Watch a short overview of how existing enterprises may be impacted by blockchain technology.
- Let's take a deeper look at some of the potential obstacles to widespread adoption of blockchain technology and why they may present risks to existing enterprises. In the near term, it's financial organizations that are grappling with the disruptive nature of digital currencies. Let's face it, banks for example, make huge profits on financial transactions. They are motivated to exert control. There's little incentive for massive and disruptive innovation.
Financial organizations also have huge investments in their technology infrastructure so there's less appetite for more investment that could make their systems obsolete. It's not an easy sell to convince all the many millions of stakeholders in the global financial ecosystem to upend what they do and worse yet make much less money doing it. Financial firms must also tread carefully around some of the most robust regulations and laws. So even innovating carries risk.
However, major risk lies with doing nothing. Standing by and hoping that digital currencies such as Bitcoin or the blockchain itself will pass as a novel fad could be fatal. This is why financial organizations are researching the blockchain and keeping it on their agenda. Some like Wells Fargo, the Commonwealth Bank of Australia, Goldman Sachs, Bank of America, and Mastercard are already exploring active blockchain projects.
For them it seems it is better to participate than to stand idle and face the risk of obsolescence. More likely, over the long term, financial organizations will evolve and embrace blockchain innovation. They will find a way to work with it and prosper rather than avoiding it. Already we see the emergence of interesting new ideas and blockchain partners such as Ripple and the Interledger Protocol. They are ready to enhance and improve existing payment systems rather than destroy them.
If we step back from financial services and simply look at the risk of blockchain in general, we identify a few key areas. First are the risks of either doing nothing or doing something. In a world of rapidly changing technology and consumer expectations, doing nothing regarding any technology and particularly in an era of rapid digital transformation, could make a business obsolete. The emergence of the gig economy, for example new start-ups like Uber and Airbnb, have already disrupted major businesses.
Doing no research, education and experimentation has a potential to limit an organization's ability to compete in the future. However, doing something also carries risk. For example, if a business commits limited available funds to building a prototype solution only to see it fail, it risks loss of capital. What might it mean to your existing customers and partners? Might you break some law regarding tax obligations using digital currency or on reporting requirements of a publicly traded company? And what about insurance? Will you be covered for blockchain transaction losses? Doing business over the blockchain has privacy risk issues too.
While there is encryption as part of the basic design, the blockchain itself is open to everyone. It's a quality and a liability. And even though I've touted security as a benefit of the blockchain, there still remains some vulnerability to hackers and fraud. The risks of doing nothing or doing something with any new innovations are similar, but they are magnified with blockchain given what it does and how it does it. Inherently, the art of innovating is a risk.
For any business though, it's the price of doing business. In the 21st century, the ability to be agile on how and what is delivered will be a defining quality of those that succeed and those that fail.
Jonathan begins by describing some of the current challenges with the Internet, including existing risks and security problems such as identity management. Next, he describes how traditional online databases function, so that you have a basis for how the blockchain redesigns this function. He then describes how the blockchain becomes a potential solution for many of the existing limitations of online databases. Since the blockchain has its genesis in Bitcoin—the digital currency—he provides some background on that too. He also discusses how blockchain technology actually offers new capabilities beyond simply solving old problems. To wrap up the course, Jonathan shares steps you can take in your organization to understand the implications of the blockchain.
- Risk and security challenges
- Rethinking the traditional database
- What is the blockchain?
- What problems does the blockchain solve?
- Transforming transactions
- Examples of the blockchain in action
- Obstacles to blockchain adoption
- Risks to existing solutions and enterprises