This is the second piece in a 2-part series dedicated to blockchain technology. If you would like to read the part 1, which covers what the blockchain is, and how it works, you can do so here.
When Will The Blockchain Affect My Business?
All of the promises made by blockchain technology – automation, reduced transaction time and cost, enhanced security, and perfect record keeping – should be music to the ears of any individual or organization which manages and exchanges data, but how feasible are the promises of the blockchain at this point in time? Should organizations really be pouring millions of dollars into R&D for creating a blockchain proof of concept?
It is difficult to say — on one hand, many of the world’s largest companies are doing just that. On the other hand, many companies are waiting for a true “winner” to emerge in the blockchain battles. Just as Netflix beat out Blockbuster, many of the blockchain technologies today are competing for the same markets. Companies and governments are cautiously waiting to see which platform emerges as the “Netflix” for their specific market/industry/use case that they most interact with. No one wants to be stuck with a Blockbuster membership when the entire world has a Netflix account. Similarly, no organization wants to bet big on the wrong horse, and be stuck with a blockchain that cannot interact with the “winning” blockchain.
As with any technological standard, the true value is realized when participants in one group can interact with it, and be certain that they will get the same results as another group. Just like with the internet, standardization of blockchain protocols is the key to mass adoption. As we have seen elsewhere (the US EMV Debit challenges immediately come to mind), the development of a standard requires input from numerous and diverse stakeholders, and simply put, takes time.
Realistically, there likely won’t be one blockchain “winner” that emerges in the next few years. Different blockchain protocols are better suited to distinct kinds of tasks. As platforms continue to develop, the “killer app” of each will be identified and organizations will select the technology platform that is best suited to their needs. The real opportunity for innovation will begin once the integrations between different blockchain protocols are built out and when a blockchain can seamlessly integrate with existing public and private network architecture and protocols (including “smart” or connected devices). Once this occurs, I believe that we will see an entirely new class of services, applications, and use cases of which we could not have previously imagined – similar to the way that the internet, smartphones, and cloud computing have drastically changed the way we think about how we interact with both systems and each other.
The Fundamental Questions to Ask About Blockchain
Simply put, it will take time for these battles to be fought, technology to be refined, and standards to be formed. Blockchain technology is developing rapidly – more quickly than most would have imagined, but there are still fundamental questions that need to be answered before companies should dive in head first.
- “What problem am I trying to solve, and is blockchain technology the best tool to use?”
- “What blockchain protocol should I use – is one better suited for my goals than the other?”
- “Should I run a private instance of the blockchain, utilize a public version of the chain, or leverage a hybrid model – what are the implications of one versus the other?”
- Note: Think of the differences between a public blockchain and a private blockchain as being similar to the public/accessible internet, and the private/permissioned “intranet.”
The answers to these questions will need to be ironed out before the majority of organizations should fully commit to the blockchain. The ironing will need to come not just from the marketplace, but from the individual needs of merchants, companies, governments, and individuals alike.
To answer the question, “Should I care about the blockchain?” I believe that the answer is yes, but not to the extent that it should be THE driving force for any short-term strategic planning and innovation efforts in your organization at this point in time. It most certainly should be on your radar, however.
Immediate Steps to Prepare for Your Blockchain Journey
The best advice I can give to anyone that is thinking about diving head-first into blockchain is to first pause and reflect. A misguided or unsubstantiated investment in technology can have disastrous results. Mass adoption, and as a result, a deep understanding of what the technology can truly provide is at least 3 years out. This is the time that you should start thinking about what internal and external processes would be good candidates for translation to blockchain technology. Characteristics include:
- Repeatable processes that require human intervention and oversight for issue resolution. Put another way, those that have inflated administrative costs and high degree of risk for a breach of contract (invoicing and payments).
- Processes that require strict management and tracking/verification of materials throughout the endpoints of production and/or delivery (supply chain management)
- Transactions that require the oversight and validation of agreement terms by a third party, and that come at increased cost and execution time (financial transactions, contracts)
- Anything that requires accurate documentation of records and the ability to record and validate authenticity/ownership (property ownership/registration, identification/background checks)
The sooner that we can understand what the blockchain should be used for, the sooner that vision can be executed upon once the overall blockchain landscape has become less murky — the benefits and limitations are understood, the infrastructure has matured, and the initial commercial applications are in place.
Just like the internet revolutionized the way we communicate, transact, and share information in ways that we could not even begin to imagine in the 1990s, blockchain technology too possesses this potential, likely in ways that we cannot even yet fully comprehend. Just like the early pioneers of enterprise internet adoption, those who truly understand the opportunities it presents and have a firm understanding of how it fits into their organizational goals and processes will be rewarded. Those who rush into a blockchain adoption effort without a deep understanding of how it will fit within their organization’s existing processes and strategy will run the risk of increased costs, longer execution times, and a drop in efficiency – all things the blockchain was meant to prevent in the first place.
If you would like to learn more about blockchain technology, you can reach Sam Schieber at firstname.lastname@example.org.