What's up with the Blockchain

There seems less noise now about blockchain than say 2-3 years ago. People are more familiar with the concept, including the differences between blockchain as a technology and cryptocurrencies such as Bitcoin. 2016 saw several big technology players and consortia such as R3cev Financial Services based collective moving swiftly to delivery corporate grade blockchain technology platforms. Further energy and investment since then has gone into solving the hard technical challenges and scalability issues of the previously available “products”.

If this is true, why have we not see a wider adoption of blockchain based solutions in the mainstream?

Two reasons I would offer are:

1.      Target use cases have highly complex and distributed processes that cannot be readily transferred to blockchain, without enabling changes in legal and operational frameworks.

2.      Use cases straightforward enough to be implemented may not make sufficiently value creating use of the technology’s differentiating capabilities to justify the effort.

To get real value from blockchain technology, use cases need to go beyond a simple exchange of value. This is the point of “smart contracts” which allow a range of conditional actions to be executed automatically, across a network of distributed parties. However, new operational and legal frameworks need to be agreed and in place for these to be implemented with reliable and valid outcomes. This takes time and the technology, per se, does little to alleviate this part of the problem.

Consider a smart contract for the sale of a security such as a publicly traded share, a well understood and regulated process. The value case for this (faster execution and lower transaction costs) requires significant automation and in turn will require changes in ways of working as well as legal and regulatory changes agreed by parties including brokers, exchanges, registrars, regulators and banks. That is all in addition to the development and integration of a technology solution.

Blockchain biggest adoption challenge is no longer technical, it is the associated non-technical change. The technology has undoubted value, but applying it to current processes will continue to be slow and somewhat difficult.

So how might an organisation successfully approach adopting blockchain?

Firstly, take a lesson from cloud migration where, from an agile perspective, the faster route to value has been in innovative “net new” cloud native initiatives rather than “lift, shift (and fix at some point later)”. Companies should look for really innovative, new ideas possible as part of digital transformation. This would allow embedding blockchain at an early stage while legal and operational frameworks are still evolving.

Secondly, try to really test the value proposition for using blockchain over other technologies for a given use case. It may be company level solutions are less able to progress than solutions at an industry or government sponsored level against the likely headwinds.