Enterprise Blockchains: Entering the Era of Enhanced Risk Management and Streamlined Workflows

KEY TAKEAWAYS

Enterprise blockchain technology offers enhanced risk management, streamlined workflows, and cost reduction, making it a key technology for digital organizations. The power of smart contracts automates agreement execution and monitoring, providing transparency and trust. However, barriers to adoption, such as scalability, interoperability, and organizational considerations, need to be addressed.

Blockchain technology is quickly evolving from a finance-oriented distributed ledger to a specialized instrument for managing a wide range of transactions. This is leading to a number of unique use cases that are being optimized for the widely diverse needs of the enterprise.

The enterprise blockchain maintains all of the key attributes of the traditional blockchain – namely, massive scalability and immutability. However, in most cases, it is also outfitted with access control, data protection, and other measures to ensure privacy.

And while it is often used to manage financial transactions, it can be easily applied to non-financial functions like supply chain management, contract fulfillment, and record-keeping.

Growing Adoption of Enterprise Blockchain

Blockdata estimates the market value of the enterprise blockchain at $16 billion, growing at a compound annual rate greater than 60%. More than three-quarters of the Fortune 100 have deployed the technology, making it one of the leading technology initiatives of the decade.

Companies embracing enterprise blockchain technology
Enterprise blockchains are also starting to align themselves along key industry verticals. Top oil and gas firms like Exxon and British Petroleum participate in VAKT, a platform developed in 2018 by providers, traders, and financiers. Pharmaceutical leaders like Pfizer and AstraZeneca employ the EU-backed PharmaLedger blockchain, while life-science companies Eli Lily and Amgen use the MediLedger program that evolved to meet the requirements of the U.S. Drug Supply Chain and Security Act (DSCSA).

Less risk

Overall, the key benefit that the enterprise blockchain brings to today’s digital organization is enhanced risk management.

Dataconomy’s Kerem Gülen notes that the technology’s use of advanced cryptographic protocols heightens the integrity of the individual blocks of data in the chain, which in turn strengthens security and resilience.

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At the same time, it streamlines workflows, lowers operational costs, enhances collaboration, and simplifies many of today’s costly and complex jobs like legal and regulatory compliance.

The Power of Smart Contracts in Enterprise Blockchain

Essentially, enterprise blockchain allows organizations to distribute value at the same speed it distributes data, says Daniela Barbosa, executive director of the Hyperledger Foundation. The global communications network is great at sharing information and reaching agreements, but the actual settlement of those agreements can take days, and it comes with a hefty cost.

Blockchain alleviates this friction by creating a highly effective transactional and record-keeping framework that can be applied to anything – both real and digital.

Already, this is producing a new form of “smart contract” that automates the execution and ongoing monitoring of agreements. Using self-verification and other tools, these contracts free the enterprise from having to manually ensure that responsibilities are being met and objectives are being fulfilled – a job that typically requires teams of highly paid experts.

At the same time, they engender greater trust between parties by providing a fully transparent record of transactions.

Overcoming the Hurdles

Despite its usefulness, however, there remain a number of barriers to greater deployment of enterprise blockchains. Author and Northeastern University professor Ravi Sarathy says that while technology concerns like scalability, interoperability, and security are part of the problem, equally important are economic and organizational considerations, such as determining ROI and the impact on overall corporate culture.

To overcome these issues, Sarathy recommends a number of best practices:

  • Find the right use case: Blockchain is natural for data-intensive applications that require high levels of resiliency and data protection.
  • Create a strategy for legacy systems: Even if a system is working well, you need to determine if it should be replaced or integrated into a blockchain.
  • Decide whether it’s internal or external: Blockchains work equally well on internal processes as external ones, but they need to be optimized for each environment.
  • Consider the cost-benefit ratio: As with any enterprise initiative, blockchain should be subject to clearly-defined ROI metrics.
  • Find the right talent: From programmers to legal expertise to executive management, understanding how blockchains work and how to optimize them is the best way to go from a pilot program to full-scale functionality.
  • Watch the data: The larger it gets, the more data the chain will generate. Intelligent collection and analytics tools will help spot potential problems before they impact performance.
  • Don’t let IT take over: This is a technology that must serve business needs first.

It’s important to note that while blockchains are immutable, they are not impervious to hacking. Several notable hacks have occurred in the past few years, including a breach that drained $625 million from the Ronin Network.

In most cases, the attack does not target the technology’s immutability but penetrates the chain using stolen keys and passwords.

Size Matters

Even the immutability of a blockchain can be compromised depending on how the chain is structured.

In public chains, copies are stored at hardened data centers around the world, a majority of which must be updated simultaneously in order to add another block. Private blockchains, as used by most enterprises, tend to have far fewer copies, making it conceivable that a determined hacker or group of hackers with sophisticated malware could update a critical mass of ledgers in order to make a fraudulent transaction seem legitimate.

For this reason, bigger is always better when it comes to blockchain, which is part of the reason that the largest players in the world’s leading industries are out front on truly private enterprise deployments.

The Bottom Line

It’s hard to see blockchain failing to become a key enterprise technology going forward. The risk of loss is very small, while the benefits of improved operations and streamlined workflows and processes are substantial.

As with any technology, there are hurdles and even setbacks – but these are learning experiences. As each wrinkle gets ironed out, the enterprise blockchain can be a launchpad to new services, new revenue streams, and even entirely new business models, all while lowering costs and democratizing the value created by human endeavor.

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Arthur Cole
Technology Writer

Arthur Cole is a freelance technology journalist who has been covering IT and enterprise developments for more than 20 years. He contributes to a wide variety of leading technology web sites, including IT Business Edge, Enterprise Networking Planet, Point B and Beyond and multiple vendor services.