By Cassandra Balentine
Blockchain technology refers to a decentralized database made up of continuously growing records—or blocks, which are linked and secured with cryptography.
According to a recent report by Grand View Research, Inc., the blockchain technology market is expected to reach 7.74 billion USD by 2024. The research firm explains that blockchain is an underlying technology that originated in the form of a public ledger monitor all cryptocurrency transactions and works as an electronic, transaction processing and record keeping system that allows participants connected to the network to track information through a secure network, eliminating the need for third-party verification.
Best known for its role in the bitcoin trend, the technology has potential to expand into many uses, offering benefits like transparency, data integrity, and security.
Cryptocurrency is the most popular use of blockchain technology; however its potential expands to trade finance, supply chain management, healthcare data, cyber security, and identification.
“Blockchain is a revolutionary technology and its potential applications are extremely diverse,” suggests Charley Cooper, head of external affairs, manager director, R3. In financial services, these range from smart contracts to digital identity use cases. There are also a number of broader applications where it is being considered, like centralized healthcare records and voting systems.
In addition to cryptocurrencies, some of the most popular uses of blockchain technology involve trade finance, securities settlements, food safety, supply chain management, health data exchange, and cybersecurity, comments Ashok Reddy, general manager CA Technologies. He says organizations like Aetna, Nasdaq, UPS, Visa, and Walmart actively use or explore blockchain technology in an enterprise context.
Reddy says some of the blockchain uses CA Technologies is exploring include the ability to monitor and detect operational anomalies of multiple blockchain networks, identify and resolve the impact of poorly performing smart contracts, scan for sensitive information on the blockchain, integrate blockchain transactions with existing database systems, automate business flaws and workloads with blockchain, and test and deploy blockchain applications to multiple platforms.
According to Mark Rakhmilevich, senior director, blockchain product management, Oracle, payments and asset trading activities are today’s popular adopters of blockchain technology. However, he points to a broadening use both within financial services and beyond into areas like supply chain, identity issuance and management, public sector, and healthcare.
Rashesh Jethi, SVP, engineering and global head of innovations for airlines, Amadeus IT Group SA, says there are many potential blockchain applications in the travel industry. “Blockchain could be used to exchange travel identification, baggage tracking details, or loyalty points.”
One start up, Civic, uses the immutable trust aspects of blockchain to help people prove their identity. “Civic helps travelers store verified identity credentials in a secure, user friendly application. At the airport, a quick response code could be added to a traveler’s record to access key data about the owner to help with security compliance. Utilizing the capabilities available on smartphones today, Civic could help airports avoid the need to roll-out costly custom biometric scanning hardware,” explains Jethi.
Benefits and Factors Driving Adoption
Blockchain offers several key benefits, including transparency and immutability, cryptographic security, and data integrity. These advantages intrigue many verticals and drive adoption or exploration of the technology in a range of industries.
In addition to promoting digital transparency and trust, Reddy says blockchain technology allows organizations to realize better business outcomes through efficiencies in time and cost and reduction of fraud and risk.
“I think the most important benefits are the cost savings and efficiencies blockchain brings to a system. If you have a single, immutable record of data that is visible to all the parties that need to see the data, you’ve immediately removed the need to spend significant amounts of time and money ensuring that everyone’s individual records match,” explains Cooper.
Another benefit is the level of privacy and security blockchain technology offers and how it can be adapted to specific needs, adds Cooper.
Blockchain technology brings many benefits to the enterprise, including the acceleration of business to business (B2B) transactions, automating multi-party business processes, and enabling new business models and revenue streams, points out Rakhmilevich. “These in turn help reduce the cost and risk of using intermediaries, reduce the cost of fraud, and regulatory compliance. Blockchain also improves data quality and timeliness by avoiding offline reconciliation and manual exception handling, as well as increase audibility and trust, reducing audit costs.”
In the enterprise space, Rakhmilevich says customers see blockchain technology as a way to solve many challenges at the enterprise’s edge where it conducts business with or shares data with other organizations. “These factors include a lack of trust in peer-to-peer B2B transactions, the high cost and potential single point of failure risk in using centralized intermediaries, and the risk of manual, error-prone information exchange and processes across enterprise boundaries to achieve single source of truth. Traditional practices involve high cost and delays of typical batch offline reconciliations, high risk and cost with potential fraud, and settlement risk and poor auditability of records due to cross-enterprise resource planning discrepancies,” offers Rakhmilevich. “Blockchain helps solve the lack of real-time information visibility within a trading ecosystem that businesses are used to, and streamline the process overall.”
