Among the technologies making a lot of buzz recently, blockchain is one that raises a lot interest, questions or sometimes push-back from some who consider it as a fad that will pass. And this is quite typical for a technology at that stage. In its 2016 hype cycle for emerging technologies, Gartner has placed blockchain almost at the top of the “Peak of Inflated Expectations”, among “the set of technologies that is showing promise in delivering a high degree of competitive advantage over the next five to 10 years" as described by Mike J. Walker, research director at Gartner.
There are indeed high expectations for blockchain, sometimes considered as transformative as the Internet has been. I tend to agree with this because blockchain is in the middle of several fundamental trends:
- we currently observe a strong consensus about this technology, moving from its birth ecosystem (bitcoin) to become a central piece for some major players in several industries,
- there is also a strong underlying trend pushing for less intermediaries, removing the middleman, which comes from a general distrust in institutions or governments and the multiplication of global peer-to-peer platforms,
- digitally-savvy generations are starting to be the ones holding the purchasing power, thus encouraging the adoption of digital behaviors like the multiplication of peer-to-peer models and systems managing our digital lives,
- finally, other technologies such as artificial intelligence are maturing and blockchain could be the technology providing the architecture and trust to enable business transactions between various virtual assistants or artificial intelligence APIs.
When several trends combine, they strengthen each other, so the real question is not if blockchain is going to impact us, but when.
OK, but what is blockchain?
If you’ve never heard about blockchain, let’s put it very simply. Take Lego blocks and imagine a group of people, who are piling up Lego blocks one on top of the other, in the exact same order and at the exact same time, forming a chain of blocks. Each block represents a piece of information to be recorded in the blockchain. These people can be either in a closed room with restricted entrance (private blockchain), or in an open space where anyone else can join the group (public blockchain).
Each time a person wants to add a new information (add a new block to the pile), all the others also add the same block, so they all have permanent and real-time access to their own copy of the full blockchain, including all the history and the order in which each information has been added. Besides as every block is plugged on the previous one, no one can replace a blue block by a yellow one without breaking the chain. In a blockchain, the same happens as each block contains encrypted information from the previous block, so it can’t be altered. And even if that were to happen, the other people in the room would notice that one pile of block is different from the other copies, so the fraud would be detected.
The reality is obviously a bit more complex, but you’ll easily understand that this mechanism has the advantage of building a highly secure and trustable way to record and share information with others.
This mechanism has been invented to secure the bitcoin currency, thus replacing the role of a central bank, and is now being applied to vast range of other industries and applications. However, the various areas of blockchain application have different timeline due to their different levels of complexity to implement.
The most complex to implement is related to the smart contracts (auto-enabled and executable contracts over blockchain), because it requires companies to rethink their operating model and organization. However, this could be the most disruptive as it could provide to big companies the fast and agile models they envy from startups and redefine the way we do business.
Investigating blockchain applications
Nokia is running blockchain initiatives in various domains: for research purpose, for product applications, or to reinvent our operations.
For example, how could we use blockchain to increase speed and efficiency in our supply chain? Or to better manage our installed base or offer new services to our customers?
Here are a few things we have learned that we would like to share with you:
- Always ask yourself whether blockchain is the right technology, or whether it is enough to use a simple database instead. To help you answering this question, we found the advice given by Gideon Greenspan in his blog “Avoiding the pointless blockchain project” very helpful and we have built our own matrix to scan and test the different blockchain use cases.
- As blockchain is still quite new and not a fully mature technology yet, there is some resistance to overcome. Like for many disruptive innovations, it can be safer to deploy it first in non-strategic areas.
- To come back on the smart contracts example, I gave earlier, there are some challenges that still need to be addressed:
- Governance: who is responsible when there is no more central authority?
- Auditability: transactions and business processes need to be verified, how to have blockchain system interoperate and comply to legal requirements? Besides there is still some uncertainty related to regulations as governments may require some level of visibility on the transactions (be it for fraud repression or tax purposes)
If you are also eager to collaborate with us on this topic, or have suggestions to address those challenges, please post your ideas on Open Ecosystem Network!
Resources: Understand blockchain in 2 minutes video