Getting enterprises up to speed on blockchain

• Only 20% to 30% of an organisation’s systems need to be on blockchain
• Private blockchain is more suitable for enterprises to adopt

THE digitalisation of conventional- or enterprise-grade businesses is now absolutely necessary. Enterprises have been slowly executing some digital transformation initiatives including the implementation of cloud and utilising blockchain.

Everyone seems to be talking about the benefits of blockchain and how it can be applied to a business, but IDC Asia Pacific senior market analyst for blockchain and security research Jeff Xie pointed out two common misconceptions that need to be addressed so organisations can fully understand the technology before implementing it.

“First, blockchain is not cryptocurrency or bitcoin which is just one of the financial concepts on blockchain. Next, is the perception of having a whole organisation’s infrastructure on blockchain.

“The truth is, we can only put 20% to 30% of the processes or systems onto blockchain because the company has to think about why they want to use blockchain and what will go up there. It will be different for each organisation.”

Indonesian Blockchain Association secretary general Pandu Sastrowardoyo says that there are two types of blockchain, namely public and private blockchain.

A public blockchain network has no access restrictions. Anyone with an internet connection can send transactions to it as well as become a validator (node) or participate in the execution of a consensus protocol.

However, public blockchain is not suitable for enterprises since a significant amount of computational power is required to maintain a distributed ledger at a large scale.

“As an example, in bitcoin, to achieve a consensus, each node has to show their proof of work by increasing their hashing power (the power that your computer or hardware uses to run and solve different hashing algorithms),” she says.

Private blockchain is permissioned. One cannot join it unless invited by the network administrators. Participant and validator access is also restricted.

This type of blockchain can be considered a middle-ground for companies that are interested in blockchain technology in general but are not comfortable with the level of control offered by public networks.

Xie went on to explain the challenges faced by organisation seeking to implement blockchain. “If a company wants to implement private blockchain, they might not have enough nodes in the blockchain (for blockchain to make sense, it needs empowerment of users on the chain).

“If the organisation runs the entire blockchain by itself, it’s like going back to centralisation again as they hold the authorities while blockchain’s main characteristic is decentralisation.

“In terms of cost, if we are talking about public blockchain or supply chain, there are multiple users across the chain, so how do we know who should bear the cost for implementation? There is no perfect cost-sharing model yet.”

At this early stage of blockchain, Xie advises companies not to implement blockchain on its own due to the lack of understanding and right resources.

“Many blockchain-based companies out there are offering working models which companies can adopt and tailor to their needs.”

When it comes to implementation of blockchain in the industry, he thinks that financial and supply chain industries have the most potential.

“The underlying security aspect for blockchain is perfect for the financial industry, as all transactions are automated and secured, especially when it comes to cross border payments.

“For supply chain use case, although there are many challenges, a lot of organisations see the potential because of the multiple parties involved in a supply chain. Blockchain provides distributed ledger technlogy, as an example, in checking inventory, in which there will be a lot of movements in numbers and in the luxury goods business to verify authenticity.”

Lesson to be learnt by Indonesia

State-owned securities paper and banknote printing company (Peruri) head of digital business Farah Fitria Rahmayanti says that the company has implemented blockchain in its business to verify the originality of statements of land ownership documents.

“When implementing blockchain, we have to know the value that we can get, not just follow the trend.”

Xie says local government should play a part in blockchain adoption by providing educational courses and taking the initiative to apply blockchain in order to encourage other organisations to follow suit.

“An example of blockchain implementation in government system is in e-voting. Voting is supposed to be anonymous and the vote count must not be tampered with. This is where blockchain could bring anonymity to citizens and transparency.”