Skip to main content

How to make the business case for blockchain

Blockchain is gaining traction in the enterprise after its boost from the Bitcoin use case, but where does it go from here? Experts weigh in on Bitcoin, blockchain, and the challenges blockchain faces as it expands its reach into the enterprise.

You would be forgiven if you thought the first blockchain to ever be developed was the cryptocurrency Bitcoin. While Bitcoin is the highest profile use case of blockchain—a transparent, immutable ledger platform—it is far from the first.

“Blockchain is just a shared database with time stamping," says Stuart Haber, the man behind Surety, the first blockchain, which was first published in 1995. "It is a data structure and doesn’t have to be linked to a volatile currency.”

While confusion between the two technologies may still exist, some experts believe it’s only a matter of time before the blockchain ecosystem develops beyond Bitcoin.

Keep up with blockchain hot topics with enterprise.nxt’s newsletter. 

“Fundamentally, blockchain gives you a decentralized model fueled by a unique set of economics,” says Sandeep Panda, Hewlett Packard Enterprise’s worldwide strategy lead for blockchain incubation. “You can do transactions without the necessity of central authority or broker or notary, and that concept is what makes it powerful.” 

If you’re considering a blockchain project, it’s important to understand how Bitcoin has influenced the application of blockchain to date, the uphill battle blockchain faces in the next few years, and its next big use case. 

Bitcoin and blockchain

Andreas Antonopoulos, an early advocate for the currency and author of O’Reilly Media’s "Mastering Bitcoin," says, “The most interesting features of blockchain are actually Bitcoin features. They come from the open and decentralized nature of Bitcoin. Blockchain without a native currency can be done, but can it provide any of the benefits?”

In Antonopoulos’ opinion, it cannot. It is the work element that makes Bitcoin immutable or “censorship resistant.” You can change a private blockchain—if you have more processing power than the blockchain owner—but there is no such thing with Bitcoin. The ledger is too big and too distributed. “Other applications come a lot later and only on top of currency,” says Antonopoulos.

Blockchain’s challenge

It is not difficult to sell enterprise blockchain applications to tech decision-makers, according to Raphael Davison, worldwide director of blockchain for HPE.

The difficulty is when those decision-makers take the idea to peers and superiors who may not understand the differentiation between the blockchain technology and the Bitcoin use case, which has had its fair share of security breach stories. 

The fork of the Bitcoin currency into two separate but related currencies has possibly made matters more challenging, according to technologist and writer David Strom, despite the fact that both the parent currency and the new fork are selling at a much higher rate than most expected. 

“The fact it went up is great,” says Strom, “but for corporate types, it’s going to make them even more nervous.” The issue is the volatility of the currency, and the thinking might go, “Well, if Bitcoin is unpredictable, and blockchain is the foundation of Bitcoin, then blockchain itself must be unpredictable.”

Additionally, there is the lack of understanding, in that the heavily reported cryptocurrency hacks are not of the technology that creates the currency, but rather the wallets that store the currency.

The hack of the cryptocurrency Ethereum was not a hack of the cryptocurrency itself, says Strom, which had “nothing to do with underlying blockchain security.” Rather, the hack pursued the code in the “wallet,” which users used to trade the currency.

Haber is one of the few blockchain specialists who is as concerned with the technology’s possible flaws as most are with its possibilities. 

“In our first time-stamping paper, we noted the dangers of relying on a single cryptographic hash function,” says Haber. “Those from the early '90s are dangerous to use now. No two documents are supposed to be created that have the same hash value. It’s like a fingerprint. But what if two are created? One could be used like a forged signature. It seems fine now, but hacking gets better and better. We have to figure out a way to swap in new hash functions.”

Uses of blockchain technology

The first direction blockchain has taken in the enterprise is toward financial services, given the proven use case of Bitcoin. Goldman Sachs Equity determined that blockchain could save banks $2 billion in the U.S. and $6 billion globally simply by improving the efficiency of transactions.

An example of this is HPE’s work with the Commonwealth Bank of Australia to create a blockchain-based prototype of an open ledger to allow the purchase of shares of stock.

Likewise, the Baltic country of Estonia, in partnership with Nasdaq, successfully tested a blockchain proxy voting system in their stock exchange.

Building on a proven concept is rarely a bad idea. But will it prove to be the application that makes people move past Bitcoin? According to Panda, one of the technology’s top use cases is likely to be identity management.

“The first generation of blockchain was cryptocurrencies—very disruptive," Panda says. "The second generation concerns how we can implement what’s already proven in a private context and get a ton of benefits. But the third generation is going to move blockchain from transactions to an executional context."

He adds, “Google recognizes you differently than Facebook, and your bank recognizes you in a different way than a government website does. With identity management, you can effect communication between multiple parties no matter the application.”

In three years, Panda imagines that we will be talking about blockchain and identity management in the same context that we talk about blockchain and Bitcoin today.

Haber sees a different use case as the likely number one: logistics. “You can link markers on physical objects through a massive supply chain, put records in a trusted, easy-to-manage place, and build a blockchain for that.”

In partnership with financial consultancy EY, Guardtime, one of the larger blockchain platform companies, is moving in that direction. It has built a blockchain-based platform for maritime insurance, an area Guardtime CEO Mike Gault says has a cost base of 40 percent on premiums of $30 billion globally. A secure, direct platform can significantly reduce cost in a vital industry, Gault believes. 

Regardless of which use case you may believe will break blockchain out of the cryptocurrency-only perspective, technology is only part of the solution, according to Gault.

“What you build is what matters," he says. "If you’re working in blockchain, you can get a meeting with almost any company. But you should be going in and talking about customer problems first, then think how blockchain can solve that problem, not about what the latest and greatest distributed census protocol is.”

How to make the case for blockchain: Lessons for leaders

  • Blockchain is the technology and Bitcoin is one application.
  • Blockchain is a linked chain of hash values, often used to implement a shared, secured database with time stamping.
  • Pundits believe finance, identity management, and supply chain logistics may be the next high-profile blockchain use cases. 
  • Understand the pain points, and ask whether blockchain can relieve them. No matter how exciting the technology is, without the business case, it will be a hard sell.
  • Blockchain, though not foolproof, is inherently hack-resistant. The process and the technology surrounding blockchain is where most of the successful hacking has taken place.
  • Blockchain’s not magic, but it is structured in such a way that if security is a major issue, it might well be for you. 

Related reading:

This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.