Why partners shouldn't lose faith in blockchain technology

Blockchain's hindrances

"When I learned about blockchain, I was fascinated because it brings something to the web stack we didn't have before: a way to prove that the way something was introduced wasn't changed or tampered with," said Karen Kilroy, CEO of blockchain solutions provider Kilroy Blockchain, based in Austin, Texas.

When Kilroy began exploring blockchain's potential and what larger tech companies were doing with the technology, she discovered that cryptocurrencies had become "the gold rush of our times -- and there's a lot of hype and mystery" around them. But Kilroy said she believes there is a cyptocurrency bubble, similar to the dot-com bubble, "where everyone's acting like there's a bunch of money and projects, and there's not."

Karen Kilroy

Lack of clarity in laws and regulations around cryptocurrencies, as well as the explosion in initial coin offerings, caused "cryptocurrency hype and misrepresentation," giving blockchain a black eye, Kilroy said. "It made people afraid to say the word 'blockchain' there for a while," she said.

Kilroy said she also finds that "people in decision-making positions for IT projects are still learning what blockchain is."

That sentiment is echoed by Neeraj Satija, CEO and CTO of Concordus Applications, a systems integrator based in Sacramento, Calif. "The single biggest factor hindering blockchain is the inexperience of businesses and their ability to understand its relevance and power. People don't understand the impact this technology will have," Satija said. He also co-chairs the CompTIA Blockchain Advisory Council.

The single biggest factor hindering blockchain is the inexperience of businesses and their ability to understand its relevance and power.

Tim Coates, head of U.S. blockchain and ecosystems at Synechron, a New York-based digital financial services consultancy, said that over the course of dozens of POCs at major banks, "we learned the costs and complexity of implementation [of blockchain] far outweighed the benefits of decentralizing a financial value chain."

Many industries work just fine with centralized platforms, Coates added. The primary limitations tend to come from fragmentation of the market, "which is a problem blockchain exacerbates rather than solves."

Further, as the industry came to understand the need for a centralized body to run a blockchain network and to drive industry standardization, "the benefits case of an industrywide transformation continued to erode," Coates said.

The lack of an overarching regulatory body has prevented mass adoption, Satija agreed. "You have [cases] of multiple blockchains that are not really interoperable, ... and you have to do a lot of integration to make them talk to each other, so there is a sense of chaos and the Wild West."

Tim Coates

Indeed, interoperability between different distributed ledger platforms is the primary technical challenge, Coates said. "This is a phase two challenge. Solutions will need to launch and have success as stand-alones first," he said. "Interoperability would provide next-generation benefits after that."

The channel has also been slow to adopt blockchain, Satija said. He has several conversations a month with channel partners who either are thinking about blockchain or have started to do something "and are struggling to make sense of it and embrace its power."

That said, blockchain pays back in multiple ways, including quicker dispute resolution, promotion of good trade behavior and a reduction in Opex costs by removing the middleman, Satija said. "Now there is a realization in the channel that blockchain is here to stay, and they've got to do something to embrace it."

Often blockchain is mistaken for bitcoin, which is a cryptocurrency and just one way blockchain can be implemented, Satija added.

How does blockchain fit into organizations?

There are baby steps happening with blockchain implementations in multiple vertical industries, Kilroy said. "Starbucks has a project to prove the origin of coffee. Supply chain is really the first big area that's taken off [with blockchain] and that's because there are so many players in the whole logistics system and so much paperwork," she said. Those players are "also spread all over the world, and they definitely don't trust each other."

There are three big bright spots where blockchain is concerned, said Ben Golub, executive chairman and interim CEO of Atlanta-based Storj Labs, which provides a distributed cloud storage network. The first is with payment, especially if a company is doing a lot of cross-border payments or in cases where there isn't a well-established trusted authority.

Concurring with Kilroy, Golub said the second bright spot is in supply chain. When there are multiple suppliers delivering to multiple customers, a blockchain can ensure quality control.

The third is a decentralized cloud model. The model can provide an improved method for storing data. Additionally, it can offer a cheaper and more secure way to do compute.

Neeraj Satija

However, Satija said he believes that the number of players in a supply chain may work against the use of blockchain. "The nature of the channel is such that every single transaction has multiple stakeholders," which can include agents, master agents, suppliers, implementation partners and others, he noted. To get all of them to use the same CRM platform is virtually impossible because they all have their own already in place, he said. Another issue is that the ROI for a blockchain project is longer than the typical IT project, he added.

The main area where blockchain excels is in proving whether data has been tampered with, Kilroy said. "The rest is just bells and whistles -- like workflow, distributed data and the fact that it has smart contracts and consensus."

Keep blockchain on your radar

Channel firms should not lose faith in blockchain, industry observers said. The technology is being integrated with other systems. Partners can play a key role either through consulting, implementation or integrating blockchain with other systems if they have expertise without having to know all of the tools in the stack, Kilroy said. Many companies have free offerings, including IBM, Oracle, Hewlett Packard Enterprise and SAP, and a great way to start is with blockchain as a service, Kilroy noted.

There are a narrow set of use cases where blockchain is still progressing strongly, Coates said. "Firms should take advice from trusted folks that have worked in the industry for some years with regard to the use cases that work for that firm."