In the recent years, along with the growth of crypto currencies such as Bitcoin or Ethereum, Blockchain technology has been rapidly catching the attention of enterprises that wish to apply it to other domains beyond financial transactions such as distributed storage (Filecoin), Internet of Things (IOTA) or decentralized autonomous organization (DAO). A common approach is to replace the traditional centralized database system with the core of distributed blockchain storage so that multiple entities can use the blockchain to guarantee data integrity. However, even when we have suitable use cases for blockchain, employing such a technology is not a trivial task. There are several issues that enterprises may encounter with when using blockchain in their systems.
Bitcoin, Ethereum and many other public permissionless blockchain are expected to provide decentralized open platforms to implement smart contracts that allow business to connect and ensure the trust among one another. However, the economy factor of using public permissionless blockchain is not stable for businesses in non-financial domains. For example, in order to “perform” a transaction on Ethereum, one must play a lower bounded amount of gas, which, in turn can be paid by ETH, the currency token in the network. However, the exchange price of ETH to USD varies like stock on the exchange market. The same transaction can cost 10 times different in USD equivalent just after several days. We can argue that in the future it is possible to have a stable economy system where cryptocurrencies prices are managed intelligently like real life currencies. It is very hard for a business to rely on this type of approach without taking a significant risk or change at the core of their business.
Another downside to blockchain is that it is somewhat overly praised by the mass public. During the cryptocurrency rush in 2018 where Bitcoin price peaked at more than 30 times its price in 2017, we can see a large number of companies that tried to use “blockchain” in their businesses to perform initial coin offering (ICO) to attract investment from the public. Unfortunately, a large portion of those companies are scam entities. Many relied on the fact that there was no clear regulation guideline from governments on such matters to create a fake hype on the technology to push the price of cryptocurrencies up for profit with no intention of developing any sensible thing for the community. Thus, when governments do take actions such as the US Securities and Exchange Commission's cracking down of unregistered coin offerings  or many Asian countries' more extreme measures like banning cryptocurrencies entirely , many actual projects such as Ethereum have to bear the side effects. It is a great risk for a company to employ such a technology in their businesses without considering a possibility that public cryptocurrency is banned or having bad reputation in countries where they want to establish.
- Blockchain & Enterprise: Is Blockchain Suitable for Your Business?
- Strategic Business Value of Blockchain in Insurance
- Improve the Effectiveness of Customer Authentication with eKYC
Under the context of those challenges, we see that the consortium, “private” blockchain solution is generically more approachable for enterprises. In enterprise systems, the consensus process or, the process to decide what can be written into the blockchain, is controlled by pre-selected set of nodes. For example, a consortium of enterprises working on e-commerce can each run a node and produce a blockchain together where they can commit product list and transactions. The right to read those data can be either entirely public, restricted to those enterprises or hybrid such as constructing a merkle tree and only public the root hash on the blockchain. There are a number of growing consortium blockchain systems such as the Hyperledger Project, R3 CORDA or BigchainDB, etc. that are invested and actively developed by the community as well as giant technology companies.
However, we have seen little success with either public or private blockchain on different domains. Reporters  and respectable scholars  are raising many questions on the actual outcomes of the blockchain technology after so much investment and research efforts. Professor Arvind Narayanan from Princeton University pointed out one of the many reasons for this slow adaptation is that: “Open platforms can’t win by directly appealing to users on philosophical grounds, or even cost (see Linux on the desktop). Mainstream users have no good reason to directly interact with blockchain technology—or any piece of code—without intermediaries involved, ” . Indeed, we must consider that many of the current blockchain technology platforms are too complex for mainstream users. Even to companies, successfully employing the blockchain technology impose great challenges both in term of economy as well as technical issues.
What exactly are the challenges that businesses must overcome to adopt the blockchain in their businesses? There are numbers of challenges that businesses have to face when they try to adopt a new technology:
- Following the trend: many businesses try to adopt new technologies just because it is new, and some other businesses are already doing it. However, while the blockchain offers is useful, it may only be usable in some situation as described above.
