While many remain uncertain about what impact blockchain will have on their businesses, 60% of the CIOs surveyed as part of Gartner’s 2019 CIO Agenda Survey expect some level of adoption of blockchain technologies in the next three years. According to the research firm, key industries set to transform thanks to blockchain include the banking and investment services industries, the world of gaming and the retail space. And yet, David Furlonger, a research VP at Gartner, says that the existing digital infrastructure of many organisations and a lack of clear governance limits CIOs from getting full value out of blockchain.
For Riccardo ‘fluffypony’ Spagni, lead developer at Monero and co-founder of local blockchain startup Tari, there’s definite transformative power in blockchain. But people often underestimate how much time and effort – and convincing of regulators – is required to really enjoy the benefits of blockchain. Spagni cites Bitcoin as a prime example. Bitcoin has been around for a decade, but only now are we starting to accept what’s required to achieve scale and scope. This isn’t to say that Bitcoin hasn’t already been transformative: there are people whose lives have been transformed because of Bitcoin, he asserts. “But broad sweeping statements about its ability to fundamentally change business and society are laughable at this stage.”
Beyond being the foundation for cryptocurrencies, blockchain presents a new way to structure data, states Ian Jansen van Rensburg, senior systems engineer at VMware.
There certainly are enough use cases and proofs of concept out there, in several sectors, to suggest that sooner or later, we will see a shift from hype to wider acceptance.
Ian Jansen van Rensburg, VMware
One needs to think of blockchain as being a bit like a database. But it isn’t a regular database. The blockchain provides a virtually tamper-proof way of safeguarding data and ensuring its integrity, he says. Given the fact that the world has become completely data-driven, this technology ushers in a new way of managing data and extracting value from it.
And from a security perspective, blockchain increases accountability, real-time accuracy and transparency, says Gerhard Dinhof, blockchain lead at IBM South Africa. Once a transaction is recorded to the blockchain, it cannot be altered or covered up, but only reversed by a new transaction. That being said, nothing is 100% secure. Groups of transactions may form a chain – and a chain is much tougher to hack than a single link – but if a malicious network were to collude, there is the possibility that they could gain control of the entire transaction approval process.
Blockchain is doing for new business models what the web did for e-commerce and product-sharing services, Dinhof adds. “Anywhere you have complex business problems – from tracking shipping details to streamlining payments – blockchain is a good solution.” The promise of blockchain is that it enables new means of exchanging business value in a decentralised manner. But as is the case with all new technologies, it’s important for businesses to first be clear about their desired outcomes and determine the most appropriate approach from that, he notes.
Alexey Malanov, a Malware expert at Kaspersky, agrees. “In our opinion, blockchain has already passed its popularity peak.” And yet there are still so many developers who champion blockchain even though it isn’t necessary or fit-for-purpose. And their main reason for punting blockchain is just because it’s fashionable, he insists.
So, where is blockchain having the greatest impact?
In a nutshell, everywhere.
Start your engines
As a new generation of ‘born on blockchain’ companies emerge, these innovative thinkers are transforming how business is done across industries.
In our opinion, blockchain has already passed its popularity peak.
Alexey Malanov, Kaspersky
According to Dinhof, blockchain technology is changing the usual course of businesses in every industry. There are many exciting examples – from food safety, smart contracts, insurance and healthcare to education, tourism, cross border payments and luxury products – where we’ve seen this technology work and make industries smarter and more efficient while also strengthening levels of trust between organisations and their customers. Financial services, healthcare, energy and a myriad industries internationally have already benefitted from implementations of the technology, continues Jansen van Rensburg. “There certainly are enough use cases and proofs of concept out there, in several sectors, to suggest that sooner or later, we will see a shift from hype to wider acceptance.”
And the South African market is no exception.
Local businesses seem to have a deep interest in the technology driven by our buoyant startup space and various tech conferences focused on the new technology, says Nick Durrant, co-founder and MD at Bluegrass Digital. This interest has seen larger institutions across financial, legal and insurance sectors investing in R&D and testing applications of this technology within their own businesses. Even at the centre of our financial industry, the SA Reserve Bank has also been running trials with ‘Project Khokha’, which released positive results from its trial aimed at settling high volumes of payments via the blockchain, adds Durrant. “In fact, I read somewhere that South Africa has been ranked as the country with the third fastest adoption rate of blockchain in the world,” he notes.
In fact, I read somewhere that South Africa has been ranked as the country with the third fastest adoption rate of blockchain in the world.
Nick Durrant, Bluegrass Digital.
Another local example involves South African-founded diamond company De Beers. It introduced a pilot programme last year using blockchain technology to provide a permanent, unchangeable record for every diamond registered from the moment it’s mined, says Jansen van Rensburg. This allows De Beers to ensure that all of its diamonds are authentic, conflict-free and natural.
A startup in Ghana specialising in blockchain technology has made it possible to register land and real estate property rights and store information in a transparent, public and secure manner. This has changed the game in the region as most landowners are unregistered and don’t hold property ownership titles.
There will be roadblocks
A true understanding of blockchain’s potential, and why it matters, remains one of the biggest obstacle we are facing, says Alex de Bruyn, CEO at DoshEx. In addition to this, the usability of decentralised systems still needs a lot of work in order for it to be simple and easy enough for the average user.
For Spagni, another adoption stumbling block relates to changing our mindsets. We come from a generation where having a bank account is almost seen as part of becoming an adult, but future generations may not even open bank accounts and they could transact using something like Bitcoin, which doesn’t require a third party to give you permission to use your own money, he says. “Then there are the regulatory hurdles.” Regulators need to accept that blockchain isn’t going away and regulatory overreach must be avoided if these solutions are to go mainstream. Durrant echoes this, noting that there’s no real consensus on a single set of standards or protocols. This is necessary for the industry to mature and achieve mainstream adoption so that there’s some sort of governance over these networks.
When it comes to blockchain use within the cryptocurrency space, the sheer amount of energy required to produce these virtual currencies can be an obstacle. Currently, the resources required to produce a single Bitcoin are worth about the same amount as the coin being generated, jokes Jansen van Rensburg. “As a society, we’re used to fast transactions. What good is a currency system if a person must wait a day before they can receive a payment?”
Sure, technology will catch up and public blockchains will get around the transaction speed challenges, but in some instances, it simply isn’t viable for businesses to wait for it to mature.
Overcoming these hurdles is all about starting small, advises De Bruyn. Find a part of your business that has a heavy reliance on trusting a third party or where reconciliation tends to be a problem and then determine if or how blockchain could reduce the reliance on trust, increase compliance and audibility among parties or increase efficiencies of reconciliation, he adds.
There’s no doubt that, when deployed properly, blockchain can help solve some of the challenges currently affecting certain sectors today, says Jansen van Rensburg. However, as is the case with many other technology solutions, companies must consider where blockchain will have an impact before they start implementing it. The potential for innovation using the blockchain is significant, but there must be corporate buy-in from the top down. “If there’s no demonstrable value to be gained from the technology, then it’s best to focus on other more important implementations first.”
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