Avoid common blockchain mistakes when planning projects
- 04 June, 2019 06:30
The rapid evolution and introduction of new blockchain technologies is causing challenges for CIOs, who must assess and compare the viability of implementing a blockchain project in their organisation
Every industry has developed an intense interest in how blockchain can be used to improve market efficiencies, as well as reduce costs and latency. Gartner predicts that more than 80 per cent of the largest successful blockchain projects will be outside of financial services by 2023. But there’s still a significant gap between the hype and market reality.
The rapid evolution and introduction of new blockchain technologies is causing challenges for CIOs, who must assess and compare the viability of implementing a blockchain project in their organisation.
Resolving inter-organisational business process, governance and performance issues are extremely difficult and complex. The vast majority of organisations get stuck when they first encounter these challenges, while attempting to move blockchain projects from proof of concept (POC) to any form of scaled development. The majority fail to get beyond that initial experimentation phase.
To mitigate any negative impact and plan for future viability with this nascent technology, avoid the following misconceptions that can lead to failure in blockchain projects.
- Misunderstanding or misusing blockchain technology
Most POCs for permissioned blockchains – where membership is controlled – aren’t using key blockchain innovations, such as decentralised consensus, smart contracts or tokenisation. These features underpin truly disruptive ways of doing business across parties that don’t trust each other, which calls into question whether blockchain is even needed by these organisations.
Instead, most commercial and government entities today use permissioned blockchain to support shared record keeping and asset tracking, supported by distributed ledger technology (DLT) data structures.
- Assuming current technology is ready for production use
The blockchain platform market is largely composed of fragmented offerings that often overlap, with some also being used in a complementary fashion. Some platforms are also under the auspices of a consortium, with some not platforms per se, but instead constitute subsystems or functional components.
Assume that most blockchain platform offerings will be too immature for true production work with accompanying and requisite system, security and network management services, for at least the next 12 months.
- Confusing a limited protocol with a complete solution
Since blockchain technology has been discussed in conjunction with solving problems in diverse areas such as supply chain management or medical information systems, there’s an implicit assumption that the foundation-level technology isn’t that far removed from a complete application solution.
Be aware of governance issues and assume they can pose significant challenges to the success of the project, even if the technology foundation is mature and stable
Such solutions typically consist of a multi-layer technology stack built on a base-level foundation, which includes middleware such as an application framework and horizontal subsystems underneath vertically oriented application logic. The complete solution will consist of a user interface, business logic, data persistence and interoperability mechanisms.
- Viewing blockchain technology as a database or storage mechanism
Some CIOs think of blockchain as a data persistence mechanism or distributed database management system (DBMS). Although this isn’t far from the core concept, it is nevertheless far enough to be off-target and result in misaligned enterprise blockchain projects.
Assess the data management requirements of the proposed blockchain solution, and decide if these requirements outweigh the benefits of a trusted sequential log of significant events. If they do, then consider a conventional data management tool or platform instead.
- Assuming interoperability standards between platforms exist
Interoperability mechanisms can ensure that a specific platform doesn’t become a dead-end choice. But it’s difficult to envision interoperability when most platforms and their underlying protocols are still being designed or developed.
Through a layer of abstraction or via an API, it’s possible to have some interoperability at the most basic level. But most blockchain platforms have much more ambitious scope that doesn’t lend itself to a common abstraction.
- Assuming smart contract technology is a solved problem
Smart contracts are perhaps the most powerful aspect of blockchain technologies in the long term. They add dynamic behaviour to what would otherwise be transactions of passive objects and enable not just the “Internet of Money,” but the “Internet of Programmable Value”.
Smart contracts, however, currently face daunting challenges in scalability, auditability, manageability and verifiability that have yet to be adequately addressed. Tread carefully when developing or deploying smart contracts under current offerings. This area will undergo significant evolution and maturity during the next two-to-three years.
- Ignoring governance issues for a peer-to-peer distributed network
While governance for public blockchains like Ethereum and Bitcoin is defined, it’s unclear to most participants, which is a worrisome leading indicator. Governance is aimed at technical issues only, rather than human behaviours or motivations, which are important factors in any project.
Be aware of governance issues and assume they can pose significant challenges to the success of the project, even if the technology foundation is mature and stable. Develop capabilities for interfacing with public blockchains as they become available and useful to enterprise operations.
Adrian Leow is senior director analyst at Gartner. He co-leads management of the research agenda for blockchain innovation, helping companies to separate reality from the hype about adoption and usage of this emerging technology.
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