“As the world economy becomes more digitized the need to create trust and transparency extends beyond the confines of a single organization or even a single geography,” comments Reddy. He says key characteristics of blockchain technology such as distributed, shared ledgers combined with immutable records and cryptographically signed transactions enable organizations to extend to the notion of digital transparency and trust to customers and partners in their ecosystem and across geographical borders. “Having worked with several enterprise customers we see blockchain along with artificial intelligence, automation, Internet of Things, and machine learning as key technology enablers for organizations to digitally transform their business.”
Cooper says that within the financial industry, institutions have been using outdated legacy systems to conduct financial transactions. “This often leads to overlapped and duplicated data, which is extremely expensive to reconcile. It’s a similar story in other areas of commerce. Many businesses and industries are looking for ways to make their systems more efficient and cut costs. The emergence of blockchain technology heralds an opportunity to do just that.”
Jethi points out that specific to the travel industry, blockchain has the potential to improve the way travel identity is handled, making it simpler to navigate the airport. “The technology is on the verge of transforming how loyalty schemes operate, making it much easier for travelers to redeem loyalty points across various providers, also the ability to settle payments between different players in the travel value chain more efficiently is a big opportunity.”
Jethi says the unique design of the internet has allowed airlines to exchange information easily and rapidly, and blockchain builds on that distributed computing layer to allow value to be exchanged between businesses, governments, and individuals. “Similar to the early adoption of standards like Transmission Control Protocol/Internet Protocol, that facilitated interoperability and transfer of data packets on the nascent internet, blockchain is increasingly offering itself as a neutral, standards-based protocol for verification and authentication of transactions for use cases in a wide range of industries including finance, healthcare, and travel.”
While blockchain has a lot of potential, it is a new technology with many issues that need to be worked out.
Jethi says that despite blockchain technology being discussed, in reality the technology remains at a very early stage in its development. “It is likely that as blockchain technology continues to develop, it will gradually make its way into existing industry applications. A big bang switch to the technology however is unlikely, despite its early promise,” he offers.
He continues, “With all the excitement and rapid development around blockchain, the fact remains that the hope from blockchain is a bit ahead of its promised help. Billions of dollars are being invested as startups and established companies aggressively try to crack the code for their own business. Blockchain will require a lot more tweaking, fiddling, and experimentation before usable standards arise and blockchains can be operationalized in a scalable, cost effective, and secure manner. Only then will we realize the many promises of this next wave of innovation,” says Jethi.
Reddy says challenges can range from selecting the right use cases to going from pilot to production addressing enterprise needs around performance, scalability, security, and governance. “These are partly due to the evolution of the technology itself, while others are about spending time upfront identifying the right use cases.”
“Customers who’ve experimented with blockchain technology in the past but haven’t moved from proof of concept to production have identified a number of challenges, including performance at scale, operational resilience, security and confidentiality, supportability and management, and enterprise integration,” says Rakhmilevich.
Rakhmilevich says they are concerned about handling growing transaction volumes, providing sub-second transaction latency, and scaling the network to hundreds or thousands of members. In addition, many implementations lack maturity to provide highly available services to avoid downtime, recover rapidly from component failures, and handle patching without downtime. Enterprise security teams look for capabilities to restrict transactions and ledger access to authorized participants, ensuring encryption of data in transit and at rest and verifying that digital signatures are based on the required technology and harden it for business-critical operations use, monitor SLAs, trouble shoot anomalies, and onboard new members efficiently. “A related concern is a frequent lack of backward compatibility as technology develops rapidly and the burden it imposes to rebuild the implementation and all the application integrations after an upgrade,” says Rakhmilevich.
Finally, Rakhmilevich points out that application integration when blockchain is used to support and extend the capabilities of existing systems of record ERP is a significant burden “There’s no plug and play and one-off integrations impose significant cost on the implementation.”
On the Rise
Blockchain is an intriguing and innovative technology currently getting a lot of attention. As organizations continue to explore its uses, we expect to new use cases to appear across a range of industries.
Mar2018, Software Magazine