Is Blockchain Ready for Primetime?
- March 02, 2018
In essence, blockchain is an open, distributed ledger running on a peer-to-peer network that can record transactions between two (or more) parties efficiently and in a verifiable and permanent way. Blockchain enables an open set of parties to maintain a safe, permanent, and tamper-proof digital ledger of transactions, without a central authority. The ledger itself can also be programmed to trigger processes automatically, adding speed and eliminating costs from complex, high-volume transactions. Blockchain is a mutual, trustworthy, shared data source that can unleash trapped value in key operational processes and help businesses collaborate more effectively and efficiently.
Blockchain’s business value
Beyond the cryptocurrency craze and putting aside Silk Road or Mt. Gox infamy, the potential for blockchain is very real, and very big. Any process that requires numerous entities sharing real-time, accurate data in complete trust and transparency can potentially benefit from blockchain’s distributed ledger technology. The key design element is the independent verification of the chain of ownership of every transaction at every stage of the process, eliminating the age-old (and expensive) challenge of maintaining and synchronizing multiple database platforms.
By establishing a “trusted” ledger, blockchain’s potential is unleashed. Combining cloud, M2M and IoT applications with blockchain’s secure and trusted peer-to-peer collaboration approach, only expands the possible use case portfolio.
The possibilities across government, industrial, commercial and consumer-driven applications continue to fuel multiple start-up companies, as both entrepreneurs and industry leaders, such as SAP, look to secure their place in the blockchain driven society.
As pointed out by NTT DATA consultant Arushi Srivastava in his 2016 blog post, common business challenges ripe for a blockchain are still valid:
- High transaction costs due to intermediaries
- High governance costs due to regulatory and auditory compliance requirements
- Slow transaction speeds due to multi-party checks and approval
- Risk of fraud due to immutability or non-transparency of information
According to one leading analyst firm, as reported in WSJ, corporate spending on blockchain software is expected to reach $2.1 billion this year, up from $945 million in 2017. Quantifying the value of technology innovation rather than the dollars spent on it, another leading research group expects the business value-add of blockchain to grow to more than $176 billion by 2025, and to exceed $3.1 trillion by 2030, as reported in NYT.
Promising blockchain applications span almost every industry, particularly those with multiple parties in the value chain. Organizations across financial services, healthcare, consumer products, manufacturing, technology, media, and telecommunications are actively investing in blockchain.
As reported in WSJ, a majority of the senior executives at large U.S. companies surveyed by Deloitte claim blockchain knowledge ranging from broad to expert, with many deeming the technology crucial for their companies and industries. 55% think their companies would be at a competitive disadvantage if they failed to adopt the technology; 42% believe it will disrupt their industries.
IDC research predicts that at least 25% of Global 2000 companies will use blockchain services as a foundation for scalable digital trust within three years, as reported in Forbes.
While most business leaders are still trying to figure out how to put blockchain technology to work, consensus is growing that blockchain has the potential to unlock vast value trapped in business operations.
Here’s just a small selection of potential industry and business applications for blockchain:
- The value of blockchain technology for financial-services industry applications comes from the security, efficiencies, cost-savings and data validity inherent in the technology. According to a Santander FinTech study, distributed ledger technology could reduce financial services infrastructure cost between US$15 billion and $20 billion per annum by 2022.
- Legal work which involves tracking transfer of ownership – for example intellectual property law, or real estate deeds – will also be made more efficient through implementation of distributed ledgers.
- In healthcare blockchain can improve electronic medical records and allow patients' records to be accessed securely by any provider who needs them, saving time, money and possibly lives. As reported in Healthcare IT News, IDC predicts that 20% of organizations will have moved beyond pilot projects and will have operationalized blockchain by 2020.
- Any business that relies on a supply chain can use blockchain to track transactions. Greater transparency via blockchain can dramatically improve key supply chain segments including track-and-trace, warranty and recalls.
- In business networks, buyers and sellers alike benefit from blockchain’s power to lower operational costs, streamline collaboration and speed up payments for goods shipped and delivered.
- Smart contracts on blockchain-enabled networks that automatically trigger activities can quickly transform dated business process.
SAP and NTT DATA investing in blockchain
Not surprisingly, industry leaders SAP and NTT DATA are partnering with customers to advance blockchain technology and tailor value-added blockchain services to address customer’s specific needs.
SAP is validating POCs and has launched a blockchain co-innovation program to share ideas and build an expert community. In May of 2017, SAP announced its SAP Cloud Platform Blockchain service, enabling customers to simplify and optimize complex multi-party processes. SAP’s Leonardo platform integrates blockchain technology with a range of technologies such as Internet of Things, Machine Learning, Analytics, Big Data, and Data Intelligence. To help discover and advance the potential of blockchain in the enterprise, SAP is a founding member of the Blockchain Research Institute and, along with NTT DATA, is a premier member in the Hyperledger project.
For our part, NTT DATA is committed to the development and standardization of blockchain platforms that are compatible with highly reliable systems. In addition to our participation in the Hyperledger project, NTT DATA is a member in the Enterprise Ethereum Alliance.
Working with our partner Skuchain, NTT DATA is building an integrated blockchain IoT platform to bring blockchain to enterprise supply chains. We’ve completed a proof-of-concept prototype with The Bank of Tokyo-Mitsubishi UFJ, Ltd leveraging blockchain technology that aims to make cross-border flows between Japan and Singapore more secure, efficient and transparent. And with Tokio Marine, NTT DATA has successfully tested the first blockchain-based insurance policy for marine cargo insurance certificates.
Is blockchain ready for primetime?
To be sure, interest (and investment) in blockchain is strong. Across industries, numerous proof-of-concepts are underway. Blockchain is very much real and the potential benefits are substantial. However, blockchain use in the enterprise is just beginning.
Limited agreed upon technical standards, regulatory uncertainty, power requirements, storage costs, transparency and scalability questions are challenges, among others, that need additional work. Many barriers—technological, governance, organizational, and even societal—will have to be overcome for blockchain to realize its full potential. Yet, the blockchain technology continues to garner excitement and investment, inspiring industry collaboration, all built on the premise of “establishing trust” on a global scale.
For industry leaders, this presents a dilemma: They are keen to exploit the advantages that blockchain purports to offer, yet they are simultaneously — and justifiably — wary of the potential risks within a complex landscape, both from a new technology and a business investment standpoint.
Our advice…. Join the blockchain discussion, learn and ask questions. Take a moment to understand and appreciate the blockchain landscape and potential innovations within your industry. Identify one or two business processes that would benefit from sharing real-time, accurate data in complete trust and transparency. Tap the expertise of proven consultants, such as NTT DATA to validate your findings, evaluate options and build a proof of concept.
Just don’t wait… Blockchain is here and it is only the beginning.
Contact NTT DATA to learn more about how blockchain can improve your business.