Large parts of the enterprise may well get retooled using blockchain technology, and new blockchain-based business models may emerge. But don’t expect this to happen overnight.
The term blockchain can elicit reactions ranging from a blank stare (from the majority of the general public) to evangelical fervour (from over-enthusiastic early adopters). But most people who know a bit about the technology detect a pungent whiff of hype, leavened with the suspicion that, when the dust settles, it may have a significant role to play as a component of digital transformation.
The best-known example of blockchain technology in action is the leading cryptocurrency Bitcoin, but there are many more use cases — think of blockchain as the ‘operating system’ upon which different ‘applications’ (such as Bitcoin) can run. So, what is a blockchain?
At heart, a blockchain is a special kind of database in which ‘blocks’ of sequential and immutable data pertaining to virtual or physical assets are linked via cryptographic hashes and distributed as an ever-growing ‘chain’ among multiple peer-to-peer ‘nodes’. Additions to the blockchain can only be made after validation by a majority of nodes using a consensus mechanism, the two main ones being Proof of Work (PoW) and Proof of Stake (PoS), after which the new blocks are distributed to all nodes. At the moment, PoW is the most common consensus mechanism, the best-known example being Bitcoin mining by solving cryptographic puzzles. However, PoS is less costly in terms of computing resources and electricity, and can deliver faster throughput.
A blockchain is therefore a cryptographically secure distributed ledger in which each node has a verified, up-to-date and immutable history of all transactions that have ever taken place among participants that do not necessarily need to trust one another. Validated transactions cannot be altered or tampered with, and can only be reversed by a subsequent transaction.
There are two broad types of blockchain networks: ‘permissionless’, which anyone can join; and ‘permissioned’, in which participants are authenticated by whoever is running it. The latter can be further divided into ‘private’ and ‘community’ blockchain networks — a single enterprise versus a group of companies involved in a particular business process, for example. In permissionless blockchains, like those underpinning Bitcoin or Ethereum, more reliance is placed on consensus mechanisms to confirm identities and validate transactions.
Business rules that govern what happens to assets during transactions are known as smart contracts, which form a link between decentralized applications (or dApps) and the blockchain itself. Ethereum is the leading example of a smart contract-based blockchain system. The linkage of virtual or physical assets to digital tokens is called tokenisation, while the process of raising funds by offering a new cryptocurrency or token in exchange for traditional currency, or an existing cryptocurrency like Bitcoin, is called an Initial Coin Offering or ICO.
As a distributed ledger, blockchain can be used to record any transaction, and keep track of any asset and associated payments. Compared to traditional business processes, blockchain can deliver time and cost savings, along with better security — especially in a permissioned network. But before we go any further, let’s consider the general circumstances in which blockchain technology is appropriate.
Note that in many cases a traditional database is the more appropriate solution. The key question is whether a trusted third party is available or required: if not, the remaining paths lead to the potential use of a blockchain — be it public, community or private.
Here’s how analyst firm Gartner summarises the key characteristics of different kinds of blockchain:
What the analysts say (2018)
The latest Trend Insight Report from Gartner on Blockchain-Based Transformation sums up the current position succinctly: “While blockchain holds long-term promise in transforming business and society, there is little evidence in short-term reality.” The report notes that most executives are focusing on blockchain to improve current business processes and records management, but stresses that there is also significant potential in digital assets and decentralisation. The analyst firm makes three specific predictions:
- Through 2022, only 10% of enterprises will achieve any radical transformation with the use of blockchain technologies.
- By 2022, at least one innovative business built on blockchain technology will be worth $10 billion.
- By 2026, the business value added by blockchain will grow to slightly over $360 billion, then surge to more than $3.1 trillion by 2030.
Gartner characterises the 2018-2021 phase as ‘irrational exuberance’, which is followed by ‘larger focused investments, many successful models’ (2022-2026) and ‘global large-scale economic value-add’ (2027-2030):
Maximising the potential of blockchain “requires adapting and transforming core models, processes and systems,” says Gartner. However, the analyst firm continues, “these systems are literally the last place a business wants change to occur, because of the large risk to operations.” As a result, the technology could “take a decade to become significant in business transactions”.
