just be seen as a service, just like the internet, on which companies will build applications on top of," Gault said. "Blockchain is just plumbing — it's what you use to build applications to solve customer problems."
"What the forward looking CIOs realize is that, yes, this is a very immature technology, but this actually a point at which you can still influence how that technology gets developed."
Principal Analyst at Forrester
Data encryption holds potential, but customers are unlikely to be comfortable allowing sensitive data outside of their firewalls, according to Gault. But large global organizations may find use for the technology.
"There may be some use cases, in particularly large global organizations, where they internally have the same reconciliation problem that you may have between companies, where everybody should be looking at the same data or everybody should have the same version of a document, but doesn't," said Bennett.
Blockchain can also be used for automation of compliance, negating the need for audits by the "Big 4," said Gault. "You don't need all this complexity of physical human beings showing up and doing checks, you can actually do this verification in an automated way and reduce these costs," said Gault.
A security system overhaul is no small feat for any company. But considering the cost of cyberattacks — $1.3 million a breach for large North American enterprises — the status quo may not be enough anymore