Few technologies have received as much hype in recent times as blockchain. A clever idea that combines decentralised records with digital transactions that are secure and difficult to fake, blockchain has been most notable in the way it has been used to facilitate cryptocurrencies such as Bitcoin.
Blockchains are chains of data that are secured and linked through cryptography, forming an open distributed ledger that records transactions in a verifiable and permanent way. The technology has huge potential in areas as diverse as supply chain management and healthcare.
Despite this, there have been suggestions that few actual blockchain deployments are happening yet, with intentions running similarly low. Is this actually the case?
Arrival
“Blockchain is a technology whose time has come. There are 500 projects currently underway using this technology around the world in IBM alone. Our view is that blockchain is going to be fundamental and in fact that it’s already part of the way there,” said Liam Chambers of IBM Research Ireland.
“In any organisation or network where there’s a complex business problem to be solved, where there’s a network involved or a group of parties involved in a transaction, then there’s a requirement for trust inside that set of network activities. Blockchain has very much become the de rigueur transaction-orientated technology for solving that kind of problem.”
Despite his bullish optimism on this subject, Chambers is happy to concede that no one technology is the answer to all problems.
“Of course, there are loads of applications where blockchain just isn’t applicable. For businesses or industries where provenance and provability are absolutely critical it’ll be key, but there will continue to be lots of other applications and lots of other spaces where it just doesn’t really make any sense to apply blockchain,” he said.
For those where blockchain’s qualities are important however, the game has changed.
“I think in any network where you want to establish trust between a large group of parties or you want a degree of auditability and verifiability within that network so that the network of people can work to a consensus about what has happened, then blockchain is exceptionally useful,” he said.
“It can show that different parties to a transaction all agree that that whatever happened, happened. That an official record exists has to be a good thing from a future-proofing, auditability, provability and traceability type perspective.”
The best applications of blockchain technology in an enterprise setting are currently taking place in areas where provenance is important, according to Chambers.
Provenance importance
“We’ve seen some that we think will be highly impactful and from a provenance point of view, two projects of note at the moment leap out. The first is the Everledger implementation for diamond traceability. There’s a lot of public information on that out there but essentially it creates a network that almost guarantees the removal of conflict diamonds from the diamond trading world. That’s highly impactful,” he said.
“The second one that we’re working on is in the area of food traceability, offering a means of guaranteeing traceability from point of origin right out to the consumer endpoint. That has huge potential to help in terms of tracing and stopping food adulteration or similar issues that can occur in big distributed supply chains.”
While that’s only two examples, others in the industry seem to be equally bullish about blockchain’s role in future affairs.
“Blockchain is going to impact everything and everywhere and I know it sounds like an exaggerated statement and I don’t want to sound like one of those super-advocates but the reality is that there are use cases in every industry,” said Antonio Senatore, chief technology officer of the Deloitte EMEA Blockchain Lab.
“We’re seeing use cases in the public sector, at the European Union, in the payment business, in the financial and insurance sectors, the stocks and commodities trading business, not to mention banking.”
Senatore goes on, citing use cases in healthcare, Internet of Things (IoT), energy trading and more.
“Blockchain is a disintermediation engine, a disintermediation type of technology. That’s its core, so to use it you have got to rethink the way the dynamics work within a business. You have to look at the way business handles interactions between people and organisations. In the future, that will be with intermediaries,” he said.
“The best use cases are where you think of a new way of doing things that you wouldn’t do before. It’s not about looking at things you already do well and trying to find ways to use this new technology to save costs.”
Criticisms
One of the criticisms of blockchain levelled by cynical observers is that it has actually been around for a while. It was invented in 2008 and implemented in the first iteration of Bitcoin in 2009 so it is nearly a decade old at this stage. Where are all the real world applications?
“People are doing a lot of development, but we haven’t seen those projects yet because it just takes time. I’m not aware of many live projects up and running in Ireland to be honest, but at Deloitte we have one – with DNVGL, a business insurance certification company. But you need to look at the big picture here,” said Senatore.
“How many years have we been in the blockchain space now really, investigating use cases? Perhaps three or four years ago things really started, and that’s nothing compared to how long the Internet in general has been around – that’s nearly 40 years.”
At this point Senatore also brings out the big guns, pointing to the biggest and best-known applications of blockchain technology – Bitcoin and the ERC 20 standard.
“Bitcoin and the other cryptocurrencies based on the same idea are enormous and have very significant applications. An enormous number of people all over the world are using Bitcoin on a daily basis.”
“The other one is the ERC 20 token standard, used for authenticating smart contracts using the Ethereum blockchain. That has changed the way venture capital works. Start-ups are able to raise tens of millions of euro compared to the few hundred thousand that they were able to raise before.”
