We are about 24 months into the hype cycle on Blockchain, measured by the volume of news that has started trickling out from institutional investors and software companies, as well as the recent surge of interest in Crypto Currency trading. We are potentially looking at another 24 months from starting to see a real presence in the marketplace, so now seems like a good time to address where Blockchain is headed in terms of its relevance as a technology platform for businesses.
For those starting to think about Blockchain, it represents an intriguing new model or opportunity as a new technology pattern that will disrupt existing platforms and technologies in industries like Manufacturing, Healthcare, and Financial Services. This blog addresses some challenges and opportunities with the technology itself, and not the relative merits of Crypto Currencies which is the realm of governing bodies to decide.
As you have no doubt heard, Blockchain and Crypto Currency , roared into the spotlight at the end of 2017. The valuations of most Crypto Currencies were the immediate subject of discussion, but the technology itself which underpins these currencies is also starting to see its fair share of traffic. Blockchain, or the distributed system of processing, recording and settling transactions, has been around for about 10 years but with the growth in Crypto Currency usage has started to emerge as a serious platform for other types of applications.
For those who aren’t familiar, Blockchains are basically platforms that support the processing, recording, and authentication of transactions like financial transactions and record updates.
Uses for Block Chain have included, but are not limited to: Currency transactions (instruments of trade that enable parties to exchange currency for goods or services without a third party intermediary), eCommerce, Contract agreement and recording (Real Estate, Healthcare and Insurance), Supply Chain transactions (tracking a record of events in the life of a product, component or individual) and more recently as a platform itself for application development (examples include Sidechains, which are complimentary Blockchain offerings that augment or improve existing Blockchain platform).
Some up and coming vendors in these spaces we have heard or seen most often are:
- Currency – Bitcoin and zCash
- Contracts – Ethereum and RSK
- Supply Chain – IBM HyperLedger
- Applications – Tendermint and BlockCypher
Apart from Crypto Currency, none of the areas listed above has been proven with Blockchain, but the number and variety of applications coming to market sets the stage for a strong and enduring presence for the technology in the areas outlined above.
Gartner’s recent report, “Cool Vendors in Blockchain Platforms,” is tracking over 70 new product entrants with some variant of a Blockchain-based architectures. The reason for this is that Blockchain presents the opportunity to side-step the layers of older technology in places like Healthcare, Insurance, and Financial Services and quickly build a scalable solution that can enable seamless transactions across geographies.
As a leader or decision maker evaluating these technologies, it is important to understand Blockchain technology and how it fits into your organization. Some key considerations are:
- Do I have a good business case or use case pattern that Blockchain more effectively addresses than the current solution I have? Many times we have seen over-eager teams jump into speculative technologies with a desire to get there before their competitors, only to end up squeezing a solution in to a problem that is best fixed some other way.
- Can my organization pilot this technology and support it for a period while we prove it out? New tech is usually either the provenance of Senior Engineers and Architects who are playing with them in a non-production environment that will never see the light of day, or CIO’s mandating change for the sake of change. It is important to have clear executive vision and sponsorship as the investment made at this point may not necessarily pay out. It will require time, care and attention to detail.
Some of the issues and challenges with Blockchain include:
- Blockchains are closed systems that make interoperability and reporting a challenge
- Blockchain platforms are mostly small, niche, unproven technologies in a rapidly evolving space and subject to rapid displacement as larger companies start to bring offerings to market
- Availability of development talent is thin at the more experienced end of the spectrum which means there is little actual experience out there running these applications
- Scalability, performance, transaction latency (time to confirm) have been an issue in the more established and larger systems, although Sidechain applications and new platforms are beginning to address these issues
- Lack of governance for open source Blockchain technologies means slower cycle for improvements
Stay tuned for more as we see where 2018 leads, as it promises to be a big year for this exciting technology.