Blockchain in companies: know the main challenges and opportunities
Posted on October 12, 2018 in Proxxima
An important factor in analyzing the difficulty of companies in using Blockchain is the understanding of the development cycle, or the introduction of a new technology, very well described by the famous Hype Cycle. This cycle is designed on two axes: time and expectation.
The cycle starts from a "trigger innovation" that is followed by a rapid rise in the expectation until a peak is formed, called Peak of inflated Expectations, the moment when the market expects that virtually everything could be solved , improved or impacted by this new technology.
The expectation begins to be reduced while this innovation goes through a process of maturing. In technology we can say that many proofs of concepts and tests are carried out during this process. The maturing of technology takes this innovation through the Slope of Enlightenment or consolidation ramp to finally achieve the desired plateau of productivity, the point at which the technology is totally dominated and the use begins to bring real benefits to the point of being used on a larger scale.
Source: Gartner (July 2017)
With this scenario, we can say that the three main current challenges of companies in the use of Blockchain are:
Challenge 1 - Identify which problem or process can really benefit from using Blockchain
The term Blockchain is on the rise. The companies take advantage of the fact that the market has raised the subject to a level of high expectations, to leverage its businesses through the association between its services and products to the term Blockchain, thus gaining attention of its potential clients. The problem with this is that the application of blockchain alone does not deliver benefit to the business, and, by the way, the implementation of blockchain, at this point, is complex and expensive. Therefore, the term Blockchain may even sell, but not everything can be benefited using this technology.
The crucial point for a successful blockchain deployment is necessarily the analysis of whether this solution really will bring real benefits to the business. Thinking about it, we should always evaluate three points before thinking about using this technology:
The problem I want to solve involves multiple agents who must share decisions and / or information?
Should there be any kind of transaction between these agents that makes it important to record the history?
Should this transaction be recorded under a given consensus rule?
To get the potential benefit of Blockchain, the answer must be "yes" to these three questions. If the problem to be solved does not have such characteristics, another solution should be used.
Challenge 2 - Pay the price to be innovative
As previously stated, the application of Blockchain is currently complex and costly, simply because it is a technology still in the process of maturation. Few people and companies are really at the forefront of this technology, since much of the maturation of this concept still happens in academic scope, or in research and development centers of large companies.
On the other hand, it is important to recognize that we are in times of exponential growth. Innovations are rapidly matured through the application of increasingly abundant resources, including talking about brains. This phenomenon can be observed clearly in the development of the blockchain, after all its most famous application (Bitcoin) was from the collaborative development within a cyberpunk community of the internet.
The result is systems with little documentation, no "shelf" products, poor support available and potential technical failures not yet known. And that is the price of innovation. With all of that we have the following question: "Who is willing to pay the price?"
It is undeniable that the main group that takes the lead in the development of this technology is formed by banks: consortia and working groups were formed even with the collaboration of competitors for the development of a common technology.
This leadership was due to two factors: the first is the proven benefit of using Blockchain in the financial system, after all Bitcoin has been there for about 10 years, using this technology in a very consistent way. The second factor is the power and availability of technology investments that this industry has always shown.
We cannot forget the partners of the banks in this endeavor, the great providers of technology solutions, such as IBM and Oracle. Along with the bank companies are developing their products that will soon be available to the followers at a much more affordable price.
Another group that divides the leadership in the use of this technology is startups, especially fintechs, new companies that exploit the technology to obtain competitive advantages against the competition, mainly related to low operating costs, and great appeal together millennial generation.
The main reason why startups bet on using this technology is the ease of deployment compared to established companies, after all it is much easier to be born digital than to become digital. In addition, the impact if something goes wrong is insignificant in the face of the risk your competitors are having when applying technology that is not yet mature. This factor justifies the disruptive character of Blockchain.
To overcome this difficulty, we suggest attention in two points:
1 - Partnerships: Partnering with someone who is knowledgeable about Blockchain is important to accelerate the adoption process and reduce costs with learning and designing the solution, as well as ensuring quality in choosing the process to be automated.
2 - Start Small: The adoption of Blockchain at this point will not be supported by a fantastic Business Case and should occur gradually, being applied technology in small processes and low criticality. Over time, with technology learning and maturation, adoption must be escalated, bringing the benefits expected on a larger scale.
Challenge 3 - Breaking cultural barriers to widespread use of technology
Because Blockchain is a network solution that has as its main benefit the relationship between nodes, it is extremely important to adopt this technology by "strong nodes" that collaborate with the network with relevant information to be transacted or consumed by others. That is, the more the network is adopted the more it will be attractive to adopt new nodes.
For example, if the State Department of Transit (Detran) adopted the solution and transformed the Single Transfer Document (DUT) into a token we could transfer and register this asset through the Internet, thus saving a lot of bureaucratic work and enormous process security. Imagine Webmotors' opportunity to offer a service ranging from offering the car to the effective purchase and transfer of the property. In this same concept, we could tokenize much of our documents and share them with the agents that interest us. Imagine how easy it would be to open an account at the bank, or get a loan! Or even enroll in school just by enabling these nodes to read information already on a network!
Another important lever for the wide use of Blockchain is the recognition by the competent bodies of one of the intrinsic main attributes of the solution: the immutability of the records. The idea is that a registry in the blockchain network provides the legal value that such information is legitimate. Like for example, a contract between two people, the registration of a well as an apartment or car, and so on.
In short, the use of Blockchain will grow rapidly over time, in an exponential trajectory, since the more it is adopted, the more attractive the solution will be.
To overcome this cultural barrier, we must get out of the role. The theoretical study of technology, whether in literature or from market cases, is only the first step. For the organization to truly believe in Blockchain's potential, it is necessary to taste this solution in practice, seeing the benefits being extracted from the operation itself and from its own processes.