September 23, 2018,   12:35 PM

Why We Should Not Fear The Blockchain

Forbes Middle East


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The pace of change in modern society is facilitated by rapid advances in technology. One of the most recent technological phenomena to provoke thought on how society can be reorganized is blockchain: cryptographically secured recording of transactions using technology based on distributed ledgers. Protagonists of blockchain advocate its implementation throughout all levels of society to bring about more transparency and decentralize power. However, adoption of this type of technology has been low in light of its nascency, in addition to the fear of change amongst in modern organizational structures, both public and private. Those considering blockchain integrations are in any case cautious, but what do they have to fear?
Fear of change is evolutionary in humans, but further evolution is only brought about by change itself.

Organizations fear change

The organization of society moving from a human-centric system to one managed by machines means automation of processes facilitated by technology. However, organizations are wary of making hasty decisions to adopt the latest technological trends to then later suffer as a new, more complete and advanced product hits the market, making their newly integrated system obsolete.

Creation of standards

As such, organisations are cautious in their adoption of blockchain due to the fact that there is currently no clear standard for how different blockchains operate: whether in terms of transaction speed, latency, security, etc. Until such a benchmark is defined by the market as the technology becomes tried and tested, the majority of business will delay blockchain integration, if not altogether.

However, early adoption of a key technology gives organizations first-mover advantage that can later pay off dividends. A Harvard Business Review study shows that resistance to change is the biggest hindrance to technological adoption in any sphere, with 34% citing legacy systems present themselves as an obstacle. Yet the same study shows a strong correlation between adoption of technology at an earlier stage and improved outcome for the business.

Misconceptions about blockchain

The fact that blockchain is misunderstood is hampering its adoption, with many believing that blockchain is in essence cryptocurrency. However, cryptocurrency is based on blockchain and not the other way around. This misunderstanding has even boiled over to equating blockchain to distributed ledger technology and synonymous use of the terms.

The negative reputation that cryptocurrency has acquired around the globe means has maligned the blockchain sphere, hampering adoption. The reality is very much different: blockchain-based systems do not require emission of cryptocurrency.

Why We Should Not Fear The Blockchain

Blockchain as a business tool

Put simply in terms of business implementation, blockchain is a type of software that brings about further business process efficiency. Decentralised technology, such as blockchain, that relies on a community of participants increases business processes performance due to a massive reduction in the cost of different organizations interacting with one another, as they can all participate in a single data sharing ecosystem, that does not necessitate verification from third parties. Due to this, in comparison to many traditional internal investments in improving process efficiency, higher returns can be expected.

Loss of control

Putting faith within a common system that forms a “trustless” environment means that organizations are obligated to give up centralized control over their data, instead of putting faith in a system of distributed ledgers that logs transactions cryptographically and chronologically.
Just as fear of change is part of the human condition, so is fear of losing control.

Decentralisation brings about more transparency as a tradeoff for control. Greater transparency also brings about further process efficiency as records and transactions can be easily verified within an automated system.

Lack of legal framework

Without clear regulatory oversight, organizations place less trust in a system since determining who is responsible for security breaches or loss of data becomes problematic. Moreover, the recent implementation of the EU GDPR compels personal data on EU citizens to be stored within the borders of the 28 member states. These are two of the biggest legal issues hindering blockchain adoption amongst the business community. However, it must not be forgotten that blockchains can be public (permissionless - open to all) or private (permissioned - open only to a defined group of individuals/ organizations) and business has more use for private networks in which information can only be accessed by authorized counterparties.

One thing must be clear: the adoption of the technology very much depends on the industry and type of organization. For instance, an organization could utilize blockchain for streamlining its internal processes while validating data. The myriad opportunities that the blockchain offers organizations as a tool to develop further with increased efficiency are not to be ignored, never mind feared.

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