In addition to being a distributed database of records enabling digital innovation in the financial markets via cryptocurrency, blockchain technology has attracted the gaze of the business fraternity for quite some time now. In its basic form, blockchain already offers a secure record in the form of distributed ledgers, security via digital signatures, immutability as the consensus mechanism sets in and tokenization via cryptography.
As the technology matures further, we are witnessing a multitude of value propositions and opportunities that, when incorporated into a business, can change the way it works. Early adopters of the tech present to us some wonderful use cases of blockchain.
- Operational and business aspects, such as supply chain management and managing hospital records
- For inter-organizational cooperation
- Maintaining transparency in government dealings within the offices and with the public, i.e. transparent voting and digital identity cards and signatures
However, experts and technology enthusiasts still focus on blockchain as an exotic subject to be revered, ignoring its practical implementation. Let’s explore the value drivers that could, in the near future, help blockchain achieve adoption as a versatile technology.
The four stages of blockchain maturity and their enablers
A decade has passed since blockchain, as the technology behind Bitcoin, found recognition. Since then it has evolved and matured through various stages, each having its own specific use and functionality. Here’s a quick overview.
- The main focus of this stage was on transactions and the deployment of cryptocurrencies. Bitcoin is the best example where, via encryption, a peer-to-peer network was initiated for the digital currency. Applications such as transfers and remittances of currency and digital payments systems were based on this decentralized network.
- Enabler – decentralized consensus
- An extension of the 1.0 version, blockchain 2.0 brought in privacy and smart contracts. Non-native asset blockchain tokens, such as Ethereum, opened new possibilities and capabilities. Smart contract-based solutions such as the IBM-Maersk partnered blockchain that supports global shipping also originated.
- Enabler – smart contracts
- This stage ushered in the era of DApps (decentralized applications) that connect users and providers directly via the blockchain network. DApps provide flexibility, transparency and resilience and follow a clear incentivized structure. Decentralized storage and computing are other applications of the 3.0 version.
- Enabler – decentralized applications, storage and computing
- This is the most recent stage where two different spectrums of technology, AI (artificial intelligence) and blockchain, come together. This amalgamation of the certain (blockchain) and the uncertain (AI) can help solve even the most complex problems. CognitiveScale, an AI startup backed by IBM, Intel, Microsoft and USAA, stores the results of AI applications to enable regulatory compliance securely over the blockchain in the financial market.
- Enabler – decentralized artificial intelligence
The above stages are separated by not only the specific features included but also how these features affect the existing capabilities of blockchain to open up new market vistas. Each of the stages has a unique value driver attached to it that vouches for its distinct applications in varied fields. Let’s consider the cause of value drivers and the associated opportunities next.
- Transaction cost – Version 1.0 with its decentralized consensus has enabled transactional efficiency and security by eliminating the need for a central authority or middlemen to validate transactions.
- Added services – Blockchain (2.0) enables a trustless environment through smart contracts, removing the need for guarantors and third party assurance. The risk of manipulation and errors is further mitigated, and the use cases go beyond the financial sector.
- Organization boundaries – DApps (under 3.0 version) help in delineating the organizational boundaries by incorporating new players and giving access to new technologies and capabilities. This network approach promotes the benefits of specialization and outsourcing, increasing efficiency and productivity.
- Autonomous decision-making – This value driver (version 4.0) holds the maximum potential as processes across the industries rein free from human interference. The execution part, once automated, leaves the management free to set and dictate parameters to operate the control.
Blockchain adoption – the questions to be addressed
Though all these stages represent a succession in technology, this doesn’t mean that they are applied in the same order. In order to create value, businesses must realize the scope and scale of their operations, and analyze which stage of the blockchain provides the maximum opportunity for value creation. In other words, blockchain adoption isn’t climbing up a ladder unlike other maturity-based technologies. Instead, it is the matching of value opportunity to the appropriate value driver or stage of technology. Here are some relevant questions to ask before making a choice.
The value opportunity being pursued
A business first needs to identify its requirement or the ‘value opportunity’ it wants to pursue. Blockchain adoption should follow when a certain need such as transparency, immutability, privacy and security, among others, are met. The drivers mentioned above are a direct consequence of the functionality obtained through blockchain use.
For instance, in property registration data, immutability is foremost. This cannot be ensured by decentralized or centralized platforms as they are trackable. Smart contracts would provide the necessary value driver to serve the purpose.
Decentralized ledger over centralized ledger
Employing technology for the sake of it can only add to the financial burden and further complexities in the business system. Blockchain initiatives are mushrooming everywhere. A study by Juniper Research stated that 57% of the firms intended to incorporate blockchain in their business processes by the end of 2018. But this fact does not imply that this incorporation would result in better and improved solutions. One needs to ask what value the new technology will add to the existing process and what solution it would offer to the existing problem. Systematic changes are often cheaper than technological changes. A business firm, therefore, should compare the alternatives. The firm must ensure that the benefits outweigh the risks before jumping on the bandwagon.
Feasibility and viability of the selected tech
Blockchain is still an emerging technology. Building a blockchain-based application from scratch can prove to be a rather lengthy and expensive affair. Pre-built solutions are limited as well. Only if there’s a strong expected benefit from blockchain implementation should the changes be brought. Once the feasibility study is completed, its viability has to be ensured. Decisions should be made on the acquisition and development of technology, whether in a phased manner or in one go, whether in combination with some other technology or as a standalone, in order to actually use the technology. Access to programmers, training of the managers, scope of legality and various other obligations and challenges must be studied and settled beforehand.
The combination of technologies
After the decision to incorporate blockchain technology has been taken, the next step is to decide whether the various elements of the technology align with the pursued value. The conditions involved include scalability, latency and level of privacy, among others.
The management of any enterprise intent on blockchain integration should focus on how, when and up to what stage they should incorporate blockchain technology to increase service innovation along with value creation. Also, utilizing SWOT analysis of the new processes over existing ones and starting humbly can help in beta testing the viability of blockchain adoption in one’s business. Blockchain, with its impeccable utilities, has a suit made for everyone. The key is to find the right fit.
Nischal Shetty is the founder, CEO of WazirX, India’s largest cryptocurrency exchange (recently acquired by Binance). He is a huge blockchain advocate and influencer with over 100,000 followers. He has also been featured in Forbes ’30 under 30′ list in the past. Nischal has been active in the space for a long time with the mission to involve everyone in the blockchain revolution.
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