Barriers to adoption
There are barriers to the adoption of blockchain technology and one of the biggest could be the European Union, in the form of the newly applicable General Data Protection Regulation (GDPR). This regulation states that EU citizens must be able to demand that personal data held by companies is deleted or edited under certain circumstances.
But a blockchain is essentially an ever-growing record of activity that has decentralised and shared across many devices. This gives it one of its core properties — that it is unchangeable — so a blockchain that stored personal information subject to the GDPR could be non-compliant.
Interest to need
Perhaps unsurprisingly, not every voice commentating on blockchain is as enthusiastic as others for this reason, and others. Peter Fellows-McCully is the CEO of Evidential.tech, a company that provides governance, regulatory, compliance and business intelligence products and services for enterprise blockchains.
“I’d say the proportion of people who need blockchain technology to those who say they need it is probably, one to 10,” he said.
“In Ireland, what we’re seeing is that there’s a concentration on blockchain in the consulting houses from the likes of Deloitte, EY and Accenture. They’re doing lots of proofs of concepts, but there’s very little that has gone into production yet.”
Consulting companies have to be in a position to provide whatever their clients need, or think they need. As blockchain is currently hot, that means customers are likely to ask about it and a good consultant needs to be able to give them the answer that is right for their client.
“The two main banks in Ireland are actively investigating blockchain and I spoke to a guy last week who said that he has a project coming up which he believes will be the first one to go into production,” said Fellows-McCully.
Banking is perhaps the most established use case for blockchain, but there are other applications that seem well suited to it. Law and conveyance in particular, depend on trustable chains of documents that need to be cited exactly and not change.
“The Law Society has a committee set up to examine the use of blockchain in conveyancing and that’s something that’s actually happened in the US. That’s a perfect application because you’ve got lots of parties who don’t necessarily trust each other and want to exchange information and conduct transactions.”
“Many people come to me and say I want a blockchain purely because it’s so overhyped. There are a small set of types of application where blockchain is sustainable and those are applications where the properties of blockchain are useful, like immutability, absolute traceability, cryptographic proof that the thing we say happened, happened,” he said.
“Where those things are required, there is a requirement for blockchain and we’re seeing that in areas like food provenance, supply chain etc. There’s a lot in fintech of course, and increasingly we’re seeing it in spaces like audit as well.”
Active application
Fellows-McCully cites the case of a company he knows in the medtech sector which is actively considering a blockchain application.
“This company has a problem with FDA audits and has to submit to an auditing process every six months, which measures its processes and production. This takes time and effort but the CEO believes that if he can put each step of the process on a blockchain, he’ll have cryptographic proof that everything happened as he said it happened.”
“That means he won’t need to do periodic audits, as he’ll be audited as he goes. If you’re using a permissioned blockchain, rather than a public blockchain, you could even give the regulator a note on your blockchain and it could go have a look at whatever you want it to see whenever it wants to.”
At the same time as there are good use cases, Fellows-McCully has seen companies attempt to use blockchain technology for uses it is not really suited to.
“I came across a company in the States trying to preserve value in second-hand ticket sales by fighting the ticket touting problem. It thought blockchain was a great solution for this and spent a lot of time on it before eventually coming to the conclusion that actually no, it wasn’t a great fit. While some of the core features of blockchain — immutability and cryptographic proof — are important in that example, there are much easier ways of securing them.”
So the message appears to be that while blockchain has been around a while, it has only reached mass adoption in relatively recent times. Interesting projects are underway, but it is still too early to expect a lot of them to have reached fruition.
This is a summation with which Hugo McCafferty agrees. McCafferty is a blockchain commentator and technical advisor to the Irish Computer Society, which recently subsumed the Blockchain Association of Ireland into its network of member societies.
Potential stage
“I think we’re still at the stage of potential. There are a lot of companies which are investing in blockchain technology but only in the form of research and development. There is a scarcity of actual real blockchain developers worldwide and those that do have the right expertise at the moment seem to be very busy,” he said.
“So what the Blockchain Association of Ireland is focused on very strongly is training and getting people, particularly developers, who have expressed an interest in learning about the technology up to speed.”
McCafferty thinks it is important for magazines such as TechPro to ask questions regarding the real-world practicality of technologies like blockchain, as this is the best way of holding the promises made about them to account.
“It’s really important that you ask these questions because the more we talk about it, the more we raise the level of awareness about it and the closer we get to that critical mass where we will actually get stuff done,” he said.
“At the moment, the area getting the most R&D funding around blockchain is undoubtedly financial technology but what you’ll see emerging quite soon is disruption to the insurance industry.”
“There are a few players with big ideas there who are looking to really shake that industry up and I think it’s an industry, particularly in Ireland, that could really do with disruption. I think the consumer would welcome anything that does that.”
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