Blockchain is all the buzz, particularly in financial technology (fintech) circles.
Better known as the distributed ledger technology that serves as the foundation for the peer-to-peer Bitcoin cryptocurrency, innumerable startups and a fair share of big banks are exploring how to put blockchain to work. A big part of blockchain’s appeal is that it is extremely resistant to tampering. Good luck trying to make changes without all the other nodes in the network catching wind of it.
There’s reason to be curious, even a little excited about the technology.
Bitcoin is an early example of how blockchain can disrupt industries. And while it’s not without its controversies and setbacks, Bitcoin has already had an impact, however small, on how the world accepts payments. Sure, it may be tough to pay for groceries with Bitcoin, but shoppers can use their virtual wallets to pick up a PC at Dell.
Startups envision a day in the not-too-distant future where blockchain-based systems enable the near-immediate settlement of securities and other financial instruments, effectively eliminating the middleman and the need for clearing houses. Some firms are looking into blockchain can be used to create smart contracts, secure health record system and, yes, even hack-proof Internet of Things (IoT) platforms.
Technology giants like Microsoft and IBM are bullish on blockchain, as are a growing number of Wall Street financial firms. It’s only natural for CIOs to begin to wonder if they need to make room for blockchain alongside their enterprise mobility, IoT and digital transformation initiatives.
The answer, according to Gartner vice president David Furlonger, is to keep an eye on blockchain, but don’t go overboard at this early stage.
Furlonger admits that blockchain has “become more of a mainstream topic” recently, but practical, production implementations are few and far between. So far, the buzz surrounding blockchain, at least among developers and IT professionals, is “much more about the underlying technology,” he told Datamation.
Over the past 18 months or so, Furlonger has observed that the IT industry is having “much more of a realistic discussion” about blockchain and progress is “moving incredibly rapidly.” Nonetheless, big challenges remain.
Chief among them are getting blockchain platforms to work at a scale that can handle enterprise-grade workloads and transaction volumes. As with any emerging tech, standards are a moving target and the entire field can turn on a dime if a new innovation appears on the scene. In short, risk-averse IT organizations may want to sit on the sidelines until the dust settles a bit.
In the meantime, prudent CIOs will want to start exploring blockchain and its potential benefits (and pitfalls). Furlonger recommends dedicating some resources “to understanding the underlying tech.” Small-scale experiments are fine, as long as organizations are comfortable with the extreme likelihood of failure.
CIOs will also want to consider the non-IT implications of blockchain and how pursuing the technology may impact their organizations. For example, last month a Miami judge ruled that Bitcoin is not money, adding a dash of legal uncertainty to things.
In terms of IT investments, CIOs should keep their ears to the ground and keep track of the advances in the field so that they’re not caught off-guard when things start to pick up.
Blockchain may be years away from widespread adoption, but the technology promises to have a significant effect on how many businesses plan and implement their IT projects in the future. “You can get the direction right pretty easily, but the timing is a killer,” cautioned Furlonger.
Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.