But lack of trust and regulatory uncertainty means few businesses have fully committed. Here’s a look at where companies are in their blockchain journey, and four strategies for navigating this new world.
Signs of the new blockchain world
Tokenised everything The representation of real or virtual assets on a blockchain is spreading to raw materials, finished goods, membership rights, and more. These digital tokens will transform company processes and usher in new business models.
ICOs are self-funding the tech Initial coin offerings, in which a company sells a predefined number of digital tokens to the public, are a growing alternative to classic debt/capital funding. They’re raising billions of dollars for the development of blockchain technology platforms.
ERP + blockchain Enterprise software platforms that are the engine for company operations like finance are beginning to integrate blockchain. Using blockchain with their ERP systems, companies can streamline processes, facilitate data sharing, and improve data integrity.
New leaders emerge Our survey respondents still perceive financial services to be the current and near-term future leader of blockchain, but other industries are on the rise (see the diagram above).
It’s hard to trust blockchain
By design, blockchain can foster trust. But in reality, companies confront trust issues at nearly every turn. 45% believe lack of trust among users will be a top barrier.
This study provides an empirical overview of the current state of both enterprise and public sector use of blockchain and distributed ledger technology (DLT). The study gathered data from over 200 enterprise DLT start-ups, established corporations, central banks and other public sector institutions, including non-public data obtained through confidential online surveys.
The study also explains the concept of ‘blockchain’ and DLT, highlights the different DLT architectures, and dives into governance-related issues. Finally, an entire section is dedicated to investigating how the public sector is approaching DLT.
Key Highlights Of The Report
Significant growth of the enterprise DLT ecosystem: at least 115 DLT start-ups employing more than 2,000 people are active in the ecosystem, in addition to large established corporations that increasingly set up entire business units and research labs exclusively dedicated to DLT
The protocol layer is slowly maturing: several dozen start-ups and established corporations are building and improving the core infrastructure (protocol frameworks,
core building blocks), but ‘immature technology’ is still considered one of the key challenges to broader DLT adoption
Only limited network and application deployment to date: the vast majority of users are experimenting with small-scale, isolated networks; live applications are mostly built as ‘permissioned layers’ on public blockchains
Majority of use cases focus on financial services: the majority of enterprise DLT companies are targeting financial and insurance-related use cases and actors, but increasing attention is being given to non-monetary applications (e.g., identity, supply chain, intellectual property)
Trend towards opening core infrastructure platforms: an increasing number of companies are open-sourcing their codebases, shifting monetisation of the platforms to higher stack levels (e.g., consulting, application development, support)
Key challenges to broader DLT adoption remain: unclear regulatory environment and legal risks are most often mentioned as key challenges; study participants consider privacy and confidentiality to be more of an issue than scalability and performance concerns
Interoperability still in its infancy: the current landscape is fragmented and comprised of incompatible protocols, but there is an increasing focus on developing common standards via the joint development of enterprise DLT frameworks by a variety of consortia
Significant public sector DLT activity observed: local, regional, national and multilateral institutions are all engaged in DLT-related activities; 77% of countries represented in the study have multiple institutions showing an interest in DLT
Public sector institutions are experimenting with a variety of DLT protocols: 63% of central banks and 69% of other public sector institutions (‘OPSIs’) have already been involved in proofs of concept and/or running trials; OPSIs are generally further ahead than central banks
Ethereum has been widely tested at central banks: 57% of central banks are experimenting with either the public Ethereum network or a permissioned version
Existing DLT deployment plans: 15% of OPSIs plan to deploy DLT-based applications this year, and another 23% plan to do so within the next two years; the timetable for central banks is more conservative than for OPSIs
According to our recent blockchain research, government organizations across the globe
are exploring use cases for blockchains that can impact their jurisdictions. With the support of the Economist Intelligence Unit, the IBM Institute for Business Value surveyed 200 government leaders in 16 countries on their experiences and expectations with blockchains.
Our research revealed that government organizations are looking at how blockchain technology can positively impact operations in a number of areas. For example, nine in ten government organizations plan to invest in blockchain for use in financial transaction management, asset management, contract management and regulatory compliance by 2018. And seven in ten government executives predict blockchain will significantly disrupt the area of contract management, which is often the intersection of the public and private sectors.
While virtually all government organizations surveyed intend to invest in blockchain by 2018, we discovered a small group of pioneers that are setting a fast pace and new direction with blockchains today. These Trailblazers, 14 percent of our survey, expect to have blockchains in production and at scale in 2017. They are prioritizing blockchains to help reduce innovation roadblocks and inaccurate or incomplete information across their organizations.
Trailblazers are focusing on blockchains to help reduce time, cost and risk in four areas: regulatory compliance, contract management, identity management and citizen services. Additionally, they expect blockchains will enable new business models, particularly in contract management, financial transaction management and identity management. These findings reveal that blockchain adoption is accelerating faster than originally anticipated, with government executives identifying key areas and benefits to explore.
In this report, we share key insights on market adoption of blockchain solutions. We also explore what differentiates early adopters – the Trailblazers – and how other government organizations can benefit from their blockchain explorations.
Distributed ledger technology (DLT), more commonly called “blockchain”, has captured the imaginations, and wallets, of the financial services ecosystem. DLT provides transaction immutability, which is a key requirement for eliminating the need for an enforcer of trust in the ecosystem. Tamper-proof distributed data enables an environment in which trust is not an issue and allows counterparties to operate with a single version of the truth.
Traditionally, asset and transaction information was stored within physical books to independently reference previous actionsinternally and externally. As technologies advanced, physical books were translated into digital ledgers.
Today, every FI maintains its own digital “book of record” repository.
As a result, central intermediaries proliferate in the industry, providing unbiased reconciliation services to facilitate transactions between counterparties without requiring them to trust each other. For transactions executed internal to the organization, reconciliation is performed within lines of businesses.
DLT transformative potential
At its core, DLT is a growing repository of transactions organized in chronological blocks where the technology intrinsically makes changes to previous transactions functionally impossible.
DLT has been designed to replicate data among participating nodes in real time, ensuring all parties operate off of a single version of the truth at all times.
Financial services implications
Challenges information silos between market participants and eliminates the need for inter-firm reconciliation.
Disintermediates central intermediaries and reduces the fear of arbitrage within the ecosystem.
Enables audit trailsto be established for assets and transactions with a significant reduction in disputes.