IDC’s latest Worldwide Semiannual Blockchain Spending Guide covers Gartner’s ‘irrational exuberance’ phase (up to 2021) and forecasts a compound annual growth rate (CAGR) of 81.2 percent from 2016 with total spending of $9.7 billion in 2021. The biggest blockchain investments — over 40 percent of worldwide spending — will be made by the US during this period, followed by Western Europe, China and Asia/Pacific (excluding Japan and China), says IDC. (Note that spending associated with various cryptocurrencies that utilise blockchain, such as Bitcoin, is not included in IDC’s spending guide.)
IDC expects the financial sector to lead the way in blockchain spending for 2018 with $754 million, followed by distribution and services ($510m) and manufacturing and resources ($448m). As far as specific use cases are concerned, the analyst firm’s leading contenders are cross-border payments & settlements ($242m in 2018), lot lineage/provenance ($202m in 2018) and trade finance & post-trade/transaction settlements ($199m in 2018). The first of these use cases is a hot political topic in the UK as it attempts to negotiate a post-Brexit customs arrangement with the EU. IDC expects this top three to remain the largest spending areas through 2021. Other prominent blockchain use cases cited by the analyst firm are regulatory compliance, asset/goods management and identity management.
“There are a multitude of potential new use cases for blockchain, as transactions and records are the lifeblood of just about every organization. However, we are seeing initial blockchain spending to transform existing highly manual and inefficient processes such as cross-border payments, provenance and post transaction settlements. These are areas of existing pain for many firms, and thus blockchain presents an attractive value proposition,” said IDC’s Jessica Goepfert, program director, Customer Insights & Analysis in a statement.
In Predictions 2018: Be Ready To Face The Realities Behind The Blockchain Hype, Forrester outlines the key 2018 blockchain trends for CIOs, kicking off with a now-familiar note of caution: “Blockchain technology may not possess the miraculous capabilities that press articles and those with software, books, or other agendas to sell have ascribed to it. But the potential is undeniable: Blockchain technology, if implemented appropriately, supports new business and trust models.”
Key takeaways from the report are: It’s Going To Be Evolution, Not Revolution (“expect steady progress on the technology front to reflect enterprise requirements and a more mature approach to projects”); and Security Takes Center Stage (“we’ll see more blockchain-based initiatives around fraud management and identity”…”developers and security pros will pay much greater attention to the security risks posed by interfaces with existing systems, serious software bugs, and potential future risks posed by quantum computing”).
Echoing Gartner, Forrester notes that “many blockchain and distributed ledger projects merely seek to improve existing processes”, whereas “true innovators are looking much further ahead”. CIOs are cautioned to set realistic expectations, understand their use cases and related interdependencies, and to start small, building their blockchain ecosystems early. As far as security is concerned, the advice is to grow blockchain expertise in developer and security teams, and focus on integration options and regulatory compliance.
What the surveys say (2018)
In Gartner’s 2018 CIO Survey just 1 percent of CIOs reported any blockchain adoption and only 8 percent were in short-term planning or active experimentation. Emphasising the immaturity of the blockchain ecosystem, 77 percent of CIOs surveyed said their organisation had no interest in and/or had no action planned to investigate or develop the technology.
“This year’s Gartner CIO Survey provides factual evidence about the massively hyped state of blockchain adoption and deployment,” said David Furlonger, vice president and Gartner Fellow in a statement. “It is critical to understand what blockchain is and what it is capable of today, compared to how it will transform companies, industries and society tomorrow,” he added.
According to Furlonger, rushed blockchain deployments could result in significant problems of failed innovation, wasted investment, rash decisions and even rejection of a game-changing technology.
Skills shortages and IT culture/structure issues are likely to be major barriers to blockchain adoption. In Gartner’s survey, 23 percent of the 293 CIOs that were actively experimenting with or have already deployed blockchain said that it requires the most new skills to implement of any technology area, while 18 percent reported that blockchain skills are the most difficult to find. A further 14 percent said that blockchain requires the greatest change in IT department culture, and 13 percent believed that blockchain implementation required structural changes to the IT department.
