Taking blockchain live: what will drive its ‘breakout moment’?
It’s become a truism that big players are investing heavily in blockchain technology.
The figures bear this out: in our blockchain survey this year, 39 per cent of respondents reported that their organisation will invest $5 million or more in blockchain technology in the coming year, while a further 41 per cent had future plans to do so. This is particularly true in financial services, technology/media/telecommunications, consumer products, health care and automotive - often driven by CIOs and CTOs.
We’re seeing a shift from proof of concept studies to commercial application but are yet to witness the technology’s genuine ‘breakout moment’, where adoption becomes mainstream, visible and ubiquitous across an entire ecosystem.
There are three key areas likely to set the timetable for when this takes place.
Firstly, addressing the performance gap. Widespread adoption will require effective, high performance consensus mechanisms, allowing participants to agree on how transactions are recorded as valid, making sense and not being corrupt. This is where the technology needs to be refined to become fully scalable and to make its big break. Decision makers, understandably, need certainty.
Secondly, standards. Functioning blockchain-based systems require interoperability and accepted ways of working which a whole industry can agree on. That isn’t easy when large firms each have their own ways of doing things and are used to developing their own structures and processes.
It’s encouraging that we are beginning to see the emergence of consortia within industries, with players coming together to agree common data and application standards – particularly the IT giants. Establishing shared assets, like Simple Mail Transfer Protocol (SMTP) protocols, was a vital step in the development of the internet. A single, universally accepted set of standards would be the best-case scenario to encourage adoption but we are likely to be waiting some time for this to happen. Achieving agreement across an industry is a good start.
Thirdly, people. Our research found that firms are actively investing in staff with blockchain experience. Partly, of course, this is about hiring people with the requisite technical expertise, but it isn’t just about technology. Building teams with the right experience across legal, finance, tax, risk, compliance and the regulatory environment is essential too. This multi-disciplinary approach Is imperative when building high performing teams.
So, what are the sectors and use cases which point to how blockchain’s commercial application is likely to develop in future?
It isn’t surprising that the initial areas where blockchain is already making a difference mostly relate to those supply chains where clear benefits arise from end-to-end traceability, near real-time information, and visibility to all parties involved in a supply chain.
In trade finance, we’re seeing an age old, paper-based, manual system being replaced by a more open, transparent shared blockchain ledger. Deloitte have been working with a trade finance consortium and an energy and commodities trading consortium which have both been proactively developed by their respective industry incumbents.
In increasing numbers of supply chains, from premium beef to luxury goods like diamonds, blockchain is beginning to enable consumers to trace the origin of what they buy, guarding against counterfeits. In the near future, blockchain could be applied to the consumption of more intangible services like music, ensuring that artists receive the royalties they are owed.
Our research has focused on how an ecosystem for blockchain adoption can develop successfully, and what this means for corporate culture.
As we look to the next stage of adoption, blockchain can no longer be treated in isolation. Increasingly, we’re seeing blockchain combined with other technologies such as augmented reality, data analytics, robotics, the internet of things, often as part of a firm’s broader digital innovation strategy. Getting beyond this ‘blockchain myopia’ will unlock new opportunities.
Blockchain is fundamentally a network technology. Realising its benefits requires a corporate culture shift away from firms working in isolation, instead shaping new standards together and continue dialogue with regulators. We’ve seen the difference which a proper regulatory framework can make in places like Malta. This cooperation can also drive recognition and understanding among consumers, particularly where - as we’re starting to see in financial services - this takes place between well-known, trusted brands.
Trial and error is part and parcel of any technological innovation. With the high expectations and huge potential of blockchain, a spirit of collaboration will help the technology thrive.