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Where does blockchain fit best?
3 characteristics of blockchain speak to where it may find a home in your organization. Supply chain is emerging as an early use case
What are the specific cases where blockchain is likely to be useful? This was the most interesting part of the blockchain discussion at the MIT Enterprise Forum’s recent Connected Things event. After all, IT and business leaders want to know where blockchain will make a difference – and where it won’t.
A session on this question, moderated by Forrester VP and principal analyst Frank Gillett, was billed as a Point/Counterpoint; in practice, Thomas Hardjono, CTO of MIT Connection Science and Andrew Stahl, SVP Business Innovation for SAP were both too level-headed about the topic to either be completely dismissive or breathlessly supportive.
Hardjono came down nominally on the blockchain skeptic side, and he did dismiss the whole “ICO (initial coin offering) thing” as being “reminiscent of drive-by funding in the nineties.” He went on to say that ICOs are actively harming innovation and that he expects the SEC to get involved with regulating them.
However, Hardjono added, Bitcoin itself is a proof point that it’s possible to have “peer-to-peer networks with amazing potential,” even if blockchain as a whole is in the “baby in diapers” stage of its development.
In that regard, he echoes some blockchain proponents, such as Irving Wladawsky-Berger of the MIT Initiative on the Digital Economy, who said at the 2017 MIT Sloan CIO Symposium, “The Internet of the early to mid 90’s was really crappy. The Internet we are really happy with today took another 15 years to get there. We’re at the toddler stage. Foundational technologies take a long time."
[ How can your organization get started with blockchain? See our related story, Blockchain: 4 ways to experiment. ]
Hardjono and Stahl were in general agreement on some of the characteristics of blockchain that are the most potentially interesting.
3 intriguing characteristics of blockchain
The first is immutability, which Stahl says could make it possible for “some fascinating things to happen.” Once something has been put on a blockchain, it can’t be removed or altered. (This introduces its own challenges, however, as it means that things like personal data can’t be removed from a blockchain once they are no longer needed. That runs counter to various types of privacy regulation and company policies.)
Second, immutability combined with the distributed and replicated nature of blockchain means that you can have a system for distributed trust in which no single entity is in ultimate control. Stahl views this trust, in cases where one entity doesn’t already trust or directly control all the participants in the network, as a key to thinking about where blockchain might be most useful.
At the same time, he cautions that blockchain doesn’t solve human interactions. What’s put on a blockchain may be immutable, but there’s no inherent guarantee that it reflects truth. For example, I can say that I have inspected a part and entered that fact on the blockchain, but that action doesn’t guarantee that I have, in fact, inspected the part.
A third blockchain ability to watch is its facility for smart contracts (which Hardjono joked are effectively what we used to call “stored procedures.”) A smart contract digitally verifies, enforces, or executes the performance of a contract. For example, in a simple case, a smart contract might automatically make a payment when an order is delivered.
Supply chain as early use case
Adding all of this together, track and trace for managing supply chains looks like an interesting use case, which is why it’s one of the applications that is most talked about – outside of the financial sector.
As Stahl, who came out of the logistics industry, noted, “In complex supply chains, blockchain becomes interesting as assets age and change hands.” There aren’t a lot of established middlemen in shipping, and it’s sufficiently decentralized that distributed trust seems like a good fit.
Not that there aren’t challenges. Stahl argued that it will be hard to fit blockchain into a brownfield world in which supply chains and their data are already running on different systems. He raised Boeing as an example of a company with rigorous supply chain management that could potentially use blockchain but probably won’t until there is an opportunity to implement it in a greenfield way for a new plane model.
Similarly, I’ve discussed blockchain with an executive I know at a shipping company. She sees good potential for blockchain, but not universal adoption. Some of the problems she cites include managing the identity of participants, small and unsophisticated IT departments, and the generally pragmatic approach of a low-margin industry. (See our related article, Blockchain: 3 things people get wrong.)
Forrester’s Gillett summed up the discussion with the advice his research firm gives to clients: “We see potential for various technologies and techniques in the long run. And believe it will have a role to play in the financial sector sooner. It’s extremely early. We’re telling our clients to track, but be cautious.”
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