Blockchain Technology Fosters Its Own Concerns
A full 39 percent of companies, including 56 percent of those with more than 20,000 employees, are either in the process of deploying blockchain solutions or are considering them, according to a report from Juniper Research, but most of them still have reservations about the technology.
“The easiest way of describing a blockchain is to think of it as a public ledger, which keeps a record of sets of activities,” explains Windsor Holden, head of forecasting and consultancy at Juniper Research. These sets of activities will most commonly be financial transactions, he says, but blockchain technology is increasingly being used for other purposes, such as provenance of assets.
“The beauty of the blockchain is that it is inviolable: You cannot erase a transaction from it. Furthermore, blockchains are transparent; anyone with access to a chain can view its records,” he states.
Although Holden notes that much of the initial focus of blockchain technology was around Bitcoin, a type of online currency that exists solely as records of transactions between addresses in a blockchain, he says the focus is changing. More specifically, it “has shifted toward the underlying blockchain technology and, importantly, away from the public blockchain model that Bitcoin uses and toward what’s known as the permissioned ledger,” he states.
“Anyone with a CPU could set up as a node in Bitcoin’s network; anyone can view the records on the chain. For companies wanting to use blockchain for highly confidential matters, this would be impossible, so a model has emerged whereby some technologies only allow specified parties access to the ledger,” Holden explains further.
The report identifies three types of companies that could benefit from blockchain technology: those that need transparency and clarity in transactions; those with a dependence on paper-based legacy storage systems; and those with a high volume of transmitted information.
Transparency is “clearly key across an array of use cases and verticals, particularly those around financial settlement and the ownership of assets,” Holden says.
As an example, blockchain technology could enable a jeweler to track a diamond “from its creation to demonstrate ownership over time, thereby supporting ethical trade and reducing the risk of trafficking and fraud,” according to Holden.
Companies that depend on paper-based systems, Holden says, find that storing information that way “can be highly inefficient, time-consuming, and prone to error”; blockchain technology “offers the potential to alleviate this and thereby reduce the cost to a business.”
As for dealing with high information volumes, blockchain technology “can represent a means whereby these transactions can be securely and inviolably recorded,” he says.
Yet implementing blockchain technology is not without its challenges. According to the report, many companies are worried about how blockchains might disrupt their internal systems and relationships with customers. In all, 59 percent of companies expressed concerns about interoperability that could ultimately lead to lost business, and 42 percent thought that the reluctance or refusal of clients and partners to deploy blockchain technology might cause difficulties.
Echoing the language of the report, Holden states emphatically that blockchain technology is not a panacea. “In many cases, the problems that businesses are hoping to solve may be organizational” and could be resolved at a lower cost via structural changes as opposed to technological ones, he argues.