Blockchain has progressed considerably as an emerging technology during 2018. Many of 2017’s PoCs have become deployed commercial solutions as standards have begun to solidify, and with more organizations beginning to explore the potential of distributed ledger architecture and smart contracting.

We are still at the very beginning of the lifecycle of this particular technology, and nowhere close to seeing its full potential yet. But as the year comes to an end, what might 2019 bring in terms of distributed ledger maturity and trends? Here are my seven predictions for blockchain in 2019.

The use case landscape shakes out

Blockchain has a clear goodness-of-fit spectrum, as I have written about in a previous blog, and to date, that spectrum has often been tested at the low end with mixed results. Blockchain has clear strengths in a number of well-defined use cases, most notably supply chain and parts management, multiparty shipping and logistics tasks, remittances, securities clearance, and more. As 2019 dawns, we will begin to see providers focus less on exploring the use case spectrum and more on building more capability into those use cases that have been proven to be blockchain-relevant.

Use cases become playbooks

The secondary benefit of a more focused approach on the part of blockchain service providers is the swift emergence of proven playbooks for specific blockchain applications. Already, providers are beginning to slash the number of discussed use cases as it becomes obvious that cold-chain pharma, farm-to-fork agricultural provenance, and airplane parts sourcing and documentation, for example, are functionally multiple iterations of the same basic design with domain knowledge added per the specific deployment.

Interoperability fades as a limiting factor

Blockchain has presented something of a Betamax/VHS (or Blu-Ray/HD-DVD, for younger readers) quandary to date, with multiple standards each offering a unique source of value but on a mutually exclusive basis. But more providers are beginning to focus on hybrid blockchain solutions and platform interoperability, and the announcement in late October that Hyperledger Fabric will be able to execute smart contracts written for Ethereum certainly signals that we are entering the next phase of the market, in which multiple market leaders will need to play responsibly in the sandbox for this technology to take deep root.

Throughput speeds improve – but DB-like operation at-speed/at-scale is more likely in 2020

Blockchain’s primary drawback up to this point is that it can operate at speed, or at scale, but not both. That is slowly changing, with more blockchain accelerators emerging in the marketplace (Microsoft’s CoCo being just one example), and greater attention being paid to purpose-built platforms (like Symbiont Assembly) that are architected for at-speed/at-scale operation. Sharding and layer-2 protocols, both under exploration by Ethereum, show promise for keeping the core value of a distributed ledger system and adding the ability to accelerate transaction throughput to near-database speeds.

Quantum computing comes in from the cold

QC has been the hobgoblin looming over blockchain in the media for years, almost always framed as a technology that sits in opposition to blockchain – either as a security threat or a technology that will make the distributed ledger concept obsolete. But, like most technologies, it will emerge from the threatening media gloom to take its place at the solution table, in the form of a blockchain acceleration and security-improving offering. Quantum computing is still some way off from making a material difference in the IT landscape, but 2019 will bring a dose of sanity in removing the oppositional rhetoric from its emerging presence.

Automation, AI & IoT combine with blockchain for next-gen digital transformation

Blockchain is often discussed as if immutability and transaction security are its primary value proposition. But smart contracting and autonomous action within a DLT environment are at least as important in terms of overall value to the enterprise – and these are capabilities enriched and informed by other emerging technologies, including IoT, artificial intelligence, and cognitive automation. Increasingly, these four technologies are combining to form the basis of next-generation digital transformation for organizations seeking results beyond the limited promise of the initial wave of early transformational work (circa 2014-2017).

Convergence sets the stage for a viable long-term replacement for ERP

What these combined technologies are capable of reaches beyond the ‘four walls’ of the transformational enterprise; they enable whole supply chains to work together as extended ERP fabrics, and to incorporate financial, regulatory, and technology entities surrounding the production and distribution cycle. The discussions around these possibilities are just beginning as 2018 draws to a close, but we expect 2019 to bring more blueprinting and ecosystem construction conversations.

One final, overarching perspective for blockchain and DLT in general: we are progressing past the point of questioning whether these technologies have a role to play in the broader business IT ecosystem. When deployed against the right business challenges, on the right architecture for the task, with the right partner, blockchain is capable of remarkable improvements – and becomes a more strategic technology when considered as a transformational component alongside IoT, AI and automation. The future isn’t built exclusively on blockchain, but it is increasingly a part of the future of business transaction management.

