Contributed by HPE
Written by James Cohen, HPE Pointnext, Chief Architect for Blockchain, Hewlett Packard Enterprise & Tom Golway, Worldwide Chief Technologist for Blockchain, Hewlett Packard Enterprise

Summary: As IT leaders continue to wrap their heads around blockchain and wait for significant issues to be addressed, it’s a good time to start evaluating use cases and learn more about what blockchain can do through workshops and conferences.

While cryptocurrencies have been in the headlines recently, it’s not going to be Bitcoin, Ethereum, or any other cryptocurrency that will lead to long-term changes in the ways in which companies conduct transactions. Rather, blockchain will upend identity management, eliminate a host of intermediaries to provide a single set of facts, establish trust between parties that have no inherent trust, and enable a wave of new applications and business automation. While blockchain platforms are still in the early stages of development, companies and their partners should start evaluating the technology now with an eye toward identifying use cases that will yield real business value in the years to come.

The Path to Blockchain Applications

Many companies have researched blockchain technologies and may even have ideas about potential use cases. But companies are worried that current platforms are immature and unproven for mission-critical applications, do not scale well, and lack resiliency.

They are absolutely right to be concerned. Significant issues need to be addressed before enterprise adoption can take place, including:

  • Blockchains can’t handle high transaction rates. The fastest existing blockchain can handle about 500 transactions per second, well below the level required for high-volume trading or payment systems. However, newer blockchain platforms claim significant improvements through changes in the consensus mechanisms being deployed.
  • Non-functional factors such as performance, elasticity and scale are difficult to model and forecast in blockchain which complicates hardware recommendations. These non-functional factors are sensitive to the requirements of the business logic supporting the business outcome, which are sometimes not well-defined.
  • Blockchain platforms such as R3 Corda, Ethereum, and Hyperledger are still in the initial stages of development. Some firms may be reluctant to make an early bet on a platform with ambiguity around the feature set or development timeline.
  • A lack of internal blockchain knowledge and developer talent.
  • Uncertainty about how to evaluate extended value chains and business processes that touch competitors, suppliers, and customers.
  • Data challenges—if the data is not correct, the blockchain will represent erroneous information.
  • Questions about how blockchain can be integrated into existing IT systems.

For these and other reasons, we expect 2018 to be a transitional year as companies continue to wrap their heads around blockchain and research potential use cases. Actual implementations will come later, starting in 2019. To avoid investments in hardware, early blockchain experiments will likely take place on pay-per-use models such as public cloud. While this will allow projects to scale, companies will have to contend with issues related to costs, security, data privacy, compliance, and vendor lock-in.

In the meantime, what should companies do to prepare for blockchain? Now is a good time to start evaluating use cases. Vendor or conference workshops can help educate IT and line-of-business executives to what blockchain can do today and get started on documenting the processes for specific use cases.

Moving forward with Blockchain
After the workshop exercise, there are two paths forward:

  1. Platform and skills evaluation.This involves assessing which blockchain platform is most suitable, , understanding transaction rates, performance and latency metrics, and determining the skills required to develop smart contracts or distributed applications.
  2. Establish a proof of value (POV).This is not a blockchain process, but rather a working model that the organization can tweak in order to validate the business value. POVs typically demonstrate whether or not blockchain has the potential to deliver quantifiable business value based on one or two use cases using the company’s own data, at its own site or in a test environment.

The distributed consensus method that underlies the blockchain model has the potential to create a trusted, universal platform to connect organizations, people, and machines. While the technology is not yet ready for enterprise adoption, this will change as platforms become stable, scaling and performance issues are addressed, and infrastructure needs are better understood. In the meantime, organizations need to understand how blockchain will impact their industries and determine where the opportunities lie to leverage blockchain.

About Hewlett Packard Enterprise
Hewlett Packard Enterprise delivers IT solutions for banking, capital markets, and insurance that help drive innovation and efficiency, adapt to new markets, and manage compliance.  The market is changing as fast as the digital technology that drives it.  To keep up, you need to transform the way you do business without taking risks.  You can trust us to help.  HPE delivers all the core IT solutions that financial services institutions require.  Our deep industry domain expertise and solutions are helping thousands of financial organizations worldwide to respond to regulatory requirements and market opportunities, and drive innovation, efficiencies, customer loyalty, and better decision-making.  A trusted financial partner for decades, HPE has delivered solutions and technological innovation to the financial industry for over 35 years.

Contact the Writers

James Cohen, HPE Pointnext, Chief Architect for Blockchain, Hewlett Packard Enterprise, james.cohen@hpe.com

Tom Golway, Worldwide Chief Technologist for Blockchain, Hewlett Packard Enterprise, thomas.golway@hpe.com