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Blockchain’s hype exceeds its grasp – for now

Clint Boulton | June 8, 2016
Broad adoption of blockchain technology is likely years away as companies struggle to understand how to apply the digital ledger technology to practical scenarios amid regulatory, governance and standards obstacles.

Blockchain faces challenges beyond basic business practicality. The lack of universal standards and regulatory governance, a shortage of engineers schooled in working with the software, and questions about blockchain's scalability dampen the technology's adoption. For now, Nichol and other experts says blockchain is caughtin a hype cycle where it’s long on promise, short on practical implementations.

"There’s a long way to go before any of the solutions that have been in the headlines in the past 18 months will be ready for enterprise deployment," says Martha Bennett, a Forrester Research analyst who advises clients on blockchain. "Anything that requires a large number of industry players to agree on a common set of processes is likely to be even further into the future; and that’s before we bring regulatory aspects into it."

Bennett also tells that there hasn’t been enough rigorous thinking about end-to-end processes. Take provenance as an example: It’s one thing to track digital goods, but another to look at the physical world. For example, if you’re tracking something from manufacture to end customer, how can you make sure it’s not been tampered with?

You can't, at least not yet. But Blockchain is hardly the first emerging technology for which hype has exceeded its maturity. Indeed, every disruptive technology platform with the potential for significant adoption or network effects, has had its trial by fire.

Consider Hadoop, the data processing technology developed at Yahoo a decade ago. Initially the plaything of hobbyists, a few startups commercialized the open source software and it suddenly became the go-to tool for crunching big data. Then companies realized they needed to hire people who could work with the software and that its strength was actually pre-processing data, not magically spitting out business insights. They needed data scientists to derive value from the software. Although it is now heavily adopted by many companies, Hadoop isn’t the be-all and end-all for big data.

Blockchain’s comparison to Hadoop in the hype context is fair, says David Schatsky, senior manager at Deloitte, who analyzes emerging technologies at Deloitte. Both technologies made things possible that weren't possible before. He says financial services firms view blockchain as a way to conceive “know your customer” solutions, while travel and hospitality outfits see a potential avenue for loyalty programs in blockchain.

“It does have the potential of wringing massive amounts of inefficiency out of legacy business processes,” Schatsky says. "But there’s fundamental questions about different models – permissioned or permissionless blockchains, the governance of permissioned blockchains, and about scalability.”

How should a CIO tackle blockchain?

Nichol says CIOs looking to adopt blockchain must consider these question: How do CIOs sell blockchain to a CFO when the best they can promise is that top-line growth is a year or more out? How many practical use cases will come to fruition and with the business appetite to commit dollars to blockchain projects? “Until we get some use cases that are narrowed down a bit it's going to be tough to do that," he says.


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