With the rise of every new technology, there is a parallel rush among enterprises to incorporate it into the near-term IT roadmap, and for good reason: new technologies offer cost savings, CX improvement, better risk management, and a host of other benefits that look terrific in annual reports and quarterly earnings documentation.

Nowhere is that trend more prevalent than in blockchain, a technology that has created significant adoption pressure for enterprise clients amid a flurry of questions regarding platform selection, process redesign, and partner engagement. Blockchain’s benefits are much vaunted (security, immutability, fault tolerance, decentralization), but then there is no shortage of drawbacks (throughput speed, fragmented platform landscape, interoperability). Moreover, there is already talk of technologies that could replace or bypass the benefits of blockchain, from hashgraph to quantum computing, adding further to the murk surrounding the process of evaluating blockchain for organizational use.

In an environment spurring on organizations to adopt blockchain, there’s actually good cause to slow the overall technological rush and ensure that a blockchain solution is the right choice for a specific business challenge and commercial ecosystem. Blockchain is a transformative technology; it changes the fundamental way that transactions are encoded, stored, and tracked. In the right setting, it can be a material lever for unlocking value within the organization, in the supply chain, and among banking and regulatory interactors. In the wrong setting, it can be an expensive dead-end that diverts resources and time from a broader slate of digital transformation activities.

So how can organizations correctly sort the real blockchain opportunities out? In the course of my research in this area, I’ve identified seven key characteristics of business processes that form the basis of an organizational blockchain ‘goodness of fit’ checklist:

1. Transactional processes

Note that this is not the same as being financially transactional; any process where information changes hands between parties, even if compensation is not a part of the exchange, can be a candidate for blockchain deployment. Blockchain excels at documenting the transfer of value or information, and fiscal gains tend to accumulate with greater volumes of handshakes. As a result, the higher the transaction count in one cycle of a given process task, the more relevant blockchain becomes.

2. Frictional processes

Process friction can take many forms – from time delays in passing information from one party to the next, to per-message costs (such as SWIFT messaging expenses in financial services), to partner fatigue in disputing invoices or claims. The more time and expense accumulates within the process, the better a fit for blockchain technology a process is.

3. Non real-time, low-volume processes

Speed is not currently a significant blockchain platform strength, so processes that need to happen in real-time at scale may be a poor fit for the technology in its current form. While some specialized platforms – most notably Digital Asset, Symbiont, and Waves – offer compelling speed at scale, most of the big names in the platform space are not yet performing at speeds comparable to a relational database, so real-time processes happening in volume may be good candidates to consider when blockchain catches up in the next two years.

4. Simpler processes

The term smart contracts tends to be a confusing one in blockchain, as it suggests more intelligence than is really present in the technology currently. Smart contracts are smart in their management of the tasks surrounding a transaction, like document processing, notarization, and approval; a smart contract is self-executing in these areas and does not require additional input.

But for all that transactional intelligence, smart contracts remain relatively ‘dumb’ in terms of overall contract complexity. So, while most can follow relatively simple ‘if-then’ logic, complicated transactions with multiple forks and ‘fuzzy’ interpretation are beyond the current reach of most smart contract platforms. Again, this is a development priority for many platform providers, so expect to see this evolve swiftly in parallel with developments in AI – but at the time of writing, simpler processes are a better fit for blockchain implementation.

5. Oppositional processes

Transparency and trust are cornerstone components of an effective blockchain implementation, particularly so when there is an element of opposed goals in a process environment (payor versus payee being the most common such example). When all parties can monitor and oversee the documented process of content or payment through a process transparently from end to end, trust is improved and disputes tend to decline both in volume and in time required for resolution.

6. Fragmented processes

Intra-organizational applications of blockchain can produce meaningful benefits, but the real value is unlocked when a blockchain connects multiple parties operating in different domains – for example, in an ocean cargo management setting, exporters, banks, insurers, regulators, shipping providers, importers, and distributors. In such an environment, where responsibility and input are being passed among many organizations, the relevance of a blockchain solution increases considerably.           

7. Risk-accumulative processes

Corporate risk management is an accumulative function to begin with, as the audit task normally demands a large volume of signed and documented data – so the ability to produce the supporting documentation without significant organizational effort or data reconstruction is a vital task. Blockchain offers historically unparalleled data immutability and signed witness status, making it an exceptionally good fit for processes that accumulate large volumes of risk-relevant exchanges over time.

