Our Chief Strategy officer, Saurabh Gupta has been pioneering new research and vision across distributed ledgers, blockchain and smart contracts. In his latest POV, entitled “The Blockchain Reality Check. Where are we, and what can we expect in 2018?” Saurabh dives into what we describe as “Blockchain Six-Pack”, which describes six built-in features of blockchains that manifest into a disruptive potential over the long run for enterprises, when leveraged intelligently in relevant business use-cases. Net-net, the Blockchain Six-Pack is changing the way we think about business transactions, data storage, and even industry value chains and associated revenue models:
- Distributed shared data over Peer-to-Peer (P2P) network reduces single points of failiure. The most fundamental difference between DLT and the way we store data today, is that Distributed Ledgers do not have a central administrator. A distributed ledger is replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. This allows information to be available across the network in a fully transparent and autonomous way, reducing single points of failure and enabling far better collaboration.
- Consensus-driven trust cuts out the middle-man. In blockchains, there is no need to trust the middle-man as you don’t have one. Trust is driven by consensus algorithms such as proof-of-work (PoW) or Proof-of-Stake (PoS) or some variation of these. As a result, we don’t need to worry about unreliable, inaccurate, dishonest or overpriced intermediaries.
- Immutable transactions ensure trust. Each block in a blockchain contains a timestamp and a link to a previous block. By definition, blockchains are inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and a collusion of the network majority creating a single source of truth.
- Hashing-based data ensures integrity and security. All records are individually encrypted. Blockchains use cryptographic hash codes to verify data that drives up integrity and creates strong resilience to cyber-security concerns
- Automated smart contracts promote touchless interactions across process chains. Several blockchains also offer ‘Smart Contract’ functionality. These are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that obviate the need for a contractual clause. This allows contracts to auto-execute based on pre-set conditions or triggers and allows for much higher levels of straight-through It can even allow the millions of IoT devices to work autonomously
- Permissioned and permission-less flavors give enterprise users flexibility. Much like public and private clouds, blockchains can be private (permissioned), public (permission-less), or somewhere in between (hybrid). These flavors give enterprises the flexibility to choose their solution based on their needs and preferences. Permissioned blockchains enhance privacy and take less computational power (so have higher throughput) but lack the Utopian trust that permissionless blockchains, such as Bitcoin, can bring.
Blockchain’s inherent features give it the potential to drive new touchless business models and disrupt existing ones by removing the need for intermediaries in the long-run. This results in significant increases in the speed, security and reliability of executive processes, transactions and interactions on both micro and macro scales. The potential is enormous, provided blockchains are adopted, sensibly regulated and executed effectively. However, HfS expects a five to seven-year horizon for blockchain to delivery fully, given the nascency of the technology and associated challenges. In addition, media hype and fake news, in addition to negative activity from threatened legacy stakeholders and other economic impacts, could impede adoption.
What can we expect from blockchain in 2018?
In the near term, we do expect blockchain initiatives to drive significant business impact and create a frenzy of excitement as ambitious businesses jump on the potential of new technology developments like never before. Use-cases around traceability through provenance and asset tracking, digitization of contracts leading to faster settlements, management of private data and digital identity will drive significant efficiency and effectiveness gains in existing business models. Blockchain can also become a source of competitive differentiation in the medium term by re-imagining IT infrastructure that is shared and decentralized, re-defining transaction management that is transparent and immutable and driving additional trust in multi-party collaboration.
We might not see the true disruptive potential of blockchains over the next 12-18 months, but we will see it become much more than a conversation topic with several use-cases that are generating tremendous business value for its constituents. And let’s not discount the levels of hype that tend to drive our industry in new directions, especially when the tech works. While digital, AI and automation have been the flavors of 2017, blockchain is gearing up to lead the hype in 2018, as enterprise leaders search for new levels of value that have genuine, proven business applications.
So don’t sit back and assume that the world is not changing, because very soon this funnel is going to flip. Go ahead and investigate blockchain!
HfS subscribers can click here to download our new POV: “The Blockchain Reality Check. Where are we, and what can we expect in 2018?”
(Cross-posted @ Horses for Sources)