Blockchain is emerging as one of today’s most disruptive technologies, with the ability to radically reshape how business is done by enabling secure, efficient and transparent business-to-business transactions.
Its predicted to deliver $176 billion additional value by 2025, and it’s forecasted that 10% of the global GDP will be stored in blockchain by 2027.
While the technology was one of the trending topics last year, the debate was primarily centred around its potential. This lag in actual business usage is especially prevalent in South Africa, with research by Accenture indicating only 31% of local executives stating that blockchain and smart contracts will be critical or very critical to their organisations over the next three years – versus a global average of 60%.
For widespread adoption to occur, organisations need to look how they can use the technology to drive business value, in order to ensure that there is a significant shift from experimentation to production deployments of enterprise blockchains.
How blockchain can help business
Reducing transaction costs: with the ability to achieve remote, autonomous consensus, blockchain can lower transaction costs by removing the need for security and third-party intermediaries, such as banks and/or money transfer agencies. Whether it is for making or accepting payments, it allows businesses to compete on a level playing field.
Smart contracts: a special code executes the terms of a contract without third-party mediation for every participant, allowing organisations to use blockchain instead of banks, money transfer agencies or law firms. Companies also stand to benefit from the enhanced security resulting from the automation of many transactional processes.
Eliminating fraud risk: blockchain and the decentralised ledgers mean that organisations can securely store, share, pay bills and transact with other businesses in a completely new way, bringing about a fundamental change that protects both consumer information and companies’ reputations. Nigeria is looking to harness this technology in improving transparency and reducing fraud, while the South African Reserve Bank is trialing the tech for clearing and settlement.
Improving regulatory compliance: once data is put on a blockchain, it cannot be altered or deleted; it keeps track of the steps required by regulation and creates an audit trail to verify compliance quickly, easily, and cost-effectively. This is especially important as countries implement data regulation, including the Protection of of Personal Information (PoPI) Act in South Africa, and Europe’s General Data Protection Regulation (GDPR).
New business models: blockchain can help businesses monetise their digital assets and data as well as generate new revenue streams. Through the use of smart contracts, organisations can securely and verifiably track the usage of their digital assets by third parties and charge for it.
Challenges to enterprise adoption
Today’s organisations looking to take advantage of blockchain technology often end up facing challenges in several areas, specifically performance, resilience, security, and enterprise integration.
Modern corporate systems handle large volumes of transactions, and changes are needed to improve the transactions per second that can be handled by the technology before broader adoption. Similarly, blockchain solutions will need to provision for rapid disaster recovery in the event of a failure, before they can be used as enterprise-class solutions.
Enterprise blockchains must further have the ability to conduct confidential transactions, and offer capabilities like fine-grained authorisations for enforcement of access control within a smart contract, private peer-to-peer interactions that limit visibility of transaction information, and selective encryption of the sensitive data for restricted access by authorised peers are necessary to further enhance data and transaction privacy.
Many processes and interactions that would benefit from using blockchain need to integrate with a number of enterprise systems of record – core banking systems, enterprise resource planning, supply chain management, human capital management, and more – which could be both complex and costly for business.
Helping hand from the cloud
One solution to these challenges is to adopt blockchain as a pre-assembled, managed service – Blockchain-as-a-Service (BaaS) – which utilises a service provider’s infrastructure and operations capabilities to manage, monitor, patch and maintain the infrastructure, allowing enterprises to focus on the application-delivered value of using blockchain.
When used as a service, a provider will integrate, manage and maintain the foundational technologies required to run, monitor, patch and troubleshoot the blockchain network. An operations interface will allow customers to configure the network, monitor service level agreements, and use tools to manage the smart contract lifecycle – from initial chaincode deployment to upgrades to new versions and more.
For blockchain to move toward production deployments in 2018, technology needs to mature in these key areas outlined above. Additionally, it will require cloud companies and open source consortia, like Hyperledger, to step up to the challenge and deliver on these requirements. Together they will help enterprises fully adopt the blockchain as a part of their business–critical IT systems.
By Niral Patel, MD and Technology Leader for Oracle South Africa