Leading the way in blockchain planning and experimentation in Gartner’s survey were the telecoms, insurance and financial services sectors.
“While many industries indicate an initial interest in blockchain initiatives, it remains to be seen whether they will accept decentralized, distributed, tokenized networks, or stall as they try to introduce blockchain into legacy value streams and systems,” Furlonger said.
IBM’s Forward Together report, subtitled ‘Three ways blockchain Explorers chart a new direction’, drew on survey responses from 2,965 CxOs gathered in the first quarter of 2017. Those already experimenting with, piloting or implementing blockchains — 33 percent of the survey population — were termed ‘Explorers’, while those not considering the technology were tagged (somewhat dismissively) as ‘Passives’.
Unsurprisingly, given the above definition, all of IBM’s Explorers expected blockchain to support their enterprise strategies in some way, with increased transactional transparency coming top of the list:
IBM cites healthcare as a pioneering sector for blockchain adoption, noting its suitability for storing and providing secure access to lifetime patient data. “If every vital sign from a doctor’s visit or wearable health device, and records of all medicines taken, illnesses and operations could be securely shared on blockchain, then the quality and coordination of care would be expected to rise and costs to fall,” the report claimed.
Another widely held belief expressed in IBM’s survey is that blockchain could render the need for trusted intermediaries obsolete, allowing organisations to collaborate and compete in novel ways.
IBM extracts three lessons from its conversations with early-adopting blockchain Explorers, starting with the observation that organizations should identify new opportunities to monetise data and alternative payment models (“Orchestrate economic advantage”). Lesson number two extols the value of industry consortia in promoting business standards so that geographically separate organisations can connect (“Establish a circle of trust”). Finally, the report cautions against a wait-and-see approach to blockchain, noting that the first platforms may shape its future evolution for decades (“Learn fast and keep an open mind”).
Venture capital firm Underscore VC sought the opinions of ‘hundreds’ of blockchain thought leaders to compile its 2018 Future of Blockchain Survey. Respondents identified more than 30 industries that they consider ripe for ‘meaningful disruption’ over the next five years. The top 15 were: Financial transactions; Micropayments; Banking; Supply chain; Crowdfunding; Securities trading; Voting; Healthcare; Cloud storage; Virtual property; Real estate transactions; Legal signatory processes; Energy markets; Small business lending; and Government.
The number-one factor accelerating blockchain adoption was decentralised control, while the leading hindrance was lack of scalability — something that 78 percent of respondents believed will take 3-5 years to solve.
Putting blockchain’s current state of development into historical perspective, Underscore VC’s respondents judged it to be comparable to June 1997 in the dot-com era — that is, three years before the dot-com bubble burst in March 2000.
Over three-quarters (78%) of respondents believed that overall blockchain adoption will be accelerated by the use of private blockchains in enterprises. However, 69 percent also thought that the current ability of enterprises to implement blockchain technology is very low.
Commenting on this discrepancy, Underscore VC co-founder Michael Skok said: “Building on our 16 years of investing experience, surveys, and understanding the way open source and cloud computing have been adopted, the enterprise has generally been a laggard. We expect the same will be true of blockchain. We believe that the public blockchain will be the area of innovation, and the way that will come about is with startups, and upstarts like Ethereum leading with innovative distributed applications (dApps).”
Gowling WLG, a Global 100 legal practice and a founding member of the Blockchain Research Institute (part of The Tapscott Group), canvassed FinTech experts in businesses around the world and conducted in-depth interviews with a panel of experts to compile its 2018 report The Ultimate Disruptor: How Blockchain Is Transforming Financial Services.
A key point made by members of Gowling’s expert panel is the distinction between cryptocurrencies and the underlying blockchain/distributed ledger technology (DLT).
