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Blockchain as a service expected to entice CIOs to test waters

AWS' Blockchain Templates offering, along with a host of other big vendor blockchain products, will spur a 'tsunami of tests.' Blockchain adoption by business is another matter.

Amazon Web Services recently launched Blockchain Templates, a blockchain as a service (BaaS) offering for Ethereum and Hyperledger Fabric frameworks, and with the news comes the question: Will the tech giant's entry into this market push blockchain into the enterprise mainstream?

Probably not, experts said. But they expect blockchain services like AWS' and other big tech vendors will nudge enterprises into a lot more blockchain experimentation, and that will indeed speed up the quest for viable blockchain use cases.

"We're going to see a huge tsunami of tests, and we might see dozens of use cases where there's real value. It's already happening now," said business futurist Patrick Schwerdtfeger, author of Anarchy, Inc.: Profiting in a Decentralized World with Artificial Intelligence and Blockchain.

With AWS joining the ranks of big technology firms with a presence in the blockchain space, Schwerdtfeger said more organizations will start experimenting with blockchain to determine where and how it can deliver business results.

"What we're witnessing is a normal propagation curve. The technology is starting to spread," he said.

Patrick SchwerdtfegerPatrick Schwerdtfeger

From there, Schwerdtfeger said he expects blockchain adoption will really pick up steam once companies identify use cases where the technology produces strong returns on investments.

"Supply chain has already shown it's a use case that will work. Digital identity and digital payments have also shown they've worked," he said.

Organizations can use Blockchain Templates to create secure blockchain networks using open source frameworks and deploy Ethereum and Hyperledger Fabric frameworks using managed and certified AWS CloudFormation templates. This offering lets organizations skip setting up their own blockchain network and, instead, focus on building blockchain applications.

AWS is not the only big player offering blockchain services. Hewlett Packard Enterprise (HPE), IBM, Oracle and Microsoft are among the others offering blockchain services.

Microsoft, Amazon, IBM, HPE, Intel -- all of the major technology platform providers are making it easier and easier to set up blockchain environments. The industry is focused on how to make this simpler, easier, easier to scale and more protected to meet the needs of enterprise clients.
David Treatmanaging director, Accenture

Although they all have modular, cloud-based open source products, their offerings aren't identical. HPE's blockchain as a service offering, for example, is based on Corda, the blockchain platform developed by the New York-based banking consortium R3. On the other hand, IBM's BaaS service is based on Hyperledger's Fabric codebase.

Initiatives garner attention

There has been a lot of buzz around blockchain for nearly a decade, ever since the blockchain-enabled cryptocurrency bitcoin arrived in 2009.

But it's only been in recent years that enterprises have started deploying the technology to solve real-world problems.

Consider some of the blockchain initiatives making news recently:

De Beers, the diamond producer, in May announced it used blockchain to track 100 high-value diamonds from miners to retailers. De Beers is using Tracr, conceived by De Beers and launched in January 2018 for use in the diamond industry.

Also in May, HSBC Holdings Plc announced that it performed the first trade finance transaction using a single blockchain platform.

And in April, Walmart announced that it is bringing its food suppliers onto blockchain to increase efficiency and transparency, following a collaboration with IBM on blockchain use cases dating back to 2016.

David TreatDavid Treat

Such events are pushing blockchain as a service further into the technology mainstream, several leading experts said, and they'll likely encourage enterprise executives to launch their own pilot programs to explore how the technology can benefit their own organizations.

"Microsoft, Amazon, IBM, HPE, Intel -- all of the major technology platform providers are making it easier and easier to set up blockchain environments. The industry is focused on how to make this simpler, easier, easier to scale and more protected to meet the needs of enterprise clients," said David Treat, managing director, Global Blockchain Lead, at Accenture.

Experts anticipate even more initiatives such as these from enterprises now that AWS has entered the blockchain services market.

Nick PappageorgeNick Pappageorge

"So far, much of the corporate action on blockchain technology has been facilitated through IBM, Microsoft and other big IT players. But AWS is already a dominant cloud vendor and Amazon could quickly make inroads to the enterprise blockchain space," said Nick Pappageorge, a senior intelligence analyst with research firm CB Insights.

Dominant use cases

Blockchain has made the most inroads in three sectors, according to blockchain experts.

First is financial services infrastructure, where it's being used for payments, clearing and settlements, and other transactions as well as in areas such as wholesale banking.

Second is supply chain, where suppliers, shipping companies and others use the technology to track physical objects as they're being transported and transferred.

And third is in digital identify verification to ensure authentication and to prevent fraudulent activity.

Similarly, Treat identified three types of entities as the leading users of blockchain. They are:

  1. Central infrastructure player, where a central organization controls or regulates a space. Treat cited the Australian Securities Exchange and its announcement last year to replace its clearing system with blockchain technology as an example. "They take a leadership position to modernize their platform on behalf of the participants they serve," he explained. "They're able to move faster, because they're providing a service and acting on behalf of their ecosystem."
  2. Consortiums that bring together organizations to work a mission or goal for their common benefit. One such example is the foreign exchange-focused consortium founded by cash settlement system provider CLS Group, which now has more than 60 of the world's leading financial institutions as members.
  3. Platform providers that are the technology providers that have launched their own blockchain networks. As an example, Treat pointed to the April 2018 commercial launch of Finastra's blockchain-based solution for financial institutions operating in the syndicated lending market.

Interest in blockchain and blockchain services is expanding beyond those areas, however.

"We're seeing an all-time high in corporate interest in blockchain -- this past quarter, executives name-checked 'blockchain' and 'crypto' 393 times in earnings calls and mentions of blockchain surged 78%," Pappageorge said.

There's good reason for enthusiasm.

Research and advisory firm Gartner, in its "Forecast: Blockchain Business Value, Worldwide, 2017-2030," predicted that the business value-add of blockchain will be approximately $176 billion by 2025 and $3.1 trillion by 2030.

Challenges remain

However, there are speed bumps to blockchain's forward march.

First, blockchain has a long way to go before it's widely used.

Gartner's 2018 CIO Survey found that only 1% of CIOs indicated any kind of blockchain adoption within their organizations, only 8% were in short-term planning or active experimentation with blockchain, and only 14% were engaged in medium- or long-term planning. Contrast that with the 43% who said they have blockchain on their radar but have no planned actions to use it and the 34% who report no interest in the technology.

Moreover, as organizations move forward, they will find that blockchain, like nearly all other technologies, is far from plug-and-play and that it requires more than a single technology to work. It requires transformation in business policies and standards to deliver the best ROI, experts said.

Organizations also will be challenged to identify the use cases where blockchain makes the best sense and to resist deploying blockchain in response to the hype rather than for well-planned strategic cases, experts added.

"My sense from discussions with corporations is that most organizations are still playing with the blockchain, and I haven't yet seen strong use cases [from enterprises] where the blockchain is being deployed, but this is changing," said Giuseppe Ateniese, chair of the computer science department at Stevens Institute of Technology in Hoboken, N.J.

Ateniese said blockchain can be a challenging technology to understand, which is why services such as AWS' Blockchain Templates can help speed adoption by making the technology easier for CIOs to adopt.

But how quickly CIOs will make that move is hard to predict, Ateniese said.

"It's going to take a while. People have to first understand what blockchain is, and the blockchain as it is now is very tuned to financial transactions. People are exploring different use cases, and it's going to take a couple of years at least before a series of use cases will be developed and deployed. But I see a bright future, because the blockchain makes sense for making things more standard, accountable and decentralized."

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