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But today, with all the technical jargon replaced by marketing words of the same ilk, cloud computing is everywhere. While people might not understand what virtualisation is all about, they know what cloud computing offers the business.
In a similar vein, it is hard for most in business to imagine how blockchain will be used, despite lofty expectations driven by industry analysts. Gartner predicts the business value-add of blockchain will grow to around $176bn by 2025 and exceed $3.1tn by 2030.
It is a giant leap, but blockchain and other distributed ledger technologies (DLTs), after huge hype, now face a “chasm to cross” if early pilots are to be applied to real-life business challenges, according to Dean Demellweek, digital innovation strategist at BNP Paribas, who spoke at a recent Blockchain Live event in London.
Gartner agrees. “Blockchain is developing quickly, but significant business challenges and technology gaps remain before widespread use cases and ways to generate value emerge,” said the analyst firm in a statement. “CIOs are under pressure to guide decisions on ‘if’ and ‘how’ they should implement blockchain, but struggle with how to apply this technology to meet new business challenges.”
Events such as Blockchain Live, which are growing in number, will help demystify a technology that was created as a ledger for recording bitcoin transactions. Bitcoin itself requires a degree of financial and technical knowledge to understand.
But amid all the talk of cryptocurrencies – bitcoin, ether, dash, monero, ripple and litecoin, to name a few – blockchain’s ability to provide the infrastructure for tamper-proof and transparent records of transactions is seen as critical as digital technology creates ever more transactions.
Read more about blockchain and its application
- In this e-guide, read about how blockchain’s inherent security makes it tamper-proof and perfect for keeping and sharing records for transactions in many scenarios.
- Dubai government is introducing a biometric border checking system that uses blockchain to ensure sensitive data can only be seen by the digital passport holder and the relevant authorities.
- Artificial intelligence and blockchain initiatives are earmarked for a doubling of investment, finds the 2018 Computer Weekly/TechTarget IT Priorities survey.
- By reducing the cost of peer-to-peer data and resource transfer, blockchain can remove the need for third parties and middlemen across industries.
In fact, blockchain is not really a disruptive technology in itself, but one which supports the technologies that will disrupt industries, such as artificial intelligence (AI) and the internet of things (IoT).
As BNP Paribas’s Demellweek put it: “Blockchain is not a disruptive technology, but a foundational technology. It is about building a network to enable disruptive business models.”
Finding use cases for blockchain
Organisations are testing out the application of blockchain in real-life business processes, with the financial services sector, unsurprisingly, heading the pack.
For example, JP Morgan has used blockchain technology to build a cross-border payments network, to which 75 other banks have signed up to test out. Using a distributed ledger that can be accessed by the banks involved, JP Morgan aims to make it easier to carry out compliance checks and make corrections, processes that can delay payments.
Then there is an HSBC and ING trial of blockchain’s application to trade financing, which the companies claim has been a success, leading the way to faster, cheaper and more secure transactions. Trade finance transactions are large payments, often international, that traditionally require many participants, lots of paper and many couriers. The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous.
But it is steady as she goes for IT leaders. In May 2018, Gartner found that just 1% of CIOs were working on blockchain projects and only 8% were either planning to do so in the short term or were already experimenting with the technology.
Here lies the chasm that needs to be crossed.
At Blockchain Live, Demellweek said there was a growing focus on the business challenges that blockchain could solve. “Enterprise blockchains are very nearly ready to enter the stage,” he said.
Quoting Gartner, he said enterprises passed the peak of inflated expectation in 2016, adding that the industry had hoped, after a period of disillusionment, that blockchain would have a wider application in business by now.
“Enterprise blockchain will help us cross the chasm from early adopters and visionaries to pragmatists in business, as we need to show them that blockchain will have real impact on their business,” said Demellweek.
He said business pragmatists had concerns around connecting with legacy systems, as well as regulatory considerations. He pointed out that blockchain must be able to show real business value, real-world applications and an ecosystem of organisations supporting it.
Introducing blockchain standards
One such ecosystem that already exists is the Society for Worldwide Interbank Financial Telecommunication (Swift), whose head of UK, Ireland and the Nordics, Vikesh Patel, also spoke at Blockchain Live.
As a cooperative, which exists for the very purpose of innovating for banks, Swift is working with the banking community to answer questions about where and how blockchain fits.
Patel said the need for standards was top of the wish list when it came to transmitting a piece of information to ensure it could be relied on.
“We have been looking at how we can support innovation in our ecosystem, and our primary work has been around standards,” he added. “In the many-to-many cross-border space, ISO20022 is the standard used to send financial messages. We have been looking at ways of applying that in our messaging today, and looking at new technologies including blockchain.”
The organisation is also testing out blockchain in regard to financial services business processes. It recently organised a pilot to apply blockchain to enable banks to manage nostro accounts, which are used to make cross-border payments in real time. It revealed that further progress was needed before blockchain could “support production-grade applications in large-scale, mission-critical global infrastructures”.
While Swift said the test “went extremely well”, it stressed that “further progress is needed”.
Patel said the pilot, run on IBM’s Hyperledger Fabric, found that the technology had matured a lot and would continue to do so. “We came away with the overriding view that whilst it will continue to mature in its current format, there were issues around scalability to apply it in large-scale in terms of the volumes needed,” he said. “This does not mean it is not going to get there, but is an output from a very extensive proof of concept.”