With $ 2 Billionspent on R&D initiatives in 2017 in India alone, blockchain is the new buzz word for enterprises with attractive propositions like secure transactions and a tamper-proof architecture at its core. Spearheaded by BFSI, CIOs from other segments have also started to embrace the technology, leading to early PoCs and deployments, and a promising future for Enterprise Blockchain.
Every few years there comes an innovation that virtually challenges the way things are done, overshadowing norms perfected through the test of time. Born as the backbone to the world’s first cryptocurrency, Blockchain is one such elixir of technology, that has not just given birth to an entirely new type of economy; it has hit the ground running, making inroads into a number of business and organizational areas of application. Institutions across the globe have started to realize thepotential of Blockchain. Governments, banks and power corporations have been leading this revolution at the enterprise level. A number of them have hit the ground running, resulting inblockchain initiatives such as research and training programs amounting to over $ 2 Billion in 2017.
“Blockchain will enable new products such as peer to peer exchange and micro-services, and lead to massive cost savings in existing industries.”
Founder and CEO
With a phenomenal ability to dramatically enhance the overall customer experience, blockchain can deliver secure, tamper-proof data, enabling near real-time distributed transactions across the enterprise ecosystem.For enterprises, it has the ability to automate processes by removing third parties and bottlenecks, streamlining processes within the organization and reducing the chance for fraud and error. A truly visionary concept, Blockchain has become the newest buzzword across IT teams and has already a lot of excitement building around it.
Transparent and infallible in essence
In 2008, an anonymous individual under the acronym Satoshi Nakamoto wrote the algorithm for the first distributed Blockchain when forming the concept of a new form of ‘digital’ currency – the Bitcoin – serving as a transparent, fault proof public ledger for all transactions. Essentially, blockchain secured Bitcoin transactions through a decentralized system, eliminating the need for a governing body or trusted intermediary, such as the financial industry authority or a bank. With unparalleled transparency, efficiency and security, bitcoin, and other emerging cryptocurrencies – initial applications of blockchain – slowly matured and gained a number of applications. It is perhaps important to mention, that due to theabsence of governing bodies, Bitcoin rapidly gained popularity and transactions involving illegal services and goods globally. However, as the technology matured to provide more and more legal payment uses, the focus shifted towards the underlying technology and its potential applications in different sectors.
“The biggest appeal of blockchain is the way it supports the accountability, auditability, availability and integrity of the data it records,” Joseph Pindar
Director of Product Strategy
Kumar Gaurav, Founder & CEO, Cashaa – a company that leverages blockchain to make consumer-centric and affordable financial products, elaborates, “The advantage which initially brought everyone’s attention wasthe ability to remove any system based on centralized trust and can replace it with a decentralized system. This makes it the ideal core technology for governments, banks and supply chain industry. Blockchain can enable enterprises to trust in a fixed set of principles and be sure they will be followed.”The fact that it is highly secure and virtually impenetrable by bad guys makes it an attractive proposition in a number of industries. “The technology is a mutually distributed digital ledger that uses encryption to make entries tamper-proof and permanent. The biggest appeal of blockchainis the way it supports the accountability, auditability, availability and integrity of the data it records,” notes Joseph Pindar, Director of Product Strategy – Data Protection. With time, blockchain has started to find applications far beyond currency and banking, now attracting organizations from a range of sectors, such as agriculture, insurance and logistics.
“CIOs should explore the potential of this disruptive technology and at the same time recognize the limitations of the current generation of blockchain platforms.”
Head – Information Technology
VST Tillers Tractors
A growing influence in businesses world over
Frequently seen as the most exciting application of blockchain are smart contracts, an encoded set of rules which are automatically executed by the system without any intervention possible.This structure and automation capability makes it attractive to banks. Banking giants, such as Barclays, have already implemented applications around the technology with the aim of reducing transaction costs and simplifying processes.A study by Santander found that Blockchain could reduce banking sectors’ infrastructure costs by $15-20 billion a year by 2020.India has been following suit after early runners like US, Europe and China with over 400 institutions planning to leverage blockchain. The World Bank predicts this will lead to 10 % of existing IT infrastructure being based on blockchain technology by 2025.
“By eliminating costly intermediaries involved in settlement processes, distributed ledgers can help optimize business decisions through improved visibility of information.”
Vice President-Cloud Platform
In today’s markets, most customers have complex and time consuming processes to share data, carry out transactions with others and reconcile multiple sources of data across incompatible systems. Blockchain promises a huge leap on the existing standards. As Oracle India’sVice President-Cloud Platform, Sunil Mehra, points out, “With blockchain, users can post and maintain tamper-proof records with controlled shared access, such as in healthcare with patient records or in government with land/property records or issuance of identity documents, and university transcripts. By eliminating costly intermediaries involved in settlement processes, distributed ledgers can help optimize business decisions through improved visibility of information across the enterprise’s ecosystem. Customers can also reduce costs associated with fraud, regulatory compliance, and financial reporting.”
