Distributed Ledger (Blockchain) Technology Becoming Essential for Private Enterprise Ecosystems
Although hype associated with blockchain is beginning to settle, distributed ledger technology (DLT) is becoming a necessary tool in business.1 For example, 90 percent of major North American and European banks are exploring blockchain technology. Meanwhile, government regulations—such as requirements for ethical sourcing—can be expected to increase during the coming years.
An increasing number of enterprise players are beginning to embrace new ways of doing business, but unfortunately often lack the knowledge and experience to find the right entry point into tools like DLT. Experiments with the technology can be pricey and results are often misinterpreted. There are steps, however, that can improve the chances of favorable implementation.
DLT Offers a Wide Range of Potential Benefits
In addition to the basic blockchain benefits that have been mentioned numerous times over the past few years, DLT offers many advantages over traditional systems, such as the following:
- Improved system security levels through better encryption or security components.
- Many businesses have their own systems and databases which communicate with each other or business partners. It is often very expensive for systems to reconcile and make sure all the databases have the same version of data. For example, “my shipment is now with party A and every party should be able to see what I see in their own systems.” DLT helps reduces fees and expenses by improving the efficiency of such data reconciliations among multi-party enterprise ecosystems. It broadcasts the sources of truth to all nodes, with security components to assure that only the relevant information can be viewed by certain parties.
- Parties in a single ecosystem often know each other and have some level of trust. For example, a supply chain distributor maintains its relationship with upstream and downstream parties to keep business running healthy. However, they do not trust each other completely which slows down business. A payment is often made after the goods are received; but the goods need to be sold in order to generate revenue and payment for the upstream parties. DLT helps to bridge small gaps between trusted parties and achievement of higher-level trust with comforts as it facilitates digital assets to be generated or transact, and all parties can rely on automations for payments and record keeping.
- Operating fees and expense reductions achieved by reaching consensus and building a distributed network.
- Prevention of rogues and identification of abnormal behaviors.
More specifically, clients of Accenture’s DLT practice have experienced improvements in:
- Compatibility, including fast exchange of digital assets or data with other system components.
- Performance, increasing the speed of data validation and reconciliation.
- Security, including more secure data access to a specific set of users or system components.
- Auditability, through better tracking of the source of truth and the history of asset movement and transactions.
- Confidentiality—the content of confidential data, users, or digital assets—is protected by advanced encryption, while other parties can still compute the data and generate processed results.
- Transparency, by allowing every participant to query the chain and view its entire transaction history, even though only selected nodes can write to the chain.
- Recoverability, as permissioned blockchain allows participants to recover loss from incidents once the vast majority reaches consensus.
DLT Presents Challenges
Enterprise applications often rely on high transaction volumes, fast settlement, and a secured environment. These requirements, however, currently challenge applications that are built on public, permission-less blockchains.
Companies that implement DLT need specialists who not only understand blockchain but traditional conditions for building an enterprise level application as well. This often requires rich experience in building security components, environment setup, monitoring, testing, and many other relevant areas.
Experiencing the full benefits of DLT requires careful business analysis, design, and architecture.
Blockchain is not a database in which an enterprise can store everything and show everyone in its network. It provides the ability to perform “you see what I see” without breaching any confidentiality.
The preferred encryption method applied today might have a shorter expiration date than does a company’s sensitive data. DLT-based applications require security just like any application—the approach to meet these requirements should not change.
In most scenarios, enterprise blockchain is not proposed to completely disrupt a central authority’s credit endorsement. Its purpose is instead to close trust gaps among different channels and automatically execute tasks based on the level of consensus reached by participants.
Supply Chains Are Good Use Cases
DLT is particularly important in supply-chain ecosystems that consist of multiple parties, some of which might be unknown to the end manufacturer. Global supply chains are notoriously complex, with diverse sets of stakeholders, varying interests, and many third-party intermediaries. These are challenges that DLT is well-suited to address. One example is the use of DLT in supply chains to track asset movement. For example, logistics company DHL developed a DLT system that tracks pharmaceuticals from the point of origin to the consumer, preventing tampering and errors.2
Start now, Consult with Specialists, and Involve All Participants
It’s important to begin soon. Companies that participate early should be able to shape the rules of the game and reach the strategic high ground faster than others. Blockchain is maturing rapidly. It should be seriously considered by any medium to large enterprise. A good business case applied with blockchain usually yields more than just marketing value; it also offers new methods to cut intermediaries and enhance security.
Consult with specialists for a blockchain due-diligence check. It is crucial to understand that not everything is a valid blockchain use case—sometimes a traditional database might do. Experienced consulting films offer better architecture with considerations of enterprise-level security, transaction volume, and customer experience, as well as operational excellence.
Involve other participants. For companies that have already built a close relationship in a value chain (e.g. a single supply chain) and perform in the recommendations above, it is important to involve key participants in the ecosystem. This is usually a prerequisite of building a permissioned blockchain system.
DLT is helpful today but is expected to be essential tomorrow. Wise companies should not delay steps toward implementation.
Sources and References:
- “Blockchain.” Accenture. Accessed January 31,2019. https://www.accenture.com/us-en/insights/blockchain-index.
- “Blockchain in Logistics.” DHL Customer Solutions & Accessed January 31, 2019. https://www.logistics.dhl/content/dam/dhl/global/core/documents/pdf/glo-core-blockchain-trend-report.pdf.