Blockchain has been one of the buzziest tech words of 2018, with companies scrambling to figure out what use cases actually make sense for the distributed ledger technology.
In a panel discussion at the 2018 MIT Sloan CIO Symposium, three tech experts discussed the promise of blockchain, current implementations, and how mainstream CIOs should approach the technology.
“Blockchain is not going to replace existing things, it’s going to create brand new business models,” said Prasanna Gopalakrishnan, executive vice president and chief digital and information officer of Boston Private. “We have to embrace it, and disrupt with it.”
Boston Private is now using blockchain to remove inefficiencies in the system for high-net worth individuals who want to borrow money, Gopalakrishnan said. This often involves a brokerage accounts and a bank account, and pledging of securities–a complex process that still involved a paper trail going back and forth. But now, the bank can bring all of the players together using smart contract technology and an open source blockchain platform.
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“We as the lender are the main part of the node, and give permission for the parties involved in the blockchain to say what they can or cannot do,” Gopalakrishnan said. “It’s a big benefit to the end customer. The goal is about creating a unique customer experience, and making it a frictionless experience.”
Another financial blockchain use case is in transferring funds, said Peter Nichol, managing director of OROCA Innovations. The average cost to send remittances globally is 7% of the amount sent, according to the World Bank. In some areas, that number is well over 20%. Today, startups like Zendo are working to tackle this issue with blockchain and Bitcoin, Nichol said.
Outside of finance, blockchain holds immense promise for use as identification for the billion-plus people globally who do not have a proven identity–a project the United Nations is currently working on, said Atefeh Riazi, assistant secretary-general and chief information technology officer in the UN’s Office of Information and Communications Technology. This could have a number of implications, including the ability to better track refugees and human trafficking victims, and to prevent child marriage and labor violations.
“There are social ramifications of basic identity,” Riazi said. “When you don’t have identity, you don’t have a bank account, or any financial independence.”
Millions of identities have also been stolen from the private sector and the government in massive hacks, Riazi said. Blockchain can help establish trust with customers and partners, and even with elections, to ensure that the right people are voting, and voting only once.
Many of the best blockchain use cases are not yet public, Nichol said. He recommended that businesses collaborate with their peers working in the space, who may be willing to share privately.
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Determining a use case
Not every use case requires a blockchain, Gopalakrishnan said. CIOs must determine if blockchain can add value to their case, and, if so, they must get buy-in from business partners. “This means clearly articulating and understanding the business problem you’re trying to solve, and then connecting the dots to business outcomes and values you want to bring,” Gopalakrishnan said.
Because so many parties are involved with a blockchain, you have to demonstrate the value for each one, Gopalakrishnan said. “Unless everybody cohesively works together in this ecosystem, it will not be a valid use case, and you will not realize the value,” she added.
Companies can think about the different aspects of the blockchain, and decide first where they do not want to focus, Nichol said. These include access center of technology, application stacks, asset registry technology, and classic cryptocurrency, he added.
“Blockchain won’t do a lot of things,” Nichol said. “It’s helpful to move CIOs away from ‘it’s going to solve all of my problems and transform the business and change the culture’–that’s not could to happen. It could be affected, but it won’t fundamentally change.”
In terms of getting started, cloud platforms like Microsoft Azure are offering Blockchain as a Service, Gopalakrishnan said. There are also many open source, private blockchains available. You can determine what fits your use case, and then download the platform onto your servers and start experimenting, she added.
“You don’t have to build a blockchain platform, just run one,” Gopalakrishnan said. “It’s a journey, not an RFP you do on a product selection. You have to experiment with it, and learn along with way, to end up with what makes sense for your use case.”
There are not yet more production-ready applications due to classic risk/reward, Nichol said. “As CIO you have to go pitch this to the board, and it’s a tough business case, because you have to explain and educate on the technology,” he added. “Some folks can’t fully grasp it.”
And in many organizations, the expertise around blockchain doesn’t yet exist, Riazi said. However, this should not deter CIOs, Gopalakrishnan said.
“Blockchain is sometimes a difficult concept to explain to a team,” Gopalakrishnan said. “Don’t get intimidated by it. Try it, and fail fast. It’s going to disrupt every industry no matter what, so it’s very important that you start now, or you’ll get left behind.”