Few new technologies have raised as much discussion as blockchain. One reason is the controversy, concern, and perceived opportunity around blockchain-based cryptocurrencies such as bitcoin and ether. Another is the growing crop of ventures crowdfunded via initial coin offerings (ICOs).
But what is blockchain’s role in the enterprise? These days, a growing number of companies are testing out blockchain’s power to help facilitate transactions and track assets via its distributed ledger technology, in which every party has a copy of the same record and no one can change it without everyone knowing.
What should we expect for blockchain in 2018? We posed this question to Paul Brody, principal and global innovation leader, blockchain technology at EY (formerly Ernst & Young). Here are the trends he’s seeing in 2018 and beyond:
1. Blockchain will move from pilot to production
“Blockchains are appearing in pilot projects everywhere,” he says. “As those pilots and proof-of-concepts mature, while many will be abandoned, others will advance towards production systems.” This process will be part of a needed shakeout to help enterprise technology leaders determine which blockchain uses truly add value and which are just hype, he says.
[ How can you get started with blockchain? See our related story, Blockchain: 4 ways to experiment. ]
2. Use of zero knowledge proofs will grow
Everyone agrees that one powerful use of blockchain will be as a platform for transactions between corporate parties. But what form will that platform take? Some experts predict that large enterprises will create their own private blockchain networks, which suppliers and other business partners will join.
Brody thinks that’s all wrong. “Suppliers and customers can’t and won’t join the private blockchain for every one of their business partners,” Brody says. “The long-term future of the blockchain depends on the ability of companies to conduct private business over a public, shared infrastructure.”
That’s where zero knowledge proofs come in. Brody describes zero knowledge proofs as a mathematical operation and a cryptographic tool that allows one party to prove to another that something is verified, without that second party needing any additional information (such as a private key, in the case of public key encryption).
“Zero knowledge proofs are just starting to show working models in 2018,” Brody says. “They will allow blockchains to have key elements of security and privacy without giving up the redundancy and immutability that comes from synchronizing the full transaction information across the network.” He predicts that many companies will put a work on scaling them for business models in the coming year.
3. Blockchain networks will learn how to enforce the rule of law
“Smart contracts are powerful tools for automating business process operations, and they will become key productivity enablers for enterprises looking to harness blockchain technology,” Brody says. But there’s one problem: What happens when parties to a contract get into a dispute?
These matters are usually settled by the courts, but they have no authority over blockchain networks, which are decentralized, have no single arbiter or enforcer, and generally cross geographic borders. Voting across the network might be one way to settle disputes, but it could lead to trouble if one party has the better legal claim but the other party is more popular.
Participants in blockchain networks generally agree before joining to be bound by certain rules, but it’s not always clear how to implement and enforce those rules when there are disputes, Brody says. “This will be a new challenge that should be addressed in 2018.”
4. Blockchain will come into its own as an asset-tracking tool
“There are still far too many blockchain systems that seem to treat this amazing new technology as a nifty kind of digital notary or distributed database service,” Brody says, adding that people who see blockchain only in these terms are missing something important. Tokenization – using blockchain tokens (or “coins”) to represent specific assets – is a game-changing use for this technology.
You can use a token to represent an item as it moves through the supply chain and thus ensure that it never appears to be in two locations at once, Brody explains. In a similar way, you can use tokens to represent liquid assets in traditional currencies. He says this approach “offers all the benefits of blockchain-based solutions without the exchange risk.”
5. There will be a crash sometime in the next few years
“With emerging technologies, a wave of hype tends to drive investment and excitement, but something will eventually pop that early-stage bubble,” Brody says. And maybe that’s a good thing. “We should welcome a reset as a sign of market maturity and hope it comes sooner rather than later,” he says. “It won’t slow down the long-term transformation of industries based on cryptocurrencies and blockchains. And it will clear out some of the sillier ideas that are sucking up talent and mindshare in this business.”
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