Kathy Gibson at IDC CIO Summit in Chartwell – The blockchain revolution is real, and gaining pace.
The generic definition of a revoltion, says Jon Tullett, research manager: IT services, Africa at IDC, is when a group of people get together to overthrow an existing order.
“Revolutions also seldom know where they are going,” he adds.
“Blockchain revolutions are similar. Users are generally starting off by looking for a way to exchange information – but they could have a profound impact on businesses and industries.”
Tullett warns that blockchain participants shouldn’t anticipate an end goal, but focus on their own requirements.
Blockchain is currently a $2-billion market worldwide, although very high growth rates are expected – 81% CAGR over the next five years.
In fact, as many as one in eight South African CIOs already have a blockchain pilot either running or well ahead in planning.
Just one-third of CIOs have no plans to implement blockchain. “Interestingly, most of these CIOs are in industries that have their own industry networks,” Tullett says.
“However, the time may come when you have no choice about taking part in a blockchain.”
A blockchain, he explains, is a way to assert a truth.
“We do this all the time, and have mechanisms in place to do this,” Tullett points out.
“The point is that blockchain may overturn these existing networks, particularly those that are monetised.”
The reason it will be disrupted, he adds is because it does many things better. It is also easy to integrate into other networks. It is built under modern conventions and it is easy to adopt.
“Remember, blockchain is just a platform: in building the applications, organisation have an opportunity to reinvent processes, which can be disruptive in itself.”
The reasons for investing in blockchain are the same as any other technology, he points out. It can improve business processes through efficiency, automation, analytics and security.
Tullett cites a use case, currently being piloted in South Africa, where medical records are automated with the blockchain.
In this instance, the patient builds a relationship with the doctor based on a digital record – in this case the identity document issued by home affairs.
Once the doctor has examined the patient, he issues a prescription on the blockchain, and the patient authorises the pharmacist to access the prescription and the medication is issued.
This same blockchain can function thereafter as a patient record.
But the possibilities go well beyond the medical use case, Tullett adds.
Insurance companies have an interest in this data, particular to ensure that the correct mediation in the correct doses was prescribed and issued.
Government could have a use for some of this data, with the addition of other data, for non-medical uses.
Some examples of where a blockchain that asserts the truth of a person’s identity could have value in home ownership proof and even voting.
A blockchain can be built out to the whole supply chain to enable tracking and ensure provenance, Tullett adds. “And there are systems in place today doing just this,” Tullett says.
Good news for businesses is that the blockchain market is commoditising very quickly. “You will soon be able to go online and buy a blockchain service quite easily,” Tullett says.
While specific blockchain skills might not be needed within organisations, other skills will be. “The business drivers for blockchain are the same as for other business accelerators,” he points out.
Integration is arguably the most important skill that organisations will need to exploit blockchain as companies will have to break down their systems, expose APIs (application programming interfaces) and integrate across systems and networks.
As organisations aim for increased automation in their businesses, they need to automate business processes and systems.
The Internet of Things (IoT) is closely related to blockchain, Tullett says. “It makes sense for the infrastructure for both technologies to be deployed alongside one another.”
Analytics, which should already be mainstream in most organisations, will need to progress to exploit artificial intelligence (AI) and machine learning. “It will soon be possible to buy these systems off-the-shelf, but companies need to have the skills that allow them to take advantage of them,” Tullett adds.
Security is always a big issue. “There are many risks associated with blockchain,” Tullett points out. “And they might be out of your security people’s existing area of comfort – so they need to be working with you on any pilots.”
Companies often ask when is the best time to invest in blockchain. Tullett says the initial investments should have happened years ago in the form of systems and networks.
“The time to deploy is whenever it will offer business benefit,” he says. This will likely be in conjunction with business peers, where a shared blockchain adds value for all the players.
“Start looking for these networks and, if you don’t find them, think about starting them,” Tullett says.
Although blockchain should not be conflated with bitcoin, there are some hard lessons that we can learn from the bitcoin journey.
The first of these lessons is that client security is a big problem in a blockchain. “Third-parties interact using client software that is out of the administrator’s control,” Tullett says. “This is a big challenge and one that companies need to bear in mind.”
Meanwhile, technology is what makes the network function, but it still relies on people using it. “And people are people,” Tullett says. “They fall for scams and phishing attacks. This needs to be built into the risk model.”
Scalability is hard in the blockchain, he points out. “Bitcoin can currently manage about seven transactions a second – several orders of magnitude less than regular transactional systems. There are things you can do to improve scalability, but you have to be aware of the issues.”
Exchanges introduce insecurities into the blockchain, but they are what Tullett calls a necessary evil. “They are often insecure, but they are the only way to bridge the gap between one network and another.”
Bitcoin has shown that there will inevitably be places where the model forks and new networks come into being. “Expect forks,” Tullett says. “You need to understand how to handle competing networks.”
He concludes with the IDC opinion that blockchain is underway. “It is happening and there are several live deployments, plus thousands of pilots.”
There can be no big bang with blockchain. “The only way to do it is to start with a clear business use case for blockchain, then allow others to emerge.”
Blockchain’s value increases as more players can use the same information. “So use industry relationships to build and steer blockchain deployment,” Tullett says.
On the resources front, organisations should understand that platform and integration capabilities are much more important than blockchain skills.
Meanwhile, analytics, automation and end-to-end security are fundamental to all innovation accelerators, including blockchain.