In conclusion

What can operations and IT executives take from this in planning for blockchain deployment? Currently, the most compelling fiscal and performance returns are coming from highly transactional processes with considerable process friction, prioritizing real-time transparency in low transaction volume, with minimal complexity, high levels of fragmentation, and considerable risk exposure.

However, it is critical to maintain a perspective on the role of implementing blockchain for these processes within the scope of a broader digital transformation initiative; blockchain demands many of the same transformation readiness checkpoints (big data capability, master data management and hygiene, and automation readiness) that other transformational initiatives do.

Finally, in assessing blockchain’s weaknesses, keep a weather eye on the horizon: blockchain’s two principal shortcomings to date (managing real-time transaction volume at scale and handling complex smart contracts) will increasingly become priorities for the major platform providers over the next two years.

EdgeVerve, an Infosys Product subsidiary, this week announced a new blockchain-powered application for supply chain management as part of its product line. Nia Provenance is designed to address the challenges faced by organizations managing complex supply chain networks with multiple IT stacks engaged across multiple stakeholders. Here I take a quick look at the new application and its potential impact.

Supply chain traceability, transparency & trust

Nia Provenance is designed to provide traceability of products from source of origin to point of purchase with full transparency at every point along the supply chain. The product establishes trust through the utilization of a version of Bitcore, the blockchain architecture used by Bitcoin. While this can be a relatively simple task in agribusiness and other supply environments in which a product involves only processing as it moves through the supply chain, environments such as consumer electronics or medical devices are much more complex, involving integration and assembly of multiple components along the way. The ability to isolate a specific component and trace it to its source of origin, through phases of value addition timestamped on a blockchain ledger, is invaluable in case of recall or consumer danger.

Transparency in Nia Provenance is provided through proof of process as the product or commodity moves through the system – so attributes that must be agreed on at specific phases of the supply chain, such as conflict-free or locally-sourced, can be seen in the system as they are accumulated. Similarly, regulatory inspections and certifications are more easily tracked and audited through a blockchain solution like Nia Provenance.

Finally, trust is gained in a system with a combination of data immutability, equality in network participation as a result of decentralization of the overall SCM ledger, and cryptographic information security. Over time, the benefits of a blockchain SCM environment accrue both to the organizational bottom line, in the form of cost savings, and to the organization’s brand as a function of increased consumer trust in the brand promise.

Agribusiness client case

As one example of how Nia Provenance is being leveraged in the real world, a global agribusiness firm undertook a proof of concept for its coffee sourcing division in Indonesia to track the journey of coffee from the growing site, through the roasting plant, the blend manufacturer, the quality control operation, the logistics providers, and on to the importer. This enabled the trader to provide trusted accreditation and certification information to the importer for properties such as organic or fair trade status, or that the coffee was grown using sustainable agriculture standards.

Providing strategic blockchain reach

Nia Provenance provides Infosys with three important sources of strategic blockchain ‘reach’ in an increasingly competitive market, because:

• It is platform-agnostic and purpose-built to dock with multiple blockchain architectures. A supply chain solution that relies too heavily on the specific capabilities of one common blockchain architecture or another – for example, Ethereum or HyperLedger – would encounter difficulty working with other upstream or downstream architectures. By keeping the DLT technology in an abstraction layer, Nia Provenance eases the process of incorporating different blockchain architectures in a complex SCM task environment
• It is designed to benefit multiple supply chain stakeholders, not just the client. Blockchain adoption becomes more appealing to upstream and downstream stakeholders, as well as horizontal entities like banks, insurers and regulators, when the ecosystem is built with clear benefits for them as well as the organizing entity. Nia Provenance is designed from the ground up with a mindset inclusive of suppliers, inspectors, insurers, shippers, traders, manufacturers, banks, distributors, and end customers
• It is designed to span multiple industries. Although the platform has its origins in agribusiness, Nia Provenance looks to be up to the task of SCM applications in manufacturing, consumer goods/FMCG, food and beverage, and specialized applications such as cold-chain pharmaceuticals.

Summary

Supply chain provenance is a core application for blockchain, and one that we expect to be a clear value delivery vehicle for blockchain technology through 2025. The combination of – as Infosys puts it – traceability, transparency, and trust that blockchain provides is a compelling proposition. Nia Provenance offers a solution across a broad variety of industry applications for organizations seeking lower cost and greater security in their supply chain operations.

