Bitcoin ushered in the adoption of Blockchain in the Finance sector and kicked off the DeFi frenzy. Other sectors such as logistics and manufacturing were also early adopters. Since then, more sectors have cautiously pursued the Blockchain security, immutability, and transparency benefits to address important data access, data sharing, data validation, or payments functions core to their business. Notwithstanding significant investments being made globally in Blockchain platforms, tools, consensus algorithms and experimentation, there is still some hesitation in adoption.
In this post, we will try to identify some of these challenges and highlight some recent developments that should address many of these concerns going forward. Indeed, we believe we may have reached an interesting point in time where more widespread adoption is likely to explode in the coming months and years bringing distributed ledger technologies (DLT) into the mainstream.
Barriers to adoption exist
There are many barriers to enterprise Blockchain adoption. These include:
Limited Technical Resources
Identification of the Right Use Case
Privacy and Regulatory Concerns
An explosion of Blockchain Platforms, Tools, and Techniques
Interoperability
There are many developments addressing these barriers. Let’s take these one at a time.
Limited technical resources
I think it’s fair to say that like all new technologies, there is a period of limited technical awareness and skilled resources with the commensurate skill sets to apply new tools in any organizational context. Awareness of the technology is perhaps the first step. It drives the inquisitiveness to ask ‘how can we use this?’ Then someone will ultimately pose the critical ‘what if’ scenarios that frequently identify the right business value proposition. Blockchain is not unique in this regard. As we experienced with Cloud computing, Robotic Process Automation (RPA), the Internet of Things (IoT), and Artificial Intelligence (AI)...we are on the same journey with Blockchain. But that knowledge is expanding quickly.
Identification of the right use case
Once a threshold of institutional knowledge is reached, it drives the identification of impactful and compelling use cases. There are now several implementations of Blockchain in the Education, Healthcare, Transportation, Utilities, and Government sectors. Indeed, even those most skeptical and resistant to endorsing Blockchain technologies – Central Banks – have now accepted the realities of faster and more secure interbank transfers and reconciliation and digital currencies.
Privacy and regulatory concerns
A common concern that arises in many organizational contexts is related to privacy and regulatory concerns. Again, grounded in the Bitcoin origins and understandings, some Executives have the impression that since Blockchain is based on a distributed ledger technology and that all nodes have a copy of the ledger, there is unrestricted access to all information on that ledger. While this is certainly true for public Blockchains, it’s important to point out that there are also private and permissioned Blockchains where access can be restricted to only authorized members and users. With Ethereum 2.0 and the implementation of Smart Contracts, there are additional layers of security that can be applied to restrict access to information. Indeed, some Blockchain platforms such as Corda, allow multiple parties that exist on the same Blockchain network but restrict transaction visibility to only those parties involved in that transaction. Another example would be Consensys' Quorum, which restricts participation to only pre-approved members and also has the ability to restrict the visibility of transaction payload to only those participants that are party to the transaction.
The explosion of blockchain platforms, tools, and techniques
A lot of effort and money is being channeled to new platforms, tools, and techniques today. We have come a long way from the Bitcoin days. The Bitcoin platform highlighted some key weaknesses of the original Blockchain design – mainly the inefficient, low transaction throughput, and high energy utilization of the proof-of-work consensus algorithm that was core to the mining of transactions. Everyone has heard that Bitcoin uses more energy than entire Countries, but a lot has changed with the advent of Ethereum 2.0, which uses the more efficient, proof-of-stake consensus algorithm, “shard chains” off the mainnet and delivers serious transaction throughput (up to 10,000 transactions/second as compared to Ethereum’s 30 transactions/second). More interesting is the proliferation of specialized platforms tailored to specific use cases and/or industry needs, such as The Linux Foundation Projects Hyperledger technologies. At the core of each of these platforms is the mechanism that defines the rules for decision-making amongst the nodes within that network. These are the consensus algorithms. ConsensusPedia suggests that there are now over 30 consensus algorithms to evaluate and choose from based on an organization’s Blockchain platform selection and specific business needs.
Interoperability
Just as interesting are the new tools available to development teams and some interesting platforms that are focused on the inevitable Blockchain interoperability challenges of the future. Tools like digital wallets and Integrated Development Environments (IDEs), such as Remix, have been around for some time and continue to evolve, but new entrants that are now automating the development of Smart Contracts, such as atra, are emerging. Just as interesting are the new IDEs that provide more than Smart Contract development capabilities, but also support full-stack application development and abstraction and integration with many Blockchains, distributed ledgers, and databases. Three interesting platforms in this category are Digital Asset's Daml, Kaleido, and Polkadot.
Daml offers a development framework that decouples the application logic and Smart Contracts from the underlying Blockchain platforms. It does so by creating a ‘virtual shared ledger’, distributing data on a ‘need to know’ basis to participants, and giving them a view of only the data they are entitled to see.
Kaleido is a development platform that offers the Ethereum packages Geth and Quorum in a Blockchain Software as a Service (SaaS) model and substantially simplifies the creation and operation of private Blockchain networks.
Polkadot takes interoperability one step further by delivering a platform that can connect public and permissionless networks with private chains. It enables the exchange of information and transactions via the Polkadot relay chain and could be the platform of the future Web3 environment.
It’s also important to highlight the role of consortiums, such as Hyperledger, Enterprise Ethereum, R3, Marco Polo, MOBI, and others, in accelerating these innovations and developments. There are many consortiums formed and forming; some are technology-focused while others are more business-focused. In all cases, they aim to reduce costs, accelerate learning, and share risks and in so doing are contributing to a speedy advancement of understanding, capabilities, and standards.
As all of this activity focused on the development of platforms, tools, and techniques continues it is likely that many of these hurdles will be overcome. Blockchain will become easier to use and organizations will have options that are more tailored to their business context. As a result, we can expect that Blockchain solutions will increasingly be viewed as an operational performance and efficiency catalyst with the opportunity to drive new business and revenue models.
In a future blog, we will put forward a structured approach for organizations to navigate all these considerations as they develop and execute a roadmap that takes them from discovery to operational platforms.
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