The hype surrounding blockchain technology has been circulating for many years, driven by the confusing and constantly changing landscape of the technology.
As regions and industries develop an intense interest in how blockchain can be used to improve market efficiencies and reduce costs and latency, there’s still a significant gap between the hype and market reality.
The interorganizational business processes, governance and performance issues can be complex and difficult to resolve, often leading to insufficient focus and attention deserved. Consequently, organizations can get stuck when they first encounter these challenges while attempting to move their blockchain projects from proof of concept (POC) to any form of scaled development.
Gartner has identified common mistakes within enterprise blockchain projects that CIOs can avoid.
- The four biggest misconceptions about blockchain in enterprise (opens in new tab)
Misunderstanding or misusing blockchain technology
As many organizations develop POC solutions, seeking to explore the potential of blockchain, Gartner’s research finds that most POCs for permissioned blockchain - where membership of the blockchain network is controlled - are not using key blockchain innovations, such as decentralized consensus or tokenization.
Organizations infrequently use complete blockchain features beyond shared record keeping and asset tracking, supported by distributed ledger technology (DLT) data structures, calling into question whether blockchain is needed by these organizations.
Use DLT for a shared single version of the truth, where appropriate. Over time, and when use cases are clear, move forward into projects that require decentralized consensus — in part to foster greater security and transparency in an ecosystem of minimal trust with no central authority. Create a trust model of the entire system, which identifies areas that are trusted and those that are not and apply blockchain technology to add trust to the untrusted domains.
Assuming that current technology is ready for production use
The blockchain platform market is largely composed of fragmented offerings that often overlap, whilst some complementing one another. Many of these are from small, venture-funded start-ups, while others are community-driven, open-source projects without overt control of a single, focused vendor. By differentiating themselves in various ways, from universal computing to higher-level and more familiar language for smart contracts, these various blockchain platforms can lead to failed blockchain projects.
Assume that most blockchain platform offerings will be too immature for true production work for at least the next 12 months.
Define a timeline of project phases; one that progresses from simple, narrow-scope functionality to a more complex, broad-scope solution. Align this timeline with the evolving capabilities of blockchain technologies as these platforms emerge and are deployed in the real world.
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Confusing a limited, foundation-level protocol with a complete business solution
As blockchain is often discussed in solving problems within supply chain management or medical systems, there’s an implicit assumption that the foundation-level technology is not that far from a complete application solution.
Such solutions typically consist of a multilayer technology stack built on a base-level foundation, which includes middleware such as an application framework and horizontal subsystems underneath vertically oriented application logic. The complete solution will consist of a user interface, business logic, data persistence and interoperability mechanisms.
Likewise, blockchain solutions for innovative supply chain management systems, decentralized energy trading systems or medical records management cannot exist without the underlying blockchain protocols. However, the actual protocol will comprise less than 5 percent of the complete solution. This is something that many CIOs do not consider when embarking on an ambitious blockchain project.
When considering a broad-scope, ambitious blockchain project, CIOs should view the blockchain portion to be less than 10 percent of the total project development effort.
Viewing blockchain technology purely as a database or storage mechanism
CIOs can often confuse distributed database management systems (DBMSs) with blockchain technology, resulting in misaligned enterprise blockchain projects. Current blockchain platforms cannot support complex data models, nor can they currently guarantee low-latency and offer high throughput, found in modern, distributed DBMSs.
The fundamental design trade-off that led to the creation of blockchain platforms was to accept limitations in the data management capabilities to enjoy an authoritative, immutable, trusted record of events arising out of a dynamic collection of untrusted parties.
To move forward, assess the data management requirements of the proposed blockchain-based solution and decide if these requirements outweigh the benefits of a trusted sequential log of significant events. If they do, then consider a conventional data management tool or platform.
Assuming interoperability standards between blockchain platforms exist
Interoperability between blockchain platforms is discussed by vendors, ensuring that a specific platform doesn’t become a dead-end choice. With multiple competing alternatives in the market being adopted by organizations and sometimes multiple within the same organization, it can become difficult to envision interoperability when most platforms are still being designed and developed.
Do not select one blockchain platform for this year’s project with the expectation that it will interoperate with next year’s blockchain technology from a different vendor.
Assuming that smart contract technology is a solved problem
Smart contracts, for managing, assigning, or valuing assets are one of the most powerful aspects of blockchain-enabling technologies. Enabling not just the “Internet of Money”, but the “Internet of Programmable Value”.
Despite this, smart contracts currently face major challenges in scalability, auditability, manageability, and verifiability, that haven’t yet been adequately addressed.
Tread carefully when developing or deploying smart contracts under current blockchain offerings; this area will undergo significant evolution and maturity during the next two-to-three years.
Ignoring governance issues for a peer-to-peer distributed network
Multiple new capabilities must be acquired by businesses to fulfil the potential of blockchain. Among these are both internal and external data and process governance. Governance is a critical issue for public blockchains.
The motives of blockchain participants range from technical to social, financial, and criminal. Deep conflict between subgroups that is unresolvable short of forking is likely in the absence of governance mechanisms that address shared commercial, public sector or human factors and values. True decentralization and permission-less entry into blockchains will likely create additional governance conflicts and challenges.
Be aware of blockchain governance issues and assume that these issues can pose significant challenges to the success of the project, even if the technology foundation is mature and stable. Develop capabilities for interfacing with public blockchains as they become available and useful to enterprise operations.
- Blockchain is set to transform the foundation of business (opens in new tab)
Adrian Leow, Senior Director in the Application Innovation Team, Gartner (opens in new tab)