When attempting to integrate Blockchain, most organizations
confront similar challenges. Understanding them might be the first step in
overcoming them on the path to success.
Blockchain technology has been accompanied by a great deal
of buzz, piqued many corporate executives’ curiosity but also caused them to be
apprehensive about its obstacles and hazards.
At its most fundamental level, Blockchain refers to
peer-to-peer distributed ledger technology that may record transactions between
two parties efficiently, veritably, and permanently, enabling tracking and
traceability. This nascent technology has the potential to revolutionize a vast
array of applications well beyond its cryptocurrency beginnings.
For instance:
• Pharmaceutical businesses have built blockchain
applications to protect medical supply chains and confidential test data.
• Walmart, in conjunction with IBM, has created a blockchain
system that reduces product tracing times from seven days to 2.2 seconds.
• In April 2021, the Ethiopian Ministry of Education
announced a partnership with blockchain company IOHK to produce digital IDs for
five million students based on blockchain technology.
With the benefits that certain early-adopter firms see from
Blockchain, knowledge of the technology is rapidly expanding. While my company,
APQC, discovered that 66% of firms were aware of Blockchain in 2019, that
percentage increased to 80% within a year. However, most businesses are still in
the adoption phase (see figure 1).
Why do just 12% of participants report using Blockchain or
Blockchain as a service in production? What is preventing 34% of respondents
from ever investigating the usage of Blockchain?
According to a 2020 APQC poll of supply chain specialists,
the following are the top five blockchain difficulties enterprises face and
potential solutions.
1. Absence of Adoptions
Blockchains are ecosystems that require widespread adoption
to function efficiently. For example, supply chain track-and-trace capabilities
would require a company and its suppliers to embrace a blockchain network. Yet,
according to APQC, just 29% of firms are exploring blockchain technology or
have completely implemented it. Without widespread acceptance, blockchains’
usefulness and scalability will remain constrained.
However, there are many reasons to be confident that
blockchain use will increase. Increasingly, organizations are organizing
collaborative Blockchain working groups to solve shared pain points and build
solutions that may benefit everyone without disclosing confidential
information.
For instance, before the COVID-19 pandemic, Deloitte and
several significant pharmaceutical companies formed the Blockchain for Clinical
Supply Chain Industry Working Group. Working with blockchain developer Ledger Domain,
the team created the KitChain application. The tool enables organizations to
trace packaged pharmaceutical shipments, which helps safeguard the supply
chain, reduces reliance on paper records, and ensures the confidentiality of
clinical trial data.
2. Skills Gap
Blockchain is still in its infancy, and the skills required
to build and utilize it are in short supply. As seen in Figure 2, 49% of
research participants cite this skills gap as a significant obstacle. The
market for blockchain expertise has been intensely competitive for some time.
According to the Blockchain Council, demand for blockchain engineers increased
by more than 500% in 2019 compared to the previous year, with basic pay for blockchain
developers increasing proportionally. The high cost and complexity of talent
acquisition in this field exacerbate concerns about implementing blockchain
technology and integrating it with legacy systems.
As the demand increases cost is also high one may need to hire blockchain
developers so you can select and read blogs in order to get a skillful and
low-cost developer to fulfill the project needs.
Using Blockchain as a service (BaaS) is one strategy to
combat the skills gap since it enables enterprises to gain the benefits of
Blockchain without investing heavily in the technical knowledge behind it.
This methodology has already reduced the skills gap among
other technologies, such as robotic process automation (RPA). Instead of
developing bots and writing code in-house, firms may now go to various
suppliers with the knowledge to deploy RPA and tailor it to their specific
needs. Users need not be programmers to use the technology’s benefits; only a
basic understanding of the technology is required. Similarly, users will need
to understand how to execute smart contracts (which utilize Blockchain to
automatically perform particular activities when the agreement’s requirements
are satisfied). Still, they will not require a technical understanding of
distributed ledgers. BaaS can reduce the blockchain skills gap.
3. Confidence Among Users
Lack of trust among blockchain users is the third most
significant barrier to widespread adoption. This difficulty is bidirectional:
Organizations may need help to rely on the security of the technology or the
other participants on a blockchain network.
Every Blockchain transaction is considered safe,
confidential, and verifiable. This is true despite the absence of a central
authority to validate and verify transactions on the decentralized network.
Consensus algorithms, which provide consensus on the current state of the
distributed ledger for the whole network, are a crucial component of any
blockchain network. It assures that each newly added block is the sole version
of the truth accepted by all nodes in the Blockchain. Business executives have
a higher confidence level in private blockchains with no unknown users.
To increase consumer trust, systems such as Trade Lens (a
global logistics network built by Maersk and IBM utilizing the IBM Blockchain
Platform) demonstrate what may occur when peers and rivals collaborate to
explore solutions to shared problems. On the Trade Lens private Blockchain,
participants are referred to as “Trust Anchors” and are known to the
network based on their cryptographic identities. Trade Lens utilizes a
blockchain with permissions to provide immutability, privacy, and traceability
for shipping papers.
4. Financial Resources
According to participants in APQC’s research, there needs to
be more financial resources for Blockchain’s broad implementation. Implementing
Blockchain is not free, and many firms have constrained funds due to the
epidemic and disruptions of 2020. Nevertheless, another lesson gained from the
pandemic is that businesses, and IT departments, in particular, may adapt more
rapidly than was previously believed.
A closer investigation of this obstacle reveals that it
stems from a fundamental need for more organizational knowledge and
comprehension of Blockchain. As knowledge of new technologies increases, so
does the capacity to create a business case for their adoption effectively.
This will also be true with Blockchain, provided that blockchain proponents
construct a business case that illustrates how the advantages of the technology
will outweigh the implementation costs.
5. Blockchain Compatibility
As many firms use blockchain technology, there is a trend
for many organizations to establish their systems with distinct features
(governance rules, blockchain technology versions, consensus models, etc.).
There is no common standard that enables various networks to connect across
blockchains.
Interoperability across blockchain networks entails the
capacity to share, see, and access information without the requirement for an
intermediate or centralized authority. Lack of compatibility can make
widespread adoption nearly tricky.
Interoperability for Blockchain will be crucial in a
post-pandemic corporate environment where collaboration between functions,
suppliers, and consumers is necessary. This is the only way for businesses to
maximize the value of their blockchain investments. The good news is that a
rising number of interoperability initiatives aimed at bridging the gap between
different blockchains have emerged during the past year. Numerous of them try
to connect private networks or to public blockchains. Ultimately, these
solutions will benefit corporate leaders more than previous methods centered on
public blockchains and cryptocurrency-related technologies.
Looking Ahead
It would be naïve to assert that these blockchain-related
difficulties do not represent substantial adoption roadblocks. In general,
though, many of Blockchain’s most significant obstacles are typical growing
pains associated with any new technology.
Final Thought
To build the business case for blockchain adoption,
proponents will need to persuade their businesses to take the kind of risks,
develop the types of connections, and make the types of tradeoffs typical in
other commercial domains.
Given the benefits that companies are now reaping from
Blockchain and the growing demand for visibility and openness across and
between enterprises, Blockchain has the potential to be a formidable solution
if it is embraced.
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