For all the discussion in the blockchain solution industry around platform selection (are they choosing Fabric or Sawtooth? Quorum or Corda?), you’d be forgiven for thinking that every provider’s first stop is the open-source infrastructure shelf. But the reality is that blockchain is more a concept than a fixed architecture, and the platforms mentioned do not encompass the totality of use case needs for solution developers. As a result, some solution developers have elected to start with a blank sheet of paper and build blockchain solutions from the ground up.

One such company is Symbiont, who started down this road much earlier than most. Faced with the task of building a smart contracts platform for the BFSI industry, the company examined what was available in prebuilt blockchain platform infrastructure and did not see their solution requirements represented in those offerings – so they built their own. Symbiont’s concerns centered around the two areas of scalability and security, and for the firm’s pursuit target accounts in capital markets and mortgages, those were red-letter issues.

The company addressed these concerns with Symbiont Assembly, the company’s proprietary distributed ledger technology. Assembly was designed to address three specific demands of high-volume transactional processes in the financial services sector: fault tolerance, volume management, and security.

Supporting fault tolerance

Assembly addresses the first of these through the application of a design called Byzantine Fault Tolerance (BFT). Where some blockchain platforms allow for node failure within a distributed ledger environment, platforms using BFT broaden that definition to include the possibility of a node acting maliciously, and can control for actions taken by these nodes as well. The Symbiont implementation of BFT is on the BFT-SMaRt protocol.

Volume management

In addressing the volume demands of financial services processing, deciding on the BFT-SMaRt protocol was again important, as it enables Assembly to reach performance levels in the ~80k/s range consistently.

This has two specific benefits, one obvious and one less so. First, it means that Assembly can manage the very high-volume transaction pace of applications in specialized financial trading markets without scale concerns. Secondly, it means that in lower-volume environments, the extra ‘headroom’ that BFT-SMaRt affords Assembly can be used to store related data on the ledger without the need to resort to a centralized data store to hold, for example, scanned legal documents that support smart contracts.

Addressing security concerns

The same BFT architecture that supports Assembly’s fault tolerance also provides an additional layer of security, in that malicious node activity is actively identified and quarantined, while ‘honest’ nodes can continue to communicate and transact via consensus. Add in encryption of data, whereby Assembly creates a private security ledger within the larger ledger, and the result is a robust level of security for applications with significant risk of malicious activity in high-value trading and exchange.

Advantages of building a bespoke blockchain platform

Building its own blockchain platform cost Symbiont many hours and R&D dollars that competitors did not have to spend, but ultimately this decision provides Symbiont with three strategic advantages over competitors:

• Assembly is purpose-built for BFT-relevant, high-volume environments. As a result, the platform has performance and throughput benefits for applications in these environments compared with broader-use blockchain platforms that are intended to be used across a variety of business DLT needs. To some degree this limits the flexibility of the platform in other use cases, but just as a Formula One engine is a bespoke tool for a specific job, so too is Assembly specifically designed to excel in its native use case environment. That provides real benefits to users electing to build their banking DLT applications on the Assembly architecture

• Symbiont can provide for third-party smart contract writing, should it elect to do so. While this is not in the roadmap for the moment, and Symbiont appears content to build client solutions on proprietary deliverables from the contract-writing layer through the complete infrastructure of the solution, the company could elect to allow clients to write their own smart contracts ‘at the top of the stack’. Symbiont does intend to keep the core Assembly platform proprietary to the company for the foreseeable future

• Assembly may attract less malicious activity interest than traditional platforms. The rising number of blockchain projects based on HyperLedger and Ethereum is certain to attract more malicious activity based on the commonality of the architecture across a broader common base of technology. In much the same way that Windows historically attracted more virus incursions than the OS platform, Assembly will tend to attract less attention than platforms with broader user bases. Moreover, Assembly’s BFT foundations will enable it to deal more effectively with those events that do occur.

Summary

Symbiont isn’t alone in developing its own proprietary blockchain technology architecture rather than choose from the broadly available offerings in the space, and as blockchain enters the mainstream of enterprise business, other provider organizations will surely go the same route.

What Symbiont has established is an exemplar for developing a purpose-built blockchain platform, beginning with the specific needs of the task environment at scale, and proceeding to address those needs carefully in the development process.