Blockchain is in the same position where cloud computing was a decade ago – everyone talked about it, but much of what was said no longer made sense.
It could be argued that the cloud was not properly understood until Salesforce and its software as a simple service (SaaS) started to attract interest among corporate customers.
But today, with all the technical jargon replaced by marketing words of the same kind, cloud computing is everywhere. While people may not understand what virtualization is, they know what cloud computing offers to the business.
Similarly, it is difficult for most of the business world to imagine how the blockchain will be used, despite the high expectations driven by industry analysts. Gartner predicts that the added value of the blockchain will increase to around $ 176 billion by 2025 and will exceed $ 3.1 tn by 2030.
It is a giant step, but blockchain and other distributed accounting technologies (DLT), after a huge uproar, now face a "chasm to cross" if the first pilots have to be applied to the challenges of real life, according to Dean Demellweek, the 39; digital innovation strategist at BNP Paribas, who spoke at a recent Blockchain Live event in London.
Gartner is on agreement. "Blockchain is developing rapidly, but important business challenges and technology gaps remain before widespread use cases emerge and ways to generate value," said the analyst in a statement. "CIOs are under pressure to guide decisions on" if "and" how "they should implement blockchain, but to fight on how to apply this technology to address new business challenges."
Events such as Blockchain Live, which are growing in number, will help to demystify a technology that has been created as a ledger for recording bitcoin transactions. Bitcoin itself requires a certain amount of financial and technical knowledge to understand.
But amid all the crypts of cryptocurrency – bitcoin, ether, dash, monero, ripple and litecoin, to name a few – the ability of the blockchain to provide the infrastructure for tamper-proof and transparent records is considered critical as digital technology always creates more transactions.
In fact, blockchain is not actually a disruptive technology, but one that supports technologies that will interrupt industries, such as artificial intelligence (AI) and the Internet of Things (IoT).
As BNP Paribas' Demellweek said: "Blockchain is not a disruptive technology, but a fundamental technology: it is about building a network to enable disruptive business models".
Find cases of use for blockchain
Organizations are testing the application of blockchain in real business processes, with the financial services industry, of course, heading the package.
For example, JP Morgan used blockchain technology to build a cross-border payment network, to which 75 other banks joined to test. Using a distributed ledger accessible to the banks involved, JP Morgan aims to make it easier to perform compliance audits and corrections, processes that can delay payments.
Then there is an HSBC and ING process of applying the funding financing blockchain, which companies claim has been a success, paving the way for faster, cheaper and safer transactions. Commercial financial transactions are large payments, often international, which traditionally require many participants, lots of paper and many couriers. The need for card reconciliation is removed because all the parts are connected on the platform and the updates are instantaneous.
But it is constant as it goes for IT leaders. In May 2018, Gartner discovered that only 1% of CIOs were working on blockchain projects and only 8% were planning to do it in the short term or were already experimenting with technology.
Here is the chasm that must be crossed.
At Blockchain Live, Demellweek said that there is a growing focus on the business challenges that the blockchain could solve. "The corporate blockchains are almost ready to enter the stage," he said.
Citing Gartner, he said companies outperformed expectations in 2016, adding that the industry had hoped, after a period of disillusionment, that the blockchain would have a wider application in business now.
"The blockchain Enterprise will help us overcome the chasm from early users and visionaries to business pragmatists, as we need to show them that the blockchain will have a real impact on their business," said Demellweek.
He said that business pragmatists have concerns about linking with legacy systems, as well as regulatory considerations. He emphasized that blockchain must be able to show the true value of the business, the applications of the real world and an ecosystem of organizations that support it.
Introduction to blockchain standards
One of these ecosystems that already exists is the Society for Worldwide Interbank Financial Telecommunication (Swift), whose head of the United Kingdom, Ireland and Nordics, Vikesh Patel, also spoke to Blockchain Live.
As a cooperative, which exists for the very purpose of innovating for banks, Swift is working with the banking community to answer questions about where and how the blockchain fits.
Patel claimed that the need for standards was at the top of the wish list when it came to transmitting information to make sure it could be invoked.
"We have analyzed how we can sustain innovation in our ecosystem and our main work has been about standards," he added. "In the many-to-many cross-border space, ISO20022 is the standard used to send financial messages, we've looked at ways to apply it in our messaging today and look at new technologies, including blockchain."
The organization is also testing the blockchain in relation to the financial services business processes. He recently organized a pilot project to apply the blockchain to allow banks to manage our accounts, which are used to make cross-border payments in real time. He revealed that further progress was needed before the blockchain could "support production applications in large-scale, mission-critical global infrastructures."
While Swift said that the test "went very well", he stressed that "further progress is needed".
Patel said the pilot, running on IBM Hyperledger Fabric, found that the technology had matured a lot and would continue to do so. "We came up with the prevailing idea that while it will continue to mature in its current format, there have been scalability problems to apply it on a large scale in terms of volumes needed,"He said. "This does not mean that it will not come to us, but it is a result of a very broad concept test".