Over recent months I’ve had a number of conversations with colleagues and clients about blockchains. I’ve read widely on the subject and still find some elements of the technology, and its benefits and potential uses, quite hard to get my head around. And it seems I’m not alone. Blockchains can appear especially complex and intimidating to those encountering the technology for the first time. So why is this?
At first glance, things seem quite straightforward. We’re dealing with what’s essentially a distributed ledger or database where ‘trust’ and ‘truth’ are established through the use of cryptographic problem solving to assure the integrity of the whole network. And ledgers are certainly nothing new.
Most organisations will operate multiple ledgers for different purposes and for the various business networks they operate in. Transactions are placed and recorded in these ledgers, and contracts often govern the conditions for how such transactions can occur. The key aspect is that these ledgers have traditionally been entirely private. Often trusted institutions maintain ledgers that hold a record of the ‘truth’ that’s drawn upon by many parties to establish trust.
This thinking has been the accepted norm and status quo for a long time. The fact that blockchains turn many of these long-established concepts and assumptions on their head causes a discord for those who are new to blockchain. For instance, ledgers no longer have to be private, centralised authorities, and intermediaries aren’t required to validate transactions and create trust. The simple fact that it’s so radically different from the way a lot of business is done, makes its transformative potential hard to imagine.
A second problem is that for some people, blockchains are bound up with Bitcoin. This can create nervousness for people who associate Bitcoin with wild currency fluctuations, nefarious activities on the dark web and fraud and security incidents such as the Mt. Gox hack. Of course Bitcoin is just a single example of a blockchain-based cryptocurrency application. And it should be noted that all of the security and hacking issues that Bitcoin has experienced have occurred within the application itself, rather than the underlying blockchain infrastructure.
Thirdly, there’s the issue of hype. Blockchain is not always the way to go and use cases require careful consideration. A recent Gartner Symposium highlighted that many of the systems currently being developed using blockchain technology could be done using existing, tested and proven systems such as relational databases hosted in a cloud.
Given these concerns, it’s unsurprising that we’ve been working with organisations to help them better understand blockchains. So what practical steps can you take?
Blockchain provides the opportunity to rethink business processes from scratch, think differently about trust, and redesign internal processes and the interactions between multiple parties in a business ecosystem.
The best place you can start? Leave your preconceptions about the way business should be done at the door.