Blockchains –when will they be adopted?
Having topped Gartner’s emerging technologies hype curve in 2016, you would probably expect to see real-world blockchain implementations by now, but they remain rare. Why? True, there are challenges with the technology, but it’s our acceptance of the technology and the construction of a trusted operational design, which may be limiting adoption. As such, blockchain still needs time to become commonplace.
I’ll start with the briefest of definitions: Blockchain is a distributed database/ledger technology (DLT). Blockchains store data in an immutable, fault tolerant and tamper proof way, meaning they are designed and guaranteed to be trustworthy without a central authority. Database-based ledgers, on the other hand, require central ownership and management by an organisation/body to whom users/customers entrust their data.
As with all new technologies, blockchain technology is still maturing, but the well-documented technical constraints and limitations such as security/permissions, scalability, performance, and storage issues are all solvable. Less well publicised are the non-technical challenges associated with implementing blockchain. These include:
- Governance – Who owns the data? With no central authority, if mistakes occur, who corrects them? and who ensures such changes are trustworthy and trusted?
- Service management – With no single owner for the service, who manages the service, and how, given its distributed nature?
- Regulation – Blockchain is boundaryless. What regulatory body exists or has jurisdiction? How does such a body police a service and enforce compliance when there is no central authority responsible for the data and the service?
So, although theoretically, blockchain can enable disintermediation and could render central governance redundant, to gain widespread acceptance, a central operating authority will be required. Central consortia or market providers may be best placed to take on this role. However, such a role can be challenging – as this account of the DAO attack illustrates.
As a consequence, there is an opportunity for and risk to existing authorities. Failure to consider and understand blockchain and the changing governance role may lead to new authorities being created to take on the role, and usurping the incumbent ones.
Most foundation technologies have taken time to mature. Parallels have been drawn between blockchain and the TCP/IP protocols. TCP/IP took over twenty years to be adopted widely to enable the internet as we know it. The success of blockchain will ultimately come from large scale inter-enterprise adoption of a blockchain standard or set of standards that reduces transactional costs and timescales.
Human institutions, as imperfect as they are, provide the ability to make change with the safety which central governance, management and regulation delivers. In an analogue world, digital solutions like blockchain need time to mature and become trusted. It remains to be seen whether this will take two years or twenty years.
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