More than just cryptocurrency: The advent of blockchain for business

The term blockchain is one which has become synonymous with cryptocurrencies such as Bitcoin in recent years. Further than just a platform for digital currencies however, blockchain is now being billed as a technology that will improve visibility, productivity and security for business. In fact, some have gone as far as to say that its system for record-keeping, transparency and verification could replace the role of trust in our society. So, what is blockchain and why is it important for business?

The first step towards understanding blockchain for business is to put aside any thoughts of cryptocurrencies.

Invented to support Bitcoin, blockchain is a digital version of a classic ledger book. However, this new digital ledger has the capability to record and, most importantly secure, many different kinds of transactions. Blockchains can also hold rules about what kinds of transaction to accept and execute more rules in order to interact with other blockchains to form “smart contracts”.

>See also: What will be the impact of blockchain on business in 2018?

The most important and disruptive feature of blockchain is that it’s a distributed ledger—multiple parties have a copy of the entire ledger. That means many kinds of business transactions can be decentralised, eliminating the cost, complexity, and slowness of involving trusted intermediaries. Smart contracts provide new ways to automate complex, multi-party business transactions which reduce costs and increase the velocity of business.

Blockchains are ideal for recording custody chains of goods like fine art to prevent forgeries. The same is true for commodities to ensure sustainability for farmed products or conflict-free sourcing of raw materials.

A global realisation has emerged that blockchains can bring new efficiencies to commerce and profoundly change how the world conducts business and interacts with Governments. Major IT providers like IBM, Microsoft, and Infosys are collaborating with banks and other financial institutions in a race to develop commercial blockchain platforms.

The advent of blockchain is fuelling a huge number of startup companies focused on specific industries and consumer applications and governments are considering how blockchain can make tax reporting easier while reducing fraud.

Is your business primed for blockchain?

Despite being in the news for several years as the technology driving Bitcoin, blockchain for commercial use is still very new. Much of the commercial uptake is still in the proof of concept (or startup) stage.

There are four key areas to consider when deciding if your business is ready for blockchain in 2018.

>See also: 5 ways blockchain technology is changing the world

Are the standards good enough for your industry? Blockchain works as an application programming interface (API), which means standards need to be developed before there is widespread adoption.

There are multiple groups working on standards, including Hyperledger and the Ethereum Alliance Framework. However, Gartner expects the industry to stabilise in 2018 with 75 commercial blockchain platforms before consolidating to about five platforms in 2019 (source: “The Evolving Landscape of Blockchain Technology Platforms“).

Is the technology robust enough yet? Blockchain is conceptually simple, but the underlying technology encompasses some difficult technology challenges. This is especially true for the distributed capabilities of blockchain which allow each party to have their own copy of the same historical record. An entry written to one replica will eventually arrive at the other replicas, which then have to collaborate and decide if the new entry is valid. This can be harder than it sounds to facilitate.

Is blockchain secure enough? Whilst in general, blockchain is considered a step forward for securing transactions, like most things in computing, security is not inherent. Blockchain uses public key encryption, hashing, and digital signatures, and other mechanisms which are well known, but not always administered correctly. Missteps in securing a blockchain, or simple bugs in the platforms, can cause serious disruption.

For example, on November 6th, 2017, $280 million in assets were accidentally (and temporarily) frozen in a blockchain managed by Parity Technologies due to a bug in the underlying platform.

>See also: The necessary adoption of blockchain by government

How can businesses achieve compliance? As is often the case for new technologies, there are policy issues to be worked out. For example, if a blockchain is immutable, how can the “right to be forgotten”, a mandatory requirement in the EU’s General Data Protection Regulation (GDPR), be applied?

There are also concerns that individuals making property transfers or declaring wills on a permissionless blockchain conflicts with how existing institutions manage public records. These anomalies still need to be ironed out.

For many, the answer will be ‘not yet’. Ultimately, there is no doubt that blockchain is a disruptive technology which has the potential to transform industries. However, despite recent momentum, it is a technology that isn’t (yet) particularly easy to use for many businesses.

The platforms are still maturing and, like many other software platforms, they are subject to bugs and operational errors. The potential risks of being a blockchain pioneer are higher than other technology adoption waves because blockchains typically apply to monetary transactions as well as transactions carrying fiduciary responsibilities.

>See also: The business of Blockchain in financial services

However, blockchain technology is likely to be intrinsically embedded within business processes in years to come. Those businesses that have technology with flexible deployment options, and those with modern enterprise resource planning (ERP) solutions in place, will be in a better position to take advantage of blockchain technology and adapt faster.

So, is blockchain right for your business? Assuming you agree that it is a technology that can improve visibility, productivity and security for businesses, then maybe the answer is yes.

Any technology that provides components needed to achieve business growth is worth paying attention to. Is it right for your business in 2018? Probably not. So blockchain, in some form appears to be in everyone’s future, even if it’s not just yet.


Sourced by Erik Johnson, chief architect, Epicor Software

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...