More than $4 trillion in goods are shipped globally each year. The 80% carried via ocean shipping creates a lot of paperwork. The required trade documentation to process and administer all the goods is estimated to reach one-fifth of the actual physical transportation costs.
In early 2018, a logistics business and a large technology company decided to develop a joint global trade digitisation platform built using blockchain technology. It will enable them to establish a shared, immutable record of all transactions and provide all disparate partners access to that information at any time.
As blockchain evolves beyond bitcoin and the financial sector, large companies are looking to the technology for potential solutions to business challenges and to explore new disruptive business opportunities.
CIOs are under pressure to help guide decisions on if and how blockchain can be implemented in their enterprises. Often the solution won’t require blockchain — existing technology will suffice. In fact, Gartner anticipates that through 2018, 85% of projects with “blockchain” in their titles will deliver business value without actually using a blockchain. However, the very action of discussing blockchain opens up the opportunity for collaborative discussions, especially with peer entities that have the same noncompetitive business challenges. For CIOs, it’s necessary to understand what blockchain is and how it works, and more importantly, how the technology can be utilised to further mission-critical business priorities — or even disrupt the business completely.
Speaking ahead of his track on blockchain at the Gartner Symposium/ITXpo in Cape Town in September,Rajesh Kandaswamy, research vice president at Gartner says: “Blockchain technologies offer a set of capabilities that provide for new business and computing paradigms. Exploiting blockchain will demand that enterprises be willing to embrace decentralisation in their business models and processes. It is not straightforward.”
Blockchain introduces challenges ranging from strategic issues around how to compete and collaborate at the same time (e.g., in an industry consortium), to the lack of technical interoperability, security issues and more hidden data management challenges, including the EU’s Global Data Protection Regulation (GDPR). However, Gartner predicts that blockchain’s business value-add will grow to slightly over $360 billion by 2026, then surge to more than $3.1 trillion by 2030. This means businesses need to start planning, to capture future value as well as mitigating competitive threats, from, for example, new decentralised operating and distributed business models.
Blockchain might one day redefine economies and industries via the programmable economy and use of smart contracts, but for now, the technology is immature. Essentially, blockchain is made up of sequentially grouped, consensually verified blocks of transactions. Those blocks are chained together, creating a shared record of all exchanges. This establishes trust among unfamiliar or unknown partners. The information is stored over many different or decentralised locations with no central intermediary (such as a bank or company.) The ledger where this information is stored forms an immutable (or unchangeable) record of transactions dating back to the first, or genesis, transaction.
Security is handled by cryptographic protocols and techniques that ensure the permanence, resilience and immutability of the data.
How bitcoin works
Bitcoin, probably the most well-known example of blockchain, records cryptocurrency transactions in a “chain-of-blocks” data structure, where a block is a group of transaction records added every few minutes in a never-ending series. The ledger records the sequence of each transaction and every “coin” (virtual currency stored as information bits).
In order to achieve this goal of a “trusted record within an untrusted environment,” the bitcoin ledger relies on significant computational power and interested parties or “miners” to validate and confirm transactions, using a structured process for adding transaction records to the blockchain in return for monetary reward.
Get in early
CIOs can (and should) now to begin considering blockchain without the risk of being left behind. Only 1% of CIOs responding to the Gartner 2018 CIO Survey indicate any kind of blockchain adoption, and only 8% are in short-term planning and pilot execution. However, 77% of responding CIOs say their enterprise has no interest in the technology and/or no action planned to investigate or develop it. Gartner believes this is a more dangerous attitude. Hype Cycles are not indicating obsolescence. Re-engineering businesses to the extent that blockchain envisages will take time, but that doesn’t mean it won’t happen and the extent of that change on businesses, industries and society will be enormous. CIOs therefore ignore the trend at their peril.