As blockchain business cases are emerging, companies are now looking at issues of data privacy, liability and cross-organisation cooperation.
Trade finance and supply chain finance blockchain platforms are proving to be popular, Lata Varghese, Cognizant’s vice president and leader of its blockchain and distributed ledger consulting practice, told bobsguide at this year’s Money 20/20 conference.
More the 91% of people, in a 1,500-participant survey conducted by Cognizant, said they thought blockchain would transform financial services, said Varghese.
“We have seen that in action as we have been working with clients - helping them to experiment with various use cases.
“The industry is still not ready to pick winners and losers with respect to blockchain platforms, but finally the industry has moved to a tipping point where they have use cases and are forming consortiums,” added Varghese.
“It will be more evolution than revolution,” said Varghese in relation to which platforms businesses will choose to work with.
“Because blockchain is shared infrastructure that crosses traditional boundaries it is different in many ways to a traditional IT system where you have centralised control,” she said.
In the recent Cognizant survey, more than 56% of respondents cited collaboration between external partners as a challenge when looking to use blockchain.
“Blockchain is now moving to a stage where people are asking: how do we engineer this and prepare the infrastructure? How do we get the technology approved by IT, operational risk management and other organisational bodies?” said Varghese.
“There are a lot of technical challenges to face such as scalability and interoperability, not just within blockchain frameworks but within your company and your enterprise systems,” she said.
Governance and data privacy are some of the important issues that businesses are starting to address.
You can't regulate technology, just its application
With regards to governance, Varghese explained; “You can’t regulate a technology, just the application of the technology. Therefore, when you can stand up a use case, such as a KYC blockchain platform, then regulatory guidance will be given.
Blockchain will require far more than one regulatory body too as it is, by nature, shared.
“There will be entities that crop up that govern the blockchain networks. Then there will be various jurisdiction regulations when the technology is being used across countries,” predicts Varghese.
Questions will also have to be asked around who is liable if something goes wrong?
“In general, we have seen regulators do not want to harm blockchain innovation. There is a lot of benefit regulators will get if they are nodes on some of these networks. It will allow them to reduce systemic risk. The potential is immense,” said Varghese.
Can blockchain forget you?
Legislation around the right to be forgotten, such as General Data Protection Regulation (GDPR) has a big impact blockchain as the technology stores data indefinitely.
The industry is looking at ways to tackle this issue. “If you can’t delete information, can you make it inaccessible. But is that the same thing?” asks Varghese.
People are looking at burning blockchain keys, for example, meaning the data will be retained but no one will be able to access it.
When businesses are looking to employ blockchain use cases, scalability can be an issue due to the vast amount of data it computes. Many companies have looked to produce more scalable blockchain technology than the structure that bitcoin sits on, for example.
Public permissioned blockchains are not scalable for enterprises. However, private permissioned blockchain allows for innovations in scalability and many companies are investing in this, including Microsoft and Jelurida.
A permissioned blockchain restricts the actors who can contribute to the consensus of the system. A permissionless blockchain is the opposite of this.
The difference between public and private blockchain is related to who can participate in the network. Bitcoin is one of the largest public blockchain networks today.
One of the drawbacks of public blockchain is the huge amount of computational power that is necessary to maintain a distributed ledger at a large scale.
A private blockchain network requires an invitation and must be validated by the network starter or a set of rules designed by the network starter.
“Challenges around scalability will be easier to fix in the private permissions space. The public space has not even shown that they would even want to,” Varghese said.
Public blockchain platforms, such as Ethereum, are forking in order to address specific requirements that enterprises need.
Don’t be blinded by the technology: what business problems are you trying to solve?
“We advise clients to look at the business problem they are trying to solve. It is too much about technology,” advised Varghese.
“We have been saying that from the start. Businesses should be having a conversation about what business problem they are trying to solve and, therefore, what is the right technology?” she added.
Varghese described blockchain as being “fundamentally a different paradigm of technology”. She argued that struggles between various organisations were inevitable as people got to grips with how the technology worked.
Businesses need to look at what they want from a blockchain platform. As the technology is collaborative, participating businesses also need to be able to act for the good of the whole platform.
“You may not be able to individually maximise your slice of it. That is the nature of a platform,” said Varghese.
Read about how a supply chain blockchain treasury platform is being developed by the Port of Rotterdam here.