Excitement surrounding the innovative data validation and storage technology called blockchain has reached fever pitch among futurists and venture capitalists. It’s become commonplace to hear proponents opine that blockchain represents a breakthrough every bit as significant as that of the Internet (for example, here, here, here, and here). The TED and TEDx archives are awash in talks with eyebrow-raising titles (such as this one) about its potential. And despite this seemingly pervasive enthusiasm, Gartner’s most recent “Hype Cycle for Emerging Technologies” still places blockchain a bit before its peak.
You might already know that blockchain is the techno-magic behind Bitcoin, but most of the rhapsodizing about the technology has been reserved for recent ideas that push its uses beyond cryptocurrency. Arguably the biggest conceptual innovation has been introduced with Ethereum, a blockchain and platform separate from Bitcoin that, akin to an iPhone, allows developers to extend its functionality indefinitely through apps (called ÐApps).
Ethereum was first released in July 2015, but “enterprise Ethereum” as a concept is a much more recent development. To understand the significance of enterprise Ethereum, we need to back up a bit and remind ourselves what blockchain is. Blockchain is an extremely secure system for electronic transactions and record-keeping that relies on mathematical algorithms instead of trusted third parties for validation. More specifically, blockchain is a peer-to-peer distributed ledger that uses digital signatures and cryptographic hashes to authenticate data records and validate transactions without the need for any middlemen such as banks, governments, or lawyers. (If you want to learn more about how blockchain works from a technical perspective, I’d recommend this video; but if you’re particularly ambitious and prefer primary sources, you might prefer to read the original paper that started it all. Alternatively, if you’re just looking for a quick, general description of blockchain and its potential, I’d recommend this video, or this one.)
Certainly, any new development platform based on an emerging technology tends to invite optimistic speculation about its future. In the case of Ethereum, and blockchain in general, the speculation has leaned toward the idealistic and even the anarcho-utopian. The creator of Ethereum, Vitalik Buterin, has even made clear that the motivation behind the platform lay at least partially in a desire to wrest power from institutions and distribute it among the people.
Because Ethereum was originally conceived as a way to obviate the need for institutions such as trusted banks and corporations, it might have surprised many to see the recent announcement that Microsoft, Intel, and many banks have joined forces to create a new consortium called the Enterprise Ethereum Alliance (EEA). Enterprises might not be the most obvious beneficiaries of blockchain, but it’s plausible that they stand to gain from this new technology in unexpected ways. So what are the possible enterprise use cases for blockchain technologies such as Ethereum, and what might be the purpose of the EEA?
It’s true that the original beneficiaries of blockchain were imagined to be individual consumers, but removing the middlemen from transactions eliminates transaction fees for individuals and institutions alike, both of whom seek to reduce costs. Other business benefits of blockchain are also relatively easy to imagine, such as in facilitating identity authentication, privacy, access management, asset management, and regulatory compliance.
Beyond these categories, Ethereum-based code can be written to be triggered by many different types of events, thereby allowing businesses to streamline business processes or provide added value in ways that are hard to predict at this early stage. (For example, an airline might use blockchain to write code allowing customers to buy a “provisional ticket” that is immediately refunded if the flight is delayed by a set number of minutes the customer chooses in advance.) More generally, just as communication on private intranets today uses the same protocols that were invented for the public Internet, so too are public blockchain technologies capable of giving rise to applications for private use both within individual companies and between businesses.
Though these are all plausible future use cases of blockchain, for enterprises they also approach best-case scenarios that are anything but guaranteed. In fact, with banks especially, blockchain in the future threatens to exclude them from many financial transactions and thereby disrupt their existing business models. The purpose of the EEA, from this perspective, is to help build a future in which blockchain becomes more of an opportunity than a threat. In order to steer blockchain down a friendly path, the companies in the EEA will help develop the open-source Ethereum codebase in a way that ensures that business processes can plug into the platform and profit from its advantages instead of being blocked from them completely.
Blockchain is still in its infancy, and as with the Internet circa 1990, the eventual winners and losers brought about by this technology are impossible to predict. But it’s time for both technology professionals and business owners to become acquainted with blockchain and follow its developments closely. The hype surrounding blockchain may or may not turn out to be overblown, but the technology is nonetheless likely to introduce both new business opportunities and threats that could significantly impact the competitive landscape over the next 10 years.
You can read the vision statement of the Enterprise Ethereum Alliance here. To keep up with important developments related to enterprise blockchain, follow Prowess on our blog and on Twitter and LinkedIn.