“I believe blockchain one of the greatest evolutions in the tech vertical and will reduce cost and turnaround time with utmost secure transactions and find a number of enterprise use cases.”
Chief Information Officer
Plans around its applications is gradually gaining momentum, with automation and data security being attractive propositions to IT leaders across enterprises, as Mayank Bedi, Head – Information Technology at VST Tillers Tractors comments, “Blockchain has the ability to increase secure data exchange in other industries as well. It also has the ability to make that data transfer simpler and easier between entities. With such wide-ranging possibilities, there is no surprise that blockchain has the potential to enhance the quality of service delivery while improving confidentiality and integrity of data.”
Major current applications across sectors
In the business aspect, blockchain is just beginning to witness real world applications, with corporations infusing large amounts on R&D for enterprise blockchain, a number that has significantly increased over the last 2 years. “Blockchain’ is a genius new concept that is set to resolve so many issues without the interference of middleware, opines P. Sarangi, Chief Information Officer, Exide Industries, “Different areas of application of Blockchain in enterprises are emerging every day in sectors like smart contracts and transactions in sectors like banking, retail, and logistics; supply chain management and process monitoring across industries.”
BFSI institutions have been leading the blockchain revolution, streamlining the processing of financial transactions and back office functions. Banks are exploring various use cases in areas like payments and settlement of currencies, asset registries, enforcement and clearing derivative contracts, regulatory reporting, KYC, AML registries, and improving post-trade processing services. A number of global banking giants have been racking up blockchain patents, such as Bank of America which has over 20 blockchain patents, and Bank of England, which has pioneered a Fintech accelerator and partnered with several blockchain companies. IBM has partners with the likes of UBS, Bank of Montreal, CaixaBank, Commerzbank and Erste Group on trade finance.However, applications have found inroad in across a variety of sectors. The Governments of the world have started building solutions around blockchain with aims to improve transparency and check corruption in governments worldwide. Blockchain has found significant use cases in smart cities as well. Some global examples include blockchain based land registry in Sweden and Dubai, government registries as well as balancing electricity markets and anti-corruption projects in UK, an E-governance platform in Estonia backed by blockchain and smart cities solutions in China.
In healthcare, blockchain-based data that allows regulating the availability and privacy of health records. Solutions are being built around enabling the healthcare community including hospitals, doctors, patients, and insurance companies to be part of the overall blockchain, reducing fraud in healthcare payments. In agriculture, businesses have been testing PoCs for blockchain-driven ecosystems which handle tasks like paperwork, inventory and logistics of agricultural produce. Solutions have been enabling buyers such as urban supermarkets in western countries to verify the produce. In defense institutions, blockchain based solutions are ensuring security against attacks on important network and hardware equipment across multiple data centers by ensuring consensus-based access. Auxesis Group, a company building a blockchain framework to deploy in military organizations recently launched of India`s first Blockchain Lab together with IIT Bombay and University of Delhi, focused on researching blockchain applications in IoT, defence, regtech and fintech. In the power distribution and generation industry, solutions like smart meters can register electricity production/ consumption data in a blockchain, which allows for consumption of the surplus energy in a different location, providing credits or currency to the original producer. Some global examples from the sector include BP`s blockchain based oil and gas trading, Royal Dutch Shell and Statoil`s support of the Energy Web Foundation aiming to build blockchain energy applications such a peer to peer energy marketplace and electric vehicle charging schemes. IT/ITES companies have been releasing solutions based on the technology. Oracle recently released Oracle Blockchain Cloud Service which uses a distributed ledger cloud platform securely extending ERP, supply chain, and other enterprise SaaS and on-premises applications.
Oracle recently joined Hyperledger to help enterprise customers realize the benefits of blockchain. As per Sunil Mehra, “By leveraging open sources and maintaining interoperability with open standards, Oracle is enabling customers to benefit from all open-source innovations, and avoid vendor lock-in.” Gemalto collaborated with Ledger, which is into security and infrastructure for cryptocurrencies and blockchain applications to deliver high-assurance security infrastructure for crypto assets applications. Cashaa has an ambitious roadmap for India, as Kumar comments, “Eventually, Cashaa will be a comprehensive, blockchain- and AI based platform representing an efficient alternative to existing payment and banking systems, lowering financial inclusion barriers and providing financial services for the banked and unbanked worldwide.”
Pros and cons of Block chain from Enterprise PoV
As a technology, blockchain brings numerous benefits to enterprises. As Cashaa’s Kumar Gaurav explains, “This will enable new products such as peer to peer exchange and micro-services, and lead to massive cost savings in existing industries.” Kumar continues, “Any good, product or information can be settled directly, any document can be notarized and traced using blockchain, and the shared and automatically updated information across the network enables all its parts a better decision making and ability to obtain instant proofs on any transaction occurred.Furthermore, blockchain technology is flexible and can be adjusted to the individual requirements of an industry and use case, ensuring either transparency or privacy as required.”
