There are two prevailing views when it comes to blockchain and enterprise data. One is that it’s the most secure, convenient solution ever to come along. The other is that it is the fad of the moment and a risky bet that puts essential data out in the unregulated wilds of the global internet.
The current wave of industry and analyst hype aside, it’s fair to say that most data managers and their enterprises are curious about this new mode of data management and storage and are taking an in-depth look into it. Blockchain and its related solutions—which one leading analyst group, Constellation Research, call “synchronous ledger technologies (SLTs)”—are designed as global, highly distributed databases with no single owners or points of failure. The data recorded within blockchains is secured by its owners with digital certificates and is deemed “immutable,” suggesting it cannot be altered or compromised by outside parties (“Constellation Research 2017 Digital Transformation Study,” September 2017).
This recent research from Constellation finds we’re still in the very early stages of blockchain and other SLTs. “Many organizations are hesitant to invest in this emerging technology, which promises to do everything from preventing double spending of digital cash to verifying digital identities,” according to the report’s authors, Chris Kanaracus, Courtney Sato, and R. “Ray” Wang, all with Constellation. The survey of 105 organizations finds that 47% say they had not even yet considered or adopted any blockchain technologies. Another 33% say they are in the “investigatory” phase, while only 10% were running proof-of-concept exercises and just 9% had completed an implementation (see Figure 1).
Constellation notes that blockchains and SLTs, as global digital ledgers, “can be designed to execute a range of actions, from compiling trade manifests and tracing supply chains to automating contract terms using decentralized mechanisms inspired by first-generation blockchain.”
While most organizations are hesitant to adopt blockchain and SLTs, the banking and financial services sector—which already has some degree of familiarity with cryptocurrencies such as Bitcoin—is moving ahead in a more aggressive way. A recent survey from VMware of 166 banks and financial services institutions finds 67% of the world’s largest banks (more than $100 billion in assets) are already implementing blockchain, while 40% of medium-size banks have projects underway. Furthermore, 80% of banks expect blockchain to have a “high impact” on their capabilities and operations within the next 3 years (“How Technology Will Shape the Bank of the Future,” VMware, October 2017).
However, executives in other industries still need a lot of convincing before adopting this new mode of tracking and storing data. Blockchain and SLTs “remain difficult to understand on a conceptual level for many organizations and are still viewed in the mainstream as mostly appropriate for cryptocurrencies such as Bitcoin and Ethereum rather than broader enterprise applications,” according to Kanaracus, Sato, and Wang. “While there is the potential for enterprise application of blockchain and SLTs, the lack of standards and successful case studies make it too risky for most organizations to feel comfortable investing in these technologies at this time.”
Within the next 3 to 5 years, the Constellation analysts predict that as standards and academic consortia, supported by open source platforms, emerge, blockchain and SLTs will gain more traction within enterprises across the board. “As the technology matures, efficiencies resulting from improvements in trust and the reduction of duplicates should outweigh most of the costs,” they wrote.
At the same time, they added, enterprises piloting blockchains and SLTs will increasingly embrace these networks for “record-keeping, supply chain provenance, commerce networks, land titles, electronic medical records, and academic transcripts.”
Still, the Constellation analysts predict “some chaos in the next 12 to 18 months as new players emerge and consortia decide upon common standards.” These standards, they continue, “will evolve to fit the needs of each industry in which SLT is deployed; thus, early adopters should seek to build industry-centric coalitions to accelerate adoption. This presents an opportunity to pool R&D resources, spreading out both the costs and risks.”