- Not implementing the right systems: The blockchain must be integrated into current business processes to utilize its full potential. The existing systems and procedures need to be adjusted to incorporate the new technology in a way that limits disruption and the need for additional training, while still taking advantage of all the new technology has to offer.
- Quantifying the benefit of the technology: Arguably, it is one of the hardest challenges “before” applying a new technology in a business. No matter how new and innovative the technology is, it can only be success if it truly provides benefit to businesses better than the current solution.
However, how can businesses measure the benefit of applying the blockchain technology in the business before implementing one or how can they know that they are implementing the right system or choosing the correct approach to the problem. While the technology offers transparency and decentralization, the cost for it is usually system performance, scalability, complexity and cost. It is extremely difficult to be certain that blockchain will bring immediate benefits to the business in term of customer experience or saving costs. We take a brief look at how top IT companies’ methodologies in structuring their development process. In , Gartner applies a pace-layered application strategy that clearly define 3 players of an IT system:
- Systems of record: Established packaged applications or legacy homegrown systems that support core transaction processing and manage the organization's critical master data.
- Systems of differentiation: Applications that enable unique company processes or industry specific capabilities.
- Systems of innovation: New applications that are built on an ad hoc basis to address new business requirements or opportunities. These are typically short life cycle projects using departmental or outside resources and consumer-grade technologies.
The key point of such layers is to use different approaches in different situations. If the core business is the blockchain itself such as Factom or Ripple, it makes sense for the business to choose the first 2 layers to focus on. However, to most other business in different domains where the first 2 options are already established, they are looking to quickly implement blockchain system of innovation not only to grab new business opportunities and enhance trust, but also to create deliverable systems that they can use in production to experience, get user feedback and quantifying the benefit of the technology.
For such reasons, we can see that for a business to successfully apply the blockchain technology in their business, there are three mandatory requirements that they must satisfy:
- Determining the correct scenario that requires the blockchain technology. We have discussed such methodologies above. However, as business workflows are often complex with a lot of transition steps, one must carefully analyze each and every step to see whether a blockchain approach makes sense. There might be scenarios where hybrid approaches that involve both centralized database and the blockchain in one workflow like what we did in Trusternity, are applicable rather than just simply saying yes or no to the blockchain.
- Quickly implement blockchain system of innovation. After determining the correct use case, the business must be able to quickly adopt new technology by implementing proof of concept systems that can go into production to let customers and staffs be familiar with the new technology. In the consortium blockchain use case, this type of system may involve a limited number of partners, peers that share their perspective on using the blockchain.
- Determining methodologies and solution to migrate from system of innovation to system of differentiation or system of records. After successfully testing the idea of blockchain in the business on the production environment, the business can migrate their proof of concept solution into a long-term system. We can see that this step might either require to redesign the blockchain system from scratch or just to simply extend the blockchain network with more partners, adding more resources in term of infrastructure and development effort.
However, to our knowledge, there is not an effective blockchain platform solution for such requirements. While there are many mature blockchain platforms supporting smart contract and decentralize application development with great ecosystem such as Ethereum, Hyperledger Fabric or R3Corda, they are the foundation block of the solution. It takes time for businesses to be efficient with the platform to the point that they can deliver production level blockchain application. Meanwhile, other end-to-end solution such as Hyperledger Cello or Microsoft Azure Blockchain are just simply integrated development and monitoring tool for those platforms. These tools are useful for businesses to quickly deploy and monitor their blockchain network. However, it lacks the capability to interconnecting different blockchain networks, helping companies to pool resources to reduce the cost or assisting businesses to integrate blockchain with their existing system. In the end, a true end-to-end blockchain as a service solution that enables enterprises to quickly develop, integrate, deploy and monitor their blockchain application.
Given such challenges, our folks at akaChain are providing an end-to-end blockchain-as-a-service platform to allow enterprises quickly applying transparency while retaining data privacy using blockchain technology. Tune in and see it for yourself.