For example, regarding criticism of the computing and electricity costs of coin mining, Dean Elwood, CEO at Umony, said: “We are not using blockchain as a currency. We are applying the same technology in a different way — we have a DLT chain which represents an audit trail which is cryptographically secure and can prove that auditable elements have not been tampered with. The software has become a commodity and is now low cost to manage. For non-currency/mining use cases, computing power required isn’t a problem.”
Gowling’s expert panel identified a wide range of sectors, headed by banking and finance, that could benefit from blockchain and DLT:
The Blockchain landscape (2017/18)
As you’d expect with an emerging technology, the blockchain market is a rapidly evolving one. Analyst IDC has compiled a view of the blockchain landscape as it stood at the end of 2017, showing the major players, and outlining the current structure of the market:
There are 72 companies listed in total, covering five Tech layers (Identity management, Fabrics & DL platforms, Security, Payments, Smart contracts), four Services categories (Blockchain as a service, Consulting and professional services, Consortiums/industry groups, Compliance), four Industry applications (Natural resources, Financial transactions, Government & health, Supply chain & trade finance), plus Regulators & agencies and Data provenance & notary.
Most companies are involved in more than one market area, and it should come as no surprise that Financial transactions leads the field by some distance:
Blockchain issues (2018)
As all things blockchain-related approach and reach ‘peak hype’ (see below), the first signs of the inevitable backlash are appearing. Bitcoin has received a lot of negative press recently, for example, which is one reason why Gartner has it as the sole occupant of the ‘Trough of disillusionment’ in its current blockchain Hype Cycle:
Security is widely regarded as a major advantage of blockchain, but there are still significant risks inherent in the technology (as currently implemented), according to the authors of a recent paper entitled A Survey on the Security of Blockchain Systems. Here’s a summary of the nine risks identified by Li et al, and their applicability to blockchain ‘1.0’ (cryptocurrencies) and/or ‘2.0’ (smart contracts):
|Taxonomy of blockchain risks|
|Risk||Cause||Range of Influence|
|51% vulnerability||Consensus mechanism||Blockchain 1.0, 2.0|
|Private key security||Public-key encryption scheme|
|Criminal activity||Cryptocurrency application|
|Double spending||Transaction verification mechanism|
|Transaction privacy leakage||Transaction design flaw|
|Criminal smart contracts||Smart contract application||Blockchain 2.0|
|Vulnerabilities in smart contract||Program design flaw|
|Under-optimized smart contract||Program writing flaw|
|Under-priced operations||EVM design flaw|
The 51% vulnerability refers to the fact that, if a single miner amasses more than 50 percent of the blockchain’s hashing power (in a PoW system) or coin ownership (in a PoS system), that miner can manipulate and modify the blockchain information in various ways.
If a blockchain user’s private key — their self-generated and maintained identity and security credential — is compromised, then their blockchain account can be tampered with.
Some trading platforms allow users to buy and sell products anonymously using Bitcoin, leading to criminal activity such as ransomware, underground markets and money laundering.
Double spending is where the same cryptocurrency is used multiple times for transactions, and is “relatively easy to implement in PoW-based blockchains, because the attacker can exploit the intermediate time between two transactions’ initiation and confirmation to quickly launch an attack,” say Li et al.
Blockchain systems take measures to protect the transaction privacy of users. But, say Li et al: “Unfortunately the privacy protection measures in blockchain are not very robust.” They quote a study which found that actual transaction inputs could be inferred with 80 percent accuracy in the cryptocurrency Monero.
Criminal smart contracts “can facilitate the leakage of confidential information, theft of cryptographic keys, and various real-world crimes (e.g. murder, arson, terrorism etc.)”, say Li et al, who describe an example involving password theft.
Smart contracts may have security vulnerabilities caused by program defects, say Li et al, who list a taxonomy of no fewer than 12 types. In one quoted study, 46 percent (8,833 out of 19,366) of Ethereum smart contracts were found to be vulnerable to four kinds of security bug.
User interaction with Ethereum smart contracts is charged by ‘gas’, which can be exchanged with ‘Ether’ (Ethereum’s cryptocurrency). “Unfortunately, some smart contracts’ development and deployment are not adequately optimized,” say Li et al. A tool that can auto-discover three gas-costly patterns reported under-optimization in 80 percent of a sample of Ethereum smart contracts.
