The underpinning distributed ledger technology has seen a lot of interest from enterprise across many industries, and it’s easy to see why - blockchain enables enterprises to scalably generate trusted data in a perimeter-less security infrastructure, creating a single version of data truth across all parties.
Essentially this means that businesses are able to contain the risk of data breaches by providing an immutable record of all activities to the data, mitigating an enterprises’ need to continue investing in cyber security, data recovery and backup solutions.
While this is blockchain for enterprise explained in a nutshell, a lot of confusion exists around its applications and realistic potential. The following are common misconceptions and explanations around blockchain for enterprise:
- What is Blockchain? Everything you need to know (opens in new tab)
‘Enterprise blockchain is going to rapidly change the way businesses operate’
Many experts have predicted a rich and exciting future for blockchain, from providing unlimited communications bandwidth to firefighters (opens in new tab), to overhauling the economy, society at large, and creating an ‘abundant market (opens in new tab)’, but is any of this plausible?
The short answer is yes. Blockchain has the potential to drive massive change in the industry, particularly when it comes to finance and supply chain management, it’s just going to take time.
According to recent research, supply chain management is the next application for blockchain technology, but won’t be adopted in a widespread manner for another 10 years, and, when it comes to blockchain technology in financial institutions, experts predict it could take anywhere from five to twenty-five years (opens in new tab).
‘Enterprise blockchain does not perform’
A common criticism of the public is that cryptocurrency blockchains like Ethereum and Bitcoin are not fast enough. Truth is that they operate in tens of transactions per second, with a transaction latency of confirmation in as little as a minute to sometimes hours (opens in new tab). This has many industry leaders asking if private - or enterprise - blockchain is a viable solution in terms of speed.
With the application of any enterprise technological solution, performance with enterprise blockchain may vary, depending on factors like the computational complexity of data type, smart contracts and payloads being processed. Other factors include the types of consensus algorithm, the volume of peers involved in the endorsement process, and of course, the enterprises’ infrastructure provider and service levels.
But, with some suitable applications, permissioned enterprise blockchains can and does perform well, and at levels that satisfy multiple business use cases. In fact, an IBM research paper documented a use case called Fabcoin, which, when used against a specific network configuration, achieved a ‘very high (opens in new tab)’ rate (1000+ /tps) of confirmation. While blockchain isn’t quite there in terms of widespread adoption, speed and availability, the potential to perform is definitely on the horizon.
- The truth about blockchain (opens in new tab)
‘Blockchain can be used in any industry, to do anything’
It’s widely accepted that blockchain has great potential to do amazing things and disrupt many industries including finance, automobile, aviation, shipping, telecom and IoT providing an immutable, digital audit trail of transactions which can be used to cheaply verify the integrity of data.
But what can’t blockchain do?
Blockchain can’t verify that certain types of data are accurate. For example: in marketing, an advertiser pays for an ad to be shown to a specific audience. The advertiser might think they’re paying to show this to a mid-thirties professional in the market for a luxury boat, but in reality, the ad might be viewed by a single mother struggling to make ends meet, or worse, a bot. Blockchain technology can track which digital identifiers are viewing the ad, but it can’t verify the honesty of a buyer’s intention, nor their humanness.
Verifying who is behind the digital identifier requires offline verification, and that’s something that is simply beyond the capabilities of the blockchain technology that exists today.
‘Enterprise blockchain is private, secure and ultimately scalable’
Blockchain usually falls into two categories: permissioned blockchain and public blockchain. Public blockchain is permission-less and decentralised, meaning that anyone can join, read, write, and participate with the blockchain itself. Examples of public blockchains are Bitcoin, Ethereum and Litecoin.
On the other hand, a permissioned blockchain, usually used by businesses, is essentially private and linked to a centralised body. A permissioned blockchain network places restrictions on who is allowed to participate in the network, and in what capacity. Through this, enterprises are able to use blockchain in a somewhat private manner by managing each participant’s access level. The issues of privacy in enterprise blockchain usually arise through human error in granting certain permissions to participants.
Essentially, a private blockchain is not private by default. It is only as secure as the permissions and security controls around the network. The issue with this is, as networks grow and more participants are added, enforcing control around access and visibility becomes more difficult, which presents challenges to scalability. As of yet, blockchain technology is not fast enough to mitigate these challenges entirely, though they are currently in development.
While the promise of blockchain is enormous, significant challenges still remain. Moving forward, striking a balance between optimism and realism will help minimise unrealistic expectations.
- Implications of blockchain In data science (opens in new tab)
Nacho De Marco, Chief Executive Officer, BairesDev