– Nitin Gaur
It’s no longer “business as usual,” and it hasn’t been since 2009. Bitcoin challenged finance; blockchain repudiated legacy beliefs.
Please erase notions and stubbornly held beliefs that blockchain is “just a database,” “a chain of blocks,” “something to do with Bitcoin.” Do not replicate the aforementioned phrases in writing or conversation. Do not refer to blockchain as “a black box.” It is not a piece of equipment with contents/functions/processes that are mysterious to the user.
Blockchain is complex and elegant. The elements of a blockchain (cryptographic hashing algorithm, consensus, time-stamping, Merkle Tree, et al.) are familiar and not new inventions. Still, the word “blockchain” conjures the mystique of some other-worldly divination. Blockchains are data structures, on a substrate of logic, rules, mathematics; faith in a new philosophy and delivery of computation with a reliable, and expected result — an immutable ledger.
Not only is it no longer “business as usual,” it is a new framework for business, a new way of computing, a technology that complies with Confidentiality, Integrity, and Availability. In blockchain’s case, high availability by virtue of its decentralized, distributed network… with no single point of failure, and replication of the ledger in near-real-time throughout the network. (the origin: On Distributed Communications Networks – Paul Baran, RAND, 1962).
Blockchain for Business by Jai Singh Arun, Jerry Cuomo, and Nitin Gaur is the navigational chart for the enterprise and a compass that helps steer an enterprise towards incorporating blockchain into its business processes, secure way-points, and reach a destination like ‘final settlement of accounts’ with the integrity of the ledger assured. What Blockchain for Business does not have is the hype and hyperbole that inflates expectations.
Let’s take a compass bearing.
- If all you have is a superficial, pop-hype understanding of the technology, you will be hopelessly lost.
- If the “block-speak” verbiage and ‘revolutionary suasion’ that blockchain is the answer to every problem resonated with you, your reasoning has been misaligned.
- If you believe this statement to be true – “if we don’t like this blockchain, we can just switch to another one” – the better angel will reply, “It. Doesn’t. Work. That. Way.”
The fundamentals of blockchain are covered in Chapter 1 (Introduction to Blockchain) and Chapter 2 (Opportunities and Challenges). These are the soft-landing, the gentle introductions, the opening persuasion in a business language that is clear and not laced with glib statements. Simply put – Blockchain is a decentralized, distributed ledger of transactions, secured by cryptography (cryptographic hashing algorithm), with no single point of failure.
A feeling of intellectual excitement, possibly euphoria, will swirl around and conjure the possibilities, the solutions, the answers to many administrative problems… all true, but there is work ahead to prepare the enterprise.
Enter Chapter 3. “Blockchain has tremendous potential and is much more than the sum of its core components. Enterprise blockchain provides a design avenue in which transaction data, value, and state are inherently close to the business logic, and the security of business transactions are validated by a secure community process, enabling a foundation of trust and the robust processing of transactions.” (Chapter 3, p. 49) For the enterprise, while it may be tempting to use a permissionless public blockchain, it is simply not practical, nor economically viable (not yet). Legislation and regulations, and mandatory compliance, set limits and boundaries which further narrow the scope of permissionless blockchains.
Gaur, et al highlight the four building blocks for any blockchain solution: (1) a distributed (or shared) ledger; (2) cryptographic protocols; (3) consensus vehicles (trust system); and (4) chaincode, smart contracts, and business rules:
And the four building blocks are the substrate for different blockchains – permissionless, permissioned, federated, and hybrid.
Blockchain(s) does not come in a box. Blockchain is not COTS (commercial-off-the-shelf).
There are a few “Blockchain-as-a-Service” (BaaS) cloud offerings but will they serve the needs of a large enterprise? Do they satisfice the compliance requirements of regulators? All the tasks of managing the blockchain will be in the hands of the cloud provider, that is, the technology and infrastructure, artefacts, etc., – for a fee. The tempting and convincing argument that removing the complexity and cost of managing one’s infrastructure on-prem results in savings and benefit. What surety is there that the provider puts cybersecurity ahead of revenue?
If an enterprise is handling Personally Identifiable Information (PII) (data such as name, address, or ID number associated with government services, banking, or other), greater responsibility and high-security are required to protect PII data. For example, the General Data Protection Regulation (GDPR) “…is a regulation in EU law on data protection and privacy for all individual citizens of the European Union and the European Economic Area. It also addresses the transfer of personal data outside the EU and EEA areas.” There is no avoidance of due diligence.
Chapter 4, “Business of Business Models” (pp. 87-104) is the map with four (4) waypoints: 1. Use Case Identification, 2. Business Blueprint, 3. Technology Blueprint, and 4. Enterprise Integration that must be visited, scoped, defined, refined, and detailed before arriving at “the project.” If an irrational “but blockchain is just a database” lept into thought… delete it and reread Chapter 3 and imprint Figure 3.4 An enterprise blockchain platform.**
Chapter 5, “Developing a Governance Structure and Blockchain Networks” (pp. 105-21) describes “governance” – the collective term for the business rules, rules of engagement within a mutually beneficial consortium, and legislative and regulatory compliance, internal business processes, responsibilities, accountability, etc. As the enterprise blockchain project is being developed, governance mapping should be conducted in parallel. Blockchain will present opportunities to streamline enterprise workflows. How the enterprise does business today must change and will change in a blockchain-enabled network.
But all of the above is moot if Chapter 6, “Building a Team to Drive Blockchain Projects” (pp. 122-35) is given a glossed approach. A gentle reminder: Blockchain is not COTS. There will be not only a technological learning-curve, but also a philosophic one as well. While the roles are familiar, there is an over-arching caveat: It is not just a ‘project’ – it must be the “…concept of bringing “the best of the best” from each enterprise together within an ecosystem is called intraprise synergy.”
Chapter 7, “Understanding Financial Models, Investment Rubrics, and Model Risk Frameworks” (pp. 137-61) is likely very familiar territory for an enterprise or consortia.
Blockchain for Business closes with an overview and realistic view of the present and future of blockchain technology (pp.176-80). Chapter 8 is a recapitulation of all that the reader should have distilled. And the reader should be able to at the very least – sketch a blockchain path on the back of an envelope and know that the work has not yet begun, but must. Blockchain technology, networks, applications continue to move forward and the advances in research are propelling it forward.
Arun, Cuomo, and Gaur have produced a primer for any enterprise to use as a guide… not a step-by-step playbook, but a guide. Each enterprise will have unique challenges, varying states of readiness, and needs for blockchain.
Begin here.
Blockchain for Business. Arun, Jai Singh, Jerry Cuomo, and Nitin Gaur. Addison-Wesley (2019).
** It would be unfair to the authors to reproduce Figure 3.4 here. Be assured that without reading Blockchain for Business in its entirety, and taking time to fully understand the depth and breadth of the technology, any application/project will be but a superficial flash-in-the-pan and hardly useful to your enterprise.
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Nadia Diakun-Thibault is a Fellow of the Digital Academy, Canada School of Public Service