The ‘gas’ value of an Ethereum operation is proportional to the computing resources it consumes. However, this can be difficult to estimate, leading to under-priced operations. “For example, some IO-heavy operations’ gas values are set too low”, say Li et al, “and hence these operations can be executed in quantity in one transaction. In this way, an attacker can initiate a DoS (Denial of Service) attack on Ethereum.”
It’s clear that, in the terminology of Gartner’s Hype Cycle, blockchain is approaching the ‘At the Peak’ stage, characterised by mass media hype and supplier proliferation, with activity beyond early adopters and negative press waiting to usher in the inevitable slide towards the ‘Trough of Disillusionment’.
That’s not to say that the current noise around blockchain is all hot air — just that there’s a lot of piloting, early adopting, supplier consolidation and VC (or ICO) funding to come before the untenable use cases are weeded out and the long climb up the ‘Slope of Enlightenment’ begins.
Large parts of the enterprise may well get retooled using more efficient and secure blockchain technology, and new blockchain-based business models may emerge. But don’t expect this to happen overnight.
Update: December 2019
When ZDNet published its mid-2018 special feature on blockchain, it was clear that there was a lot of interest in the distributed ledger technology, and that the blockchain ecosystem, although immature, was evolving rapidly.
Data harvested from the Github software development platform by State of the DApps provides a good illustration of how blockchain platforms that support decentralised applications, or DApps, have progressed in recent years:
DApp creation on Github — most of it on the Ethereum platform — took off in 2017, reaching a peak in December 2018, before plunging to December 2017 levels in June 2019. As of October 2019 there were 3,128 DApps hosted on Github, with most of the transaction activity in exchanges, gambling, games, wallets and finance.
Developer activity in the blockchain ecosystem certainly seems to have undergone a ‘boom-and-bust’ trajectory over the past two years. Is the ‘bust’ temporary or permanent? Let’s see what the analyst community and recent surveys have to say.
What the analysts say (2019)
Gartner’s 2019 Hype Cycle for Blockchain Technologies places most components at either the ‘Innovation Trigger’ or ‘Peak of Inflated Expectations’ stages. In the former, ‘proof-of-concept stories and media interest trigger significant publicity’, while in the latter ‘early publicity produces a number of success stories — often accompanied by scores of failures’. Blockchain itself, along with distributed ledgers and cryptocurrency mining, is consigned to the dreaded ‘Trough of Disillusionment’, where ‘interest wanes as experiments and implementations fail to deliver’.
For blockchain to become mainstream, says Avivah Litan, distinguished analyst and research vice president at Gartner, “users shouldn’t have to worry about picking the right platform, the right smart contract language, the right system interfaces, and the right consensus algorithms. They also shouldn’t have to concern themselves over how they will interoperate with partners that use different blockchain platforms for their projects.”
Litan compares the blockchain back end to the internet’s DNS or TCP/IP protocols, which don’t matter to web users: “All web users care about is their web-based applications. All blockchain users need to care about is their decentralized applications,” she says.
Recent developments in key areas — blockchain interoperability, smart contract portability and cross chain functionality, data privacy and key management — should bring mainstream adoption closer, Litan says.
In the meantime, though, Gartner predicts that 90% of current enterprise blockchain platform implementations will require replacement within 18 months to remain competitive, secure and avoid obsolescence. “Many CIOs overestimate the capabilities and short-term benefits of blockchain as a technology to help them achieve their business goals, thus creating unrealistic expectations when assessing offerings from blockchain platform vendors and service providers,” said Gartner senior research director Adrian Lee.
Gartner expects the blockchain market to remain fragmented in the medium term: “Due to the lack of an industry consensus on product concept, feature set, core application requirements and target market, we do not expect there to be a single dominant blockchain platform within the next five years. Instead, we expect a multiplatform world to emerge,” Lee said.
