Enterprise IT leaders “are not so much interested in secure, anonymous public networks like bitcoin but in closed networks that are between specific groups of people, particularly between enterprises that have to interact,” says Roger Kay, founder and president of market intelligence firm Endpoint Technologies Associates.
In a blockchain, each page in a ledger of transactions forms a block, which is linked via a cryptographic hash to the previous block, and new transactions are authenticated across the distributed network before the next block is formed. “Blocks are always agreed on, and each one has an encrypted representation of everything that happened before, so you can tell it’s authentic. You can’t tamper with the chain at any point,” Kay says. As a trust system, “it essentially eliminates the need for a third-party guarantor.”
That’s not to say blockchain technology is mature, however. “It’s still early days,” Kay warns.
Early adopters have launched hundreds of pilot projects, but there’s a long way to go before blockchain hits mainstream adoption. Among the obstacles blockchain deployments face are: technical challenges, lack of standards and governance models, shortage of skills, and scalability concerns. (Related: You’ve got blockchain questions, we’ve got answers)
As 2016 closes, vendors continue to devise distributed applications and platforms based on blockchain technology, and venture capital firms continue to pour money into the effort. More than $1.4 billion has been invested in blockchain technology over the past three years, according to an August report by the World Economic Forum (WEF). More than 90 corporations have joined blockchain development consortia, and more than 2,500 patents have been filed. The WEF predicts that by 2017, 80% of banks will initiate projects that involve distributed ledger technology.
For enterprises interested in exploring how they can use blockchain and distributed ledgers, research firm Gartner recommends starting with limited-scope trials that are aimed at specific problems. Enterprises can start to investigate how distributed networks might improve business processes that are constrained by transaction inefficiency and how technology suppliers might be able to help.
“The challenge for blockchain users and CIOs is to set appropriate expectations among business leaders,” Gartner writes in its 2017 strategic predictions report. “Plan for a reasonable rollout, failure and recovery (especially through 2018); develop realistic proof of concept (POC) use cases; and be agile from an IT and business perspective to follow the best path to success.”
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