Blockchain has the ability to empower users with control of all their information and transactions. It ensures process integrity, lower transactions costs, and a remarkably high quality of the data – complete, consistent, accurate, and widely available. Blockchain in essence, as taken up earlier is fault/ tamper proof and thus has the attractive assurance of durability, reliability andlongevity to enterprises. Due to the decentralized network, blockchain does not have central point of failure and better able to withstand malicious attacks.
Although in itself, the concept of blockchain is pretty bullet proof, from the perspective of enterprises implementing solutions, blockchain based solutions might be slightly slower than traditional databases. As VST’s Mayank Bedi explains, “Because of nature of blockchain; it will always be slower than the centralized database. This means that while the transaction is being processed, blockchain has to perform the same activity like regular database with additional task like redundancy, signature verifications and consensus; and back-and-forth communication.” Some of the more perceived concerns revolve around and uncertain regulatory status; integration concerns as blockchain solutionswill require significant changes on existing systems. Finally, cost might be another big hurdle, “True, blockchain offers tremendous saving in transactions cost and time but high capital cost could be deterrent,” opines Mayank.
For CIOslooking intoblockchain
India CIOs and IT leaders have started catching up with western counterparts with their own initiatives. There have been a number of government initiations of the front, starting right from the State Governments. As Oracle’s Sunil Mehra observes, “In India, we’re seeing a lot of interest from enterprise IT teams across all sectors. Initially there has been more traction in the BFSI industry vis-à-vis others. It’s still early days, with most companies trying to chart a strategic roadmap for blockchain. We’re in talks with several enterprise customers to help them in this journey.”
With a number of enterprises in planning stages, the main aims that have been driving plans are more secure, smarter transactions, and improve efficiency and bottom line. As Exide Industries CIO P Sarangi tells us about his plans about the technology, “We are in the initial stages of discussion for building solutions providing online information of battery health monitoring. I believe blockchain one of the greatest evolutions in the techvertical and will reduce cost and turnaround time with utmost secure transactions and find a number of enterprise use cases.”
A great way to kick of their blockchain journey for any CXO would be to delve into cryptocurrencies as they are the first use cases of blockchain. Cashaa’s Kumar Gaurav opines, “For anyone who wants to get involved with blockchain, the first step is to try out Bitcoin. A lot of people who are speaking about their plans around blockchain have never owned any cryptocurrency such as Bitcoin or Ether.My advice to CXOs is to not tryto draw a line between blockchain technology and cryptocurrency, which is not possible. Cryptocurrency should be embraced as an ideal, as the first step towards leveraging the wider potential of blockchain.”
When playing with new technologies and looking at unproven use cases, the goal for CIOs should not just be about the business value to their organization but also exploring the limitations, and how the technology might be improved further. Innovation should always be on the agenda. “CIOs should explore the potential of this disruptive technology and at the same time recognize the limitations of the current generation of blockchain platforms. They should gain an understanding of the current state of the art by doing proofs of concept, and implementing tactical, narrow-scope deployments that solve specific problems,” as VST’s Mayank Bedi continues, “Next, while acting tactically, organizations should think strategically and conceptually about the longer term business models enabled by next-generation distributed ledger platforms that will facilitate their use.”This might be a good way to go about blockchain, which is still maturing. Solutions developed today built on the original blockchain will eventually be replaced by more evolved distributed ledger alternatives with time.
Future of Enterprise Blockchain
As per a recent study by U.K. research firm Juniper Research, more than half of the world’s large corporations are looking into blockchain. The report also said that Cash is dead; smart refrigerators will manage grocery budgets and drones will replace delivery guys. In fact, Peter Smith, CEO of Blockchain, a firm in the domain stated, “I predict that by 2037 a complete global computer fabric will make interacting with goods, services and people easier than ever. Citizens of the world will be more closely connected through technology, communication and networks”
IoT devices and smart cities will use blockchain couple with technologies like Artificial Intelligence to make secure and more apt decisions. More companies will begin to use blockchains to work with their partners and suppliers. Blockchain will be used to collect economic data (supply chain usage) and customer data. As per Mayank Bedi of VST Tillers Tractors, “Future of Blockchain in India is bright and I am confident that blockchain is the way ahead. Decentralized and hybrid apps will take over the market in the coming years. Various big companies like Infosys and Kotak have shown immense interest in blockchain.”
With the maturing of blockchain, a world of possibilities will open up both inside the business as well as at the customer end. Blockchains will provide accessible peer-to-peer platforms that enable economic empowerment, greater efficiency, and secure information distribution. As Gemalto’s Joseph Pindar opines, “What’s clear is that the blockchain is the start of a digital turning point, and a crucial step in the way value and opportunity are created and distributed.” He continues, “It is time for businesses to embrace the technology in order to stay ahead of their competition. Blockchain is more than a buzzword. It is the future of distributed security.”