Looking further ahead, Gartner forecasts that business value added by blockchain will grow to around $176 billion by 2025 and exceed $3.1 trillion by 2030.
IDC’s updated Worldwide Semiannual Blockchain Spending Guide sees blockchain spending growing at a ‘robust’ five-year CAGR (compound annual growth rate) of 60.2% between 2018 and 2023. Blockchain spending in 2019 is forecast to be $2.7 billion (an increase of 80% over 2018), rising to $15.9 billion in 2023.
Despite ‘sometimes heated’ discussions and debates over blockchain, IDC research director James Wester says that “enterprise adoption of the technology has quietly reached a tipping point across multiple use cases. Companies are recognizing value from initial pilot programs and moving those projects into production.”
There is still uncertainty about blockchain technology, Wester says, particularly regarding governance and regulation, but “adoption of blockchain for financial services, identity, trade, and other markets is encouraging.”
The top sectors for worldwide blockchain spending in the 2018-2023 timeframe, according to IDC, will be banking (30%), followed by discrete and process manufacturing (20%). Process manufacturing will grow fastest (68.8% CAGR), with discrete manufacturing, professional services, retail and utilities all outperforming the market on spending growth.
Spending on two of the biggest blockchain use cases — cross-border payments & settlements, and trade finance & post-trade/transaction settlements — will be driven by the banking industry, IDC says, with the manufacturing (discrete and process) and retail sectors driving spending on lot lineage/provenance and asset/goods management.
IDC estimates that the combination of IT services and business services will account for nearly 70% of all blockchain spending in 2019, with blockchain platform software the next largest spending category. Regionally, the US will be the largest market, spending $1.1 billion in 2019, followed by Europe ($661m) and China ($304m).
“With enterprises moving past the proof-of-concept phase, it’s not a matter of whether blockchain is here to stay but rather the scope of blockchain’s adoption,” said Stacey Soohoo, research manager, Customer Insights & Analysis, at IDC. “Sharing data between institutions, simplifying outdated processes, and bringing transparency to business processes while also encouraging collaboration and partnerships — these are the tangible benefits that blockchain brings to the table.”
Juniper Research specialises in research, forecasting and consultancy around emerging digital market sectors, and has recently produced a white paper examining the 5 Most Promising Use Cases for Blockchain.
Juniper Research argues that blockchain offers several advantages spanning different vertical markets, including safety, decentralisation, transparency and cost-effectiveness. The quintet of use cases the company highlights cover asset tracking, financial services and digital identity, and are already in production.
Food provenance Increasing the efficiency of the food supply chain is an important issue, in terms of reducing wastage and meeting sustainability goals. Full visibility via blockchain will allow manufacturers, producers and retailers to “view their upstream and downstream activities, location and status of products, with certifications and insights for the entire value chain,” says Juniper Research, which identifies the IBM Food Trust as the ‘most solid’ blockchain-based food provenance solution.
Medical drug tracking As well as storing and managing electronic health records on a shared ledger and using smart contracts to grant conditional access, Juniper Research identifies several other potential healthcare use cases, including: data storage in clinical trials; verifying drug provenance through the supply chain; and genome research, where blockchain can address some of the privacy concerns and computational requirements. Tracking medical drugs and equipment is the ‘strongest and most cost-effective’ use case for blockchain in the healthcare sector, the company says.
Cross-border settlements A blockchain-based cross-border transaction settlement solution could “increase standardisation, substantially reduce the risk of error (including double-spend) and indeed the time taken for error checking,” says Juniper Research. “Blockchain affords complete traceability of financial documentation, allowing FIs (Financial Institutions) to have far greater visibility on participants and that (for example) a participant has been vouched for by other trusted parties.” Key players in the blockchain-powered B2B cross-border payments space are Ripple, Visa B2B Connect and IBM Blockchain World Wire, with Ripple likely to be the ‘go-to’ provider in the near future, according to Juniper Research.
