Considering Blockchain for an Enterprise?

Nitin Gaur | Director at IBM Blockchain Labs

As I examine the facets of blockchain technology and their potential benefits to enterprise applications, I realize that the blockchain landscape is fragmented, with many innovative approaches in use to apply thistechnology to problem solving. This innovation leads to specialization, and each blockchain vendor offers a variant trust system that addresses a specific business use case. These specialized vendors have defined business use cases that benefit from blockchain’s robust trust system, which allows for speed that matches the consumer’s expectations of the digital world. The tenets of blockchain, such as decentralized, distributed, global, and permanent code-based programmable assets and records of transaction, could be instrumental in managing such interactions, allowing them to keep up with the speed of the Internet. As I contemplate the benefits of blockchain technology, I also consider the adoption of blockchain by enterprises as a mainstream application transaction system. I also suggest caution when using blockchain in enterprise application platforms that are burdened with legacy and evolving design. In this post, I will attempt to demystify the perception of blockchain and will outline the challenges that may ensue if this technology is adopted within an enterprise context. I will also focus on three primary areas that will help describe blockchain in the context of an enterprise.

  1. How does an enterprise view blockchain?

Blockchain is described as a digital trust web via radical openness, and while this may be true for cyber currency blockchain, enterprises still have to consider the meaning and impact of radical openness. Public blockchain operates with extreme simplicity, supporting a widely distributed master list of all (currency) transactions that is validated using a trust system supported by anonymous consensus. But can this model of a trustless system be applied directly to an enterprise without modifying the fundamental tenets of blockchain? Does an enterprise view this disruptive technology as a path to its own transformation or as a vehicle to improve existing processes and exploit the efficiencies of the trust system? In either case, the adoption of this technology beyond an experimental stage should not disrupt the incumbent system. This presents an interesting challenge! After all, the design inefficiencies of the incumbent system have compelled enterprises to consider this paradigm shift. Many of the use cases and concepts that have been tested, as proof points are still far from appropriate for use by an enterprise. The financial services sector was the first to experiment with blockchain but feared being disrupted by another wave of start-ups from Silicon Valley and Silicon Alley. Also driven by consumer demands for speed and low priced transactions, the industry has a well-defined structure of use cases including (but not limited to) trade financing, trade platform, payment and remittance, smart contracts, crowd funding, data management and analytics, marketplace lending, and blockchain technology infrastructures. In the near future, I suspect that this thinking may permeate other industries, such as retail, health care, and the government. While blockchain technology combines many good ideas, given the nascency beyond cyber currency and the lack of defined standards to promote interoperability between multi-domain chains, the technology requires that an enterprise establish a level of understanding that may lead to further innovations and standards. This may also create unique opportunities to not only improve existing business practices (application of technology) but also to establish new business models using blockchain’s powered trust web.

  1. Litmus test to justify application of blockchain technology

In my previous posts, I noted that blockchain addresses three aspects of the transaction economy:

  1. Trade
  2. Ownership
  3. Trust

I also mentioned the technological elements of blockchain:

  1. Technology behind the trust system: Consensus, mining, and public ledger
  2. Secret communication on open networks: Cryptography and encryption
  3. Non-repudiation systems: Visibility to stacks of processes

Chain decision matrix: While the implications of this technology may be profound, an enterprise may want to devise a set of enterprise-specific criteria that can be applied to existing or new projects that may use blockchain. Given the versatility of blockchain technology and the current hype curve, enterprises should use the chain decision matrix as a tool to ensure that an enterprise has a structured approach to apply a foundational technology to a business domain. This approach will also lend itself to a consistent blockchain infrastructure and trust management system, which will prove vital as many application-driven chains evolve and as demand for enterprise visibility, management, and control grows. (I plan to develop this thought in future posts).

  1. Technology, business, and regulatory considerations of blockchain

From a technological perspective, the design goals of adopting blockchain in any enterprise should focus on disrupting the incumbent system as little as possible. One way to achieve this is to think about integration with an enterprise system of record, thereby treating blockchain-driven transaction processing and the enterprise system of record as interfaces for other enterprise applications, such as reporting, business intelligence, and data analytics and regulatory interactions.

A design paradigm should also separate the blockchain technology infrastructure from business domains that use chain technology to gain a competitive advantage. This will promote blockchain as an enterprise chain infrastructure that is invisible to businesses, while promoting ‘interprise synergy’ between the various business-driven chains. It will also separate the business domain from the technology that supports it. Chain applications should be provisioned by business domains using an appropriate trust system. Central to any blockchain endeavor, trust systems should be appropriate to the business needs. The choice of trust systems available to an enterprise also dictates the cost of the underlying infrastructure and the compute requirements. The distinction between the blockchain technology infrastructure, the architecture of the pluggable trust system, the trust intermediaries, and the design (which should provide a flexible and modular trust system) will allow a business chain to focus on the business and regulatory requirements (AML, KYC, non-repudiation, etc.). The technology infrastructure should be open, modular, and adaptable to any blockchain variant with specialized offerings, thereby providing manageability.

Interprise synergy implies driving synergies between the various enterprise blockchains to enable inter- and intra-enterprise chain (interledger) connections. This model would mean that the transactions cross various trust systems and cross aspects of enterprise governance; the model also indicates that control systems would be visible to such interactions. These interactions between various business units and external enterprises are important to fractal visibility and are associated with the protection of enterprise data. Invisible enterprise chain infrastructures will enable a solid foundation that will lead to the evolution of enterprise connectors and the exposure of APIs to enable incumbent systems to be chain aware. Due to conditional programmable contracts (smart contracts) between the business chains, interprise synergy will flourish. (More on this in future posts).

Are enterprises ready for blockchain? More importantly, should a consideration of blockchain consumption focus on integration with incumbent transaction systems, or should blockchain technology infrastructures be enterprise aware?An integrated enterprise will need more than one specialized use case and will need to drive interprise synergy to exploit the promises of enterprise blockchain fully. The success of blockchain consumption should initially focus on technology play, and enterprises should consider integration with existing enterprise business systems. This will create ease in the collective understanding of this technology, while establishing a path of least disruption and accelerating enterprise adoption.