Blockchain for business — is this promising new technology ready for enterprises or just the latest in a string of overhyped, underdeveloped concepts that needs more time and solid proof of concepts to mature?
Currently, blockchain is coming down from its “peak of inflated expectations” into the “trough of disillusionment” in the Gartner hype cycle. Warren Buffett is among the many that are skeptical of blockchain’s cryptocurrency applications, and the U.S. Securities and Exchange Commission chair is reviewing new blockchain-based companies with a weary eye.
But at the same time, companies are sprouting up left and right that are offering enticing blockchain-based solutions for enterprise, from supply chain to mobile networks, real estate investing and electronic health records, just to name a few.
To understand why blockchain is so alluring to enterprises, you need to understand the basics of blockchain itself. Essentially, any blockchain technology, from serious applications like bitcoin to the more frivolous CryptoKitties, creates an immutable ledger that tracks the exchange of a good through a system. This ledger is created by a series of crypto keys, of which only a portion of the key information is stored in any given computer that was involved in its mining. Blockchain’s complexity is what makes the chain of custody of any good or currency secure, since computers lack the computational power to quickly mine through every step in a blockchain authentication. The result is a encrypted history of data that cannot be altered.
A compelling reason to use blockchain is to authenticate ownership. Historically, there are a lot of other examples of representative of ownership or value that we all take for granted. For instance, what in reality is just a piece of paper transforms into a car title or home deed when it goes through the appropriate authentication measures. But these systems are occasionally prone to fraud.
On an enterprise level, this fraud can occur through theft or simple lack of transparency into a system. In supply chain, for example the very complex network of goods manufacturers, brokers, logistics companies and sellers generate huge volumes of data tracking ownership, but the data is seldom organized on one ledger, making it difficult to understand where a problem originated. Sometimes drivers lose or damage goods. Sometimes a trip can involve a complex network of various carriers. Sometimes goods are stolen — with theft accounting around 20 percent of the price increases in cargo.
If these data sources were integrated into a blockchain, each data point could be captured by an internet of things devices, like the electronic logging devices newly mandated for trucking companies. The streaming information coming off these devices could be analyzed using artificial intelligence, allowing enterprises to optimize their networks. Some supply chain blockchain companies even predict that having an immutable ledger of information will erase brokers, whose purpose is to coordinate carriers for multimodal orders.
By using a ledger that is permanent and verified through a complex chain, blockchain eliminates transparency issues that have plagued ownership and chain of custody. While it remains to be seen if cryptocurrencies are going to become a reliable form of wealth exchange, blockchain’s multiple other uses will likely continue to attract enterprise attention as a way around opaque systems that have proven difficult to manage in the past.