Is your organization ready for blockchain or distributed ledger technology? There is certainly no lack of enthusiasm. A recent survey of 200 business leaders by SAP finds while 92 percent view blockchain as an opportunity, only three percent actually have blockchain in production. The two most promising applications seen for blockchain include supply chain management and legal/regulatory oversight.
As evidenced by the relatively slow pace of adoption against all the hype and hope, executives need to think carefully about why, where and how they are adopting blockchain in their day-to-day business.
In a new report from the World Economic Forum, this questions is answered. The authors of the report, Cathy Mulligan, JP Rangaswami, Sheila Warren, and Jennifer Zhu Scott outline questions executives need to ask before they move forward with blockchain. As they observe, despite strong interest in adopting blockchain, business leaders have “significant questions and confusion about whether blockchain would actually address their business needs and had serious concerns about security, immutability and when to use a private or public blockchain.” There’s a need for objective and practical guidance in cutting through the hype and identifying where blockchain could add true value to their companies to cut through the confusion, they add.
Before diving into blockchain, ask the following questions of your enterprise:
Are you trying to remove intermediaries or brokers? “It is important to understand the business context – does the business problem require the removal of an intermediary? For example, would it be cheaper to collaborate directly with suppliers or competitors rather than use a clearing house? An example of this is the banking industry using a solution such as CORDA to manage remittances between themselves; this allows them to deliver services faster, securely and more cheaply than with existing technologies. They do this by redefining how business processes are delivered in their industry.”
Are you working with digital assets (versus physical assets)? Blockchain needs to work with “‘digitally native’ assets, meaning assets that can be successfully represented in a digital format. If an asset has a physical representation that can change form, then it is difficult to effectively manage that asset on a blockchain.”
Can a permanent record be created for the digital asset in question? “A blockchain needs to be the source of trust. If there are multiple sources of trust regarding the state of an object, then the object cannot be effectively stored on the blockchain. In those instances where a permanent record can be created, it is important that all parties that have responsibility for the state of the digital asset in question agree how that state will be handled/managed in the new business process prior to any development occurring.”
Is a permanent record desirable? “In a situation where the need to delete information is critical, then blockchain or DLT is not an appropriate solution. It would not make sense to store an ordinary grocery list on a blockchain.”
Do you require high performance, millisecond transactions? If a business process “requires millisecond performance on transactions, blockchains are unable to handle this effectively yet and it is advisable to work with either existing technologies or wait until blockchains can handle such transaction speeds. As of April 2018, various forms of distributed ledger technology carry between a two- and 10-minute processing time.”
Do you intend to store large amounts of non-transactional data? “It is not currently advisable to store non-transactional data on a blockchain. If this is required for a specific use case, it is not advisable to use a blockchain. If, however, the trust in question is related to transaction records (rather than the underlying data itself), then a blockchain may be applicable. In all cases, any private information or any data that may be in conflict with local and global data-protection regulations, such as GDPR, should not be stored on the blockchain.”
Do you need to rely on a trusted party? A trusted party may be necessary for compliance or liability reasons, the report states. “If an industry has specific requirements on the use of intermediaries or trusted partners, then it may be complicated to deploy blockchain, even if other benefits of its use are readily apparent. In use cases where regulation plays a big role, it may be necessary to include regulators in the project and deliver means by which the regulators can ensure compliance with laws, such as antitrust and environmental law.”
Are you managing contractual relationships or value exchange? “For blockchain to assist in reducing costs and delivering real business value, it is important that a blockchain looks at managing transactions around digital assets – if a business problem is not really about managing contractual relationships and value exchange, then there is little need for a blockchain – a different technology could probably solve that problem more effectively.”
Do contributors know and trust each other? “If the actors/entities already know one another and trust one another, there is probably no need for blockchain. If they do not know or trust one another and/or have misaligned interests, there may be a good reason to use blockchain.”
Do you need to be able to control functionality? “If the ability to change the functionality on a blockchain (e.g., node distribution, permissioning, engagement rules, etc.) without having a detailed discussion across the large open-source forums for blockchain is desirable, then you should select a private, permissioned blockchain.”
