Blockchain has become famous because of its associations with cryptocurrencies like Bitcoin but its applications can go far beyond that. If you’re not already considering how you can use it in your business, 2018 is the year to start.
Blockchain is a distributed ledger that gives multiple parties a copy of the entire ledger. This makes it impossible to alter the ledger without leaving a record of it. So it lets you decentralise business transactions, eliminating the cost, complexity, and slow speed of involving trusted intermediaries such as banks. You can use them to manage smart contracts, record custody chains of goods like fine art, and provide an audit trail for financial transactions and products.
Blockchains are very secure, reliable, and an authoritative record of events, financial or otherwise. No single person or company controls access to the data because any participant can have their own copy. Transactions won’t change and their source can’t be repudiated.
Blockchain for commercial use is still new, despite the clear use cases for it. There are four key areas to consider when deciding if your business is ready.
1. Standards
Blockchain works as an application programming interface (API), which means standards still need to be developed. Multiple groups are now working on standards and Gartner expects the industry to stabilise in 2018 with 75 commercial blockchain platforms before consolidating to about five platforms in 2019*.
2. Technology
Blockchain is conceptually simple but the underlying technology encompasses some difficult challenges, mostly around its distributed capabilities. An entry written to one replica will eventually arrive at the other replicas, which then collaborate and decide if the new entry is valid. This can be hard to facilitate.
3. Security
In general, blockchain is a step forward in securing transactions. However, security isn’t inherent. It uses public key encryption, hashing, and digital signatures, and other mechanisms that are well known but not always administered correctly. Missteps in securing a blockchain, or simple bugs in the platforms, can cause serious disruption.
4. Compliance
Policy issues and other anomalies still need to be ironed out. For example, there are concerns that individuals making property transfers on a permissionless blockchain conflicts with how existing institutions manage public records.
These concerns mean many smaller businesses may want to adopt a wait and see approach before committing to using blockchain. Larger organisations with more resources may act as test cases but there is no reason for small businesses to assume that it is only for large enterprises.
If your business uses technology with flexible deployment options and a modern enterprise resource planning (ERP) system, you may be in a better position to take advantage of blockchain technology and adapt faster than your competitors.
Blockchain technology is likely to be intrinsically embedded in business processes in years to come. However, despite recent momentum, it is a technology that isn’t (yet) particularly easy to use for many businesses. The platforms are still maturing and, like many other software platforms, they are subject to bugs and operational errors. The potential risks of being a blockchain pioneer are higher than other technology adoption waves because blockchains typically apply to monetary transactions as well as transactions carrying fiduciary responsibilities.
However, blockchain can improve visibility, productivity, and security for your business, making it worth paying attention to in 2018 and beyond.
Erik Johnson, Chief Architect, Epicor Software
