Blockchain, unblocked: its implications for enterprise computing

Blockchain proponents are bullish about its many applications, caution about governance.

Is blockchain poised to forever change the way we approach computing? Or is it something that will remain associated with cryptocurrency?

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Photo: Joe McKendrick

Don Tapscott sees blockchain as something huge and pervasive. In a recent interview hosted and posted by McKinsey & Company, Tapscott, coauthor of Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World, suggests it will change the world -- in ways never envisioned as the Internet developed.

What blockchain -- a global online database or ledger -- offers, he says, is a "trust protocol" that enables peer-to-peer sharing of value or information for any range of business activity. These days, such interactions require some kind of governing entity to provide that trust. Blockchain, on the other hand, represents a global database that is run by everyone but is not beholden to anyone. "Think of a giant, global spreadsheet that runs on millions and millions of computers," Tapscott says, making it essentially, "an immutable, unhackable distributed database of digital assets."

A recent report by the IBM Institute for Business Value concurs that blockchain offers a compelling platform for business, noting that it now supports about $1.6 billion of non-currency assets. "Intermediaries will be shuttered," IBM states. "Monumental business model changes enabled by blockchains could transform: the science of organizational management,the tightening of trust and the economics of wealth creation."

While the application of financial transactions through blockchain is evidenced with the Bitcoin phenomenon, there are many other areas business could benefit -- such as supply chains, according to the IBM report. "If import terminals received data from bills of lading earlier in the process, terminals could plan and execute more efficiently and without privacy concerns. Blockchain technology could make appropriate data visible in near real-time - for example, the departure time and weight of containers - while making inaccessible the information about the owners and value of the cargo or value. Costly delays and losses due to missing paperwork would be avoided."

Blockchains "could also enable a robust and secure exchange for shared logistics,coordinating a vast array of activities from sharing spare space in a warehouse to optimizing truck fleets and shipping containers," the report's authors illustrate. "Retailers and manufacturers could greatly improve demand forecasting and stock replenishment. Financial institutions, armed with a detailed track record of a supplier's reliability, could extend much needed credit to fuel the trading industry. Regulators could trace the origin of goods from raw materials, making it easier to identify counterfeit items, as well as sources of tainted materials."

Governance is the most vexing issue to blockchain, because the entire structure is so unregulated."Any controversy that you read about today is going to revolve around these governance issues," says Tapscott. "This new community is in its infancy. Unlike the Internet, which has a sophisticated governance ecosystem, the whole world of blockchain and digital currencies is the Wild West. It's a place of recklessness and chaos and calamity." If anything will hold back blockchain, the lack of governance may scare enterprises off, he states.

Still, Tapscott is optimistic. "To me, the blockchain, the underlying technology, is the biggest innovation in computer science," he says. "The idea of a distributed database where trust is established through mass collaboration and clever code rather than through a powerful institution that does the authentication and the settlement."

The IBM report makes the following recommendations for considering blockchain approaches to business problems:

Move step by step. "Identify the most compelling use cases by considering which frictions are holding back your enterprise. Use insights from earlier, more limited projects to re-engineer and implement larger efforts."

Look to standardize as much as possible. "Success in blockchain adoption will depend not on who has the best technology or app,but who can build the strongest network," the report's authors explain. "Explore the role of alliances and consortia in making blockchains scalable, open and interoperable." Blockchains "will benefit from open-standard governance," they add.

Open up thinking to new business models. "Understand how blockchains will extract further value from other technologies, such as big data analytics, the Internet of Things and cognitive computing," the IBM report's authors says. "Explore how new blockchain-based services and apps can complement and scale existing revenue models. As business models are disrupted by blockchains, think through how you can make money in new ways. Consider business models and markets that will benefit most from consumption-based pricing, licensing and micro-payments."