19-2-2018

Blockchain innovation: Our path to practice

To stay relevant in the age of digital transformation, it is crucial to identify emerging trends and act accordingly. At Experis Ciber, we actively explore cross-industry developments and technological innovations to guide our partners through this landscape. Blockchain is touted as an innovation for disrupting existing industries and change the world as we know it. This blogpost covers our journey into this field of ‘decentralization’.

Blockchain = Opportunity
First described in 2008, blockchain is turning into a teenager this year. (in)Famous for enabling all kinds of popular crypto-currencies like the Bitcoin, blockchain recently went viral at a global scale making the ‘crypto-mania’ practically unavoidable.
Blockchain, the technology behind the crypto-currencies, is however increasingly recognized as a general-purpose technology offering the potential for fundamental societal change. Despite all the enthusiasm, we are yet to find the transformative new business models that were supposed to displace existing industries. Being around for a decade now, this begs the question; Is there any actual substance to all the hype? And if so, what is restricting main stream adoption? These are the questions we asked ourselves over a year ago and as such we decided to come up with our own answers.

The quest for the middle ground
Researching blockchain can be a daunting task however. Either you’re circling the superficial (‘Have a problem of some sorts? Just sprinkle some blockchain pixie dust and your worries will vanish!’), or you’ll find yourself getting stuck in technicalities. On the one side, there are the blockchain experts, the so called ‘believers’, usually with some personal agenda or economic interest at stake, making all kinds of extraordinary claims. Then there are the stone-cold critics, stating that the sole purpose for blockchain is regulatory arbitrage (i.e. financing illegal activities). So… How to get to a meaningful assessment out of this foggy thing called the blockchain?

Blockchain defined
The essence of blockchain is to enable value transfers between non-trusting parties via the internet, without the need for trusted third parties to verify anyone’s identity or claims. This is achieved through a mutually agreed to ruleset, enforced by cryptographic methods and economic network incentives. This effectively removes the transaction costs associated to traditional ‘middleman’ from the interaction, which results into what is referred to as ‘decentralization’.
Using the famous case of payments, this means that banks are no longer required to validate or process payment requests, since these are now processed by incentivized participants in the network instead. These networks are based on resilient peer-to-peer protocols, which should be familiar to anyone who has at some point pirated some songs or Game of Thrones episodes using Bittorrent or the like.

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To stay relevant in the age of digital transformation, it is crucial to identify emerging trends and act accordingly.

Knowhow is the new black
To come up with our own opinion, we simply started experimenting with the platforms available to us in the field to try and figure out what blockchain can be used for and what not. It became clear that blockchain has above all become a label to describe a wide variety of technologies, addressing different use cases. Where publicly accessible blockchain solutions like Winding Tree are all about enabling community-centric, consumer-to-consumer interactions and cutting out middlemen, on the other hand there are ‘private’ blockchain networks aiming to achieve business network integration in regulated settings.

So, where blockchain is driving business model innovation in the public domain, more private enterprise settings are also being explored for optimizing existing back-end processes. An example of the latter is the joint venture IBM has setup with Maersk after successfully applying blockchain to standardize and integrate global shipping processes. It needs little explanation that our technology partners like SAP, Oracle and Microsoft are actively expanding their PaaS service offering to address this new market via what is called BaaS (‘Blockchain-as-a-Service). We took turns to develop Proof of Concepts using both variants of blockchain, including an Ethereum-based solution for intellectual property and royalty management and a scenario for optimizing B2B supply chain processes using Hyperledger Fabric. We soon learned that an authentic, unique and shared digital asset can greatly simplify existing business processes.

Whatever type of blockchain is being considered however, there are numerous challenges ahead. This includes scalability and privacy, but also concerns related to governance, security and regulation. The way these limitations are currently handled in private networks are highly reminiscent of how the internet first developed: Install a restricted network to address a single use case, while clearly specifying the rules of engagement. Although these ‘pockets’ of innovation could bring substantial business benefits in the short term, the real potential for blockchain will be unleashed when publicly accessible blockchains become scalable such that network effects can drive innovation exponentially.

Learn, share, grow
So, what does all this really mean to anyone? Should you or your business be worried?
At its core, digital transformation is all about demonstrating business relevance today and being well-equipped for the markets of tomorrow. This means discovering emerging technologies and exploring how they can enhance your business model or even undercut it. At a bare minimum, you should be prepared for the initiatives which are already unfolding and the opportunities they represent. If your business qualifies as an ‘intermediary’, do expect to see alternative business models develop in which you’re eliminated from the process. In the end, blockchain equals opportunity and all that comes with it. Even though current constraints prohibit mainstream adoption today, blockchain as a field is rapidly expanding and progressing to address these limitations. For 2018, we can for example expect the go-live of so called ‘third generation’ blockchain platforms, which include the lessons learned from existing solutions and fundamentally address many of the key limitations faced today. Despite its infancy, the concept of blockchain is here to stay.

Connect!
While we have been sharing our findings at our so called ‘SPOT-Meetings’ on various multidisciplinary occasions, we also see it as part of Experis Ciber’s mission to share our findings with our partner ecosystem to collaboratively address the challenge of Digital Transformation. If you’re interested to find out more about what blockchain means for your business, feel free to contact us at nl.info@ciber.nl

Geschreven door Martijn Hulshof en Iemke Kooijman

  • Martijn Hulshof
  • SAP Consultant

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