Insurance Blockchain could reduce the amount of fraud in the insurance market by providing an indisputable and immutable record, Juniper Research says. However, the company notes that there are significant regulatory, legal and technological hurdles to overcome, and “due to the sensitive nature of insurance data, insurers will have to use private permissioned platforms only, which are still under development.” Key uses for blockchain in the insurance space identified by Juniper Research include claims management, policy placement, P2P insurance, reinsurance and subrogation.
Digital Identity Blockchain could give users control over their digital identity via an encrypted digital hub that grants and revokes access to apps and service providers as required. This could solve some of the current problems surrounding data breaches and identity theft, says Juniper Research. Self Sovereign Identity (SSI) solutions, which typically use a blockchain to record who has validated what credential, will have significant impact in a range of verticals, the company says, including: public services and government management; retail; healthcare services; and banking.
What the surveys say (2019)
Deloitte’s 2019 Global Blockchain Survey was conducted in February/March 2019, polling 1,386 senior executives in 12 countries, at companies with annual revenues of at least $500 million (US) or $100 million (non-US). Executives at 31 ‘blockchain emerging disruptors’, all with revenues below $50 million, also contributed to the survey.
Deloitte sums up the 2019 position on blockchain as: “The question for executives is no longer, ‘Will blockchain work?’ but, ‘How can we make blockchain work for us?'” Blockchain’s relevance is certainly increasing, with 53% of respondents judging it to be a top-five strategic priority for their organisation compared to 43% in 2018:
Attitudes about blockchain have become more positive since the 2018 survey, with 86% of respondents agreeing that ‘Blockchain technology is broadly scalable and will eventually become mainstream’ compared to 84% in 2018. Other positive signs are belief in the C-suite about a compelling business case for blockchain (83% 2019, 74% 2018), emerging blockchain solutions to address organisations’ value chain challenges (82% 2019, 77% 2018), and plans to replace current systems of record (81% 2019, 69% 2018). However, 43% of respondents still see blockchain as overhyped, up from 39% in 2018.
There’s also a more even spread of barriers to investment in blockchain in the 2019 survey, headed by implementation (30%), regulatory issues (30%) and potential security threats (29%):
Survey respondents are taking a broader view of blockchain these days, says Deloitte, focusing on business advantages like security and lower risk (23%), new business models and value chains (23%) and greater speed towards production or delivery (17%). Executives should be asking questions that reflect blockchain’s potential role in their organisations, the report says, including:
- How are blockchain-enabled processes changing the way my sector does business?
- How can blockchain reshape my industry? What are my long-term objectives and strategies?
- Does blockchain create the potential for new market ecosystems, and what role should I play?
- How do I leverage the inherently open nature of blockchain?
- What opportunities does blockchain create for co-creating new markets?
- What are my biggest blockchain blind spots?
What of the ’emerging disruptors’ that Deloitte polled in addition to its core sample of enterprise respondents? Unsurprisingly, perhaps, emerging disruptors are more focused on new business models and value chains as a blockchain advantage than enterprise respondents (43% versus 23%). When it comes to barriers to blockchain adoption, 71% of emerging disruptors identified regulatory issues, compared to 30% of enterprise respondents. And because they are inherently nimbler than large enterprises, 80% of emerging disruptors expect to see results from blockchain implementations within three years, compared to 60% of enterprise respondents.
Other topics explored in Deloitte’s 2019 Global Blockchain Survey include the benefits and challenges of joining blockchain-related consortia, and a regional analysis of blockchain implementation around the world.
Overall, the Deloitte survey describes an evolving landscape, where “even those who may have looked askance at the technology in the past appear to be viewing blockchain with a new sense of possibility.”
As 2019 draws to a close, blockchain is moving up the enterprise agenda, past the pilot stage and into production deployments. That’s not to say mainstream adoption is anywhere near: for that to happen, issues like blockchain interoperability, smart contract portability, data privacy and key management need to be addressed, and a high percentage of current implementations will have to be replaced.
Promising blockchain use cases include the tracking of foodstuffs, medical drugs and equipment, cross-border settlements, insurance, and digital identity. However, more use cases and platform solutions will undoubtedly emerge, and blockchain ecosystem maturity is still years away.