Understanding Four Phases Of The Blockchain Spectrum
It’s easy to be swept up in the promise and hype of blockchain, but the reality is that most solutions marketed as “blockchain” are missing key components — particularly tokenization and decentralization. This “blockchain whitewashing” creates confusion in the market for CIOs and business leaders as they assess the cost-benefit analysis of blockchain. Further, this picture isincomplete and fails to address the evolving nature of blockchain technology.Within three to five years, many of blockchain’s core technical challenges are likely be resolved.
When considering the use of blockchain, CIOs need a model that can enable them to easily and accurately align the needs of their enterprise with the appropriate blockchain solution or alternate technology.
Gartner created the Blockchain Spectrum to examine the phased evolution of blockchain solutions and how this path aligns to the anticipated value businesses can derive.The Blockchain Spectrum is made up of four archetypes broken down by offerings and characteristics, some of which won’t fully develop for years. Each of these phases offers opportunities and risks, but CIOs should begin experimenting at some level.
These technologies provide the building block foundation upon which future blockchain solutions can be created. These blocks can also be used as part of non-blockchain solutions, for example, to improve the operational efficiency of distributed data management systems. The building blocks include cryptography, distributed computing, peer-to-peer networking and messaging.
Most enterprise blockchain solutions available today fall into this category, using components from the blockchain-enabling phase to create limited-scope projects. They rely on maintaining the architectural aspects of pre-blockchain computing — such as a centralized notary, distributed or replicated data stores, hashing/signing and a messaging layer. Critically they lack the ability to tokenize multiple forms of digital and nondigital assets and they are designed without a basis for decentralized operations.
Blockchain-inspired solutions could potentially solve challenges like fraud mitigation and reconciliation reduction. These inspired projects use traditional constructs for data management, user participation and network control. They largely replicate existing centralized enterprise transaction and information systems. While this enables enterprises to experiment with blockchain and potentially collaborate by, for example, using consortia, they do not take advantage of the potential for true disruption. CIOs will not be able to use these solutions to address a key request from their CEOs — the need for business model change
While blockchain-inspired solutions could potentially solve challenges like fraud mitigation and reconciliation reduction, CIOs need to calculate if the extra investment actually offers a better solution than traditional options.
Blockchain-complete solutions offer a path to completely new business models that use smart contracts, tokenization and decentralized operational structures. These solutions would feature all the key capabilities of blockchain and attempt to deliver a full value proposition.
Blockchain-complete solutions will feature tokenization enabled by smart contracts and decentralization, two components blockchain-inspired solutions often lack. These capabilities are the catalysts for the introduction of new business models. The introduction and use of cryptocurrency tokens and other forms of tokenized assets will allow for previously impossible monetary systems.
To distinguish these solutions from blockchain-inspired solutions, investigate how the technology is implemented, how the solution handles data, where the data controls sit, whether tokenization is a design facet, how transaction governance is enabled and how on-chain/off-chain data synchronization occurs.
Blockchain’s decentralized economic power and microtransactions, combined with the intelligent decision-making ability of AI and the sensory powers of IoT, will create never-before-possible technology constructs for business and society
CIOs and business leaders must not underestimate the radically disruptive nature of blockchain-complete and blockchain-enhanced solutions. Eventually, blockchain could provide a more seamless link between external technologies like IoT and what it is to be human through biohacking and the development of the Internet of Me.
CIOs and business leaders must not underestimate the radically disruptive nature of blockchain-complete and blockchain-enhanced solutions. Within three to five years, many of blockchain’s core technical challenges are likely be resolved. Business leaders who fail to do sufficient scenario planning, experiment with the technology, and delay consideration of decentralization and tokenization risk significant long-term disintermediation.
(The author is Distinguished VP Analyst, Gartner)