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ENTERPRISE BLOCKCHAINS-Creating Opportunity and Remaining Competitive

Blockchain has expanded its use case applications through adoption by various industries as an essential Information Technology (“IT”) platform. This has led to enterprising of blockchain as it plays a key role in shaping the business model of many industries. While there does not exist an exact definition for “enterprise blockchain”, it is referred as the utilisation of blockchain network for the enterprise level purpose. The Enterprising growth of blockchain is expected to increase to USD 13.2 billion by 2024, which is noteworthy for an emerging market technology. [1] The blockchain has enhanced from the basic use case of payments platform to offering various services to adapt to the various requirements of enterprises. Initially, the main application of the blockchain was limited to transaction of tokens and had a limited scope for enterprises unless the enterprise is involved in accepting retail payments in cryptocurrencies.

Some of the basic blockchain applications such as system of records and identity management is required by most large-scale organisations. Moreover, the blockchain is now being implemented to offer Software as a Service applications to enterprises. This is being done through providing services like tracking and traceability of products. Following this, J.P Morgan has introduced an enterprise version of the ethereum labelled as “Quorum” which has resolved concerns around privacy and scalability. Quorum is offered as a blockchain as a service offering. Ethereum has also innovated to address all issues which are being faced by enterprises and has formulated an Enterprise Ethereum Alliance (“EEA”) to work on further developments and satisfy all requirements of large-scale organisations.

The first generation blockchains did not have privacy in mind. They were created to be decentralised without keeping enterprise solutions in mind. Hence, there lacked early adoption of blockchain. With more innovation in the way, there does not exist a definite mechanism of standardisation to provide a similar curve to all blockchains. To become more enterprise friendly, several companies have evolved to function in the organisational model. Corda, a distributed ledger created by R3, has focussed more on the privacy aspect required by enterprises as it shares information only on a need to know basis. Since, the data is not being shared among all the nodes, the Corda functions in a more scalable and provides for high performance. IBM’s Hyperledger, initially introduced in the 2015, has also advanced in privacy by introducing the concept of “channels” which is sharing of information between two or more network members.

Today, it has become extremely essential for blockchains to connect with each other and process information in an open source manner with which is flexible on nature. The notion of blockchains to connect with each other and be more scalable is known as “interoperability”. The latest generation of blockchains such as “Cosmos” are focussed specifically on enterprise applications. They solve the matrix of interoperability to help enterprises perform more scalable functions. Cosmos, also referred to as the Internet of Blockchains, is focussed on providing efficient service mechanisms to enterprises by reducing costs and integrate blockchain based tools in production environments.  Any new technology which is adopted by enterprises comes with complex processes incurring risks and liabilities. Hence, at times enterprises require certain control over participants and network security. With cross border legal regulations, enterprises using the blockchain require certain frameworks in place. This can be achieved through customising the blockchain in the form of “private” or “permissioned” blockchain. In recent years, the blockchain has developed immensely to provide a sustainable framework to meet certain needs of organisations, such as: a) throughput; b) interoperability; c) transaction data confidentiality; d) governance controls; e) fast finality; and f) fund source verification. It shall also be noted that given the context of enterprise solutions, the public blockchain is not relevant. The most ideal blockchain shall be the consortium blockchain or the semi-private blockchain as most companies transact with multiple enterprises.

Enterprise blockchain has been able to accumulate economic interest. Blockchain is also being leveraged as a payments platform for enterprise use. A recent example of this is “Libra”, which is a permissioned payments network proposed by Facebook. However, the same was met with regulatory setbacks and the future of introduction of libra remains uncertain. When it comes to enterprises, a more controlled application of blockchain which facilitates data privacy is required. Each blockchain is differently designed to consider the sector requirements, such as a blockchain which is dependent on data of users when compared with sectors which are not, for e.g. an identity verification mechanism v. an automotive industry.

Technology is everchanging and requires day to day implementations to pursue global trends. According to Gartner, 90% (ninety percent) of enterprise blockchains by 2021 will require redesign in 18 (eighteen) months to remain competitive. [2] Hence, most enterprises are plunging into early adoption of blockchain so as to create more market opportunities and also to remain competitive in the economic ecosystem.

Blockchain expertise also remains consolidated only amongst specific sector. There is significant amount of time and capital that goes into creating a new infrastructure and understanding the economics and control mechanisms of the blockchain. Global organisations like the World Economic Forum (“WEF”) are continuously promoting the use of blockchain governance and has also introduced a “Blockchain Bill of Rights” for facilitating the vision of a global blockchain based economy. [3]

Authored by Samaksh Khanna (virtual intern) with inputs from Akshata Namjoshi (Lead: Fintech, Blockchain & Emerging Tech).

 

 

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[1] Enterprise Blockchain- Market Forecasts & Scenarios 2019-2024, Alan Pelz-Sharpe, Deep Analysis. Available at- https://www.deep-analysis.net/wp-content/uploads/2019/08/DA-190812-Ent-Blockchain-forecast.pdf. Last accessed on- 31st May 2020.

[2] Gartner Press Release on “Enterprise Blockchain”. Available at- https://www.gartner.com/en/newsroom/press-releases/2019-07-03-gartner-predicts-90--of-current-enterprise-blockchain. Last accessed on- 31st May, 2020.

[3] https://www.weforum.org/press/2020/05/blockchain-principles-launched-to-preserve-and-protect-user-rights. Last accessed on- 31st May, 2020.

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