CIOs Are Turning to Blockchain Technology
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Blockchain is a rising star in the business world. It has moved beyond a tool for financial services and transactions and is filtering into diverse industries.
However, embarking on a blockchain initiative can be daunting. One of the biggest problems, PwC's Smith says, is the fact that no standards currently exist. "Almost every company has a different approach to implementing [blockchain], and there are a large number of variants," he says. This makes it more difficult to implement the technology across organizations, and it introduces some risk for companies engaging in large-scale blockchain initiatives. It also makes regulation a challenge.
But other roadblocks may exist, Srivastava adds. These include the scalability of non-crypto-currency blockchains, multiple industry groups with different objectives, software vulnerabilities, investment costs, and finding the skills and talent required to put blockchain into motion in a significant way.
Putting Blockchain to Work
Formulating a strategy for blockchain is essential. Srivastava believes that the technology will disrupt businesses and entire industries, and early adopters will gain a competitive advantage. She suggests experimenting with payment systems such as Bitcoin and Ethereum and focusing on localized applications such as audit support and asset tracking ledgers.
"Let the business drive the investment, which means assessing the business use case to see if blockchain is the right solution," she says. "Blockchain is like any new technology. You can demonstrate several use cases, but only a handful of those can result in ROI in business value."
This requires developing in-house talent and investing in education and training about blockchain and how to develop and use it to maximum advantage. It means finding partners or joining an industry consortium. And, for many organizations, PwC's Smith says, there's a need to focus on legal, audit, risk and compliance (LARC) when building a blockchain tool or solution.
"People in these areas will need to be involved early on with any initiative," he explains. "Their input will determine the viability of any projects the organization pursues. It's important to understand what the costs, risks and rewards will be prior to spending a lot of money on an initiative."
Smith adds that there are two primary ways to approach blockchain: permissioned and permissionless. The former, which comprises most of the projects currently taking place in the blockchain space, requires enrollment. "Those involved in the ecosystem are all very closely controlled, monitored and defined," he says.
The latter encompasses true distributed ledgers, such as Bitcoin, that deliver a broad scope with little or no limitation on participation. He believes the permissioned approach is a wise choice for many organizations and situations.
"Organizations can save billions by moving systems onto blockchain, and it may never involve a true distributed ledger or anyone from outside of that organization participating," Smith says. For now, "The goal is to get some experience with blockchain and put yourself in a strategic position so that you can respond appropriately when the technology takes off in a big way."
"Blockchain will be a major game changer," predicts NTT Data Services' Srivastava. "It is moving from the hype phase to actual enterprise visions and discussions."
Samuel Greengard writes about business and technology for Baseline, CIO Insight and other publications. His most recent book is The Internet of Things (MIT Press, 2015).