Roadblocks on the Path to Blockchain Industrialization

By Kumar Singh, Research Director, SAPinsider

 

Every technology, in its emerging stages, has certain limitations which need to be overcome in order to propel the technology to maturity/Industrialization. Blockchain is not an exception. If you look at Gartner’s hype cycle for 2021, blockchain technologies have not reached the plateau of productivity stage yet, as shown below.

There are certainly real-world nuances and limitations that are hampering the adoption of blockchain. The perspective of limitations may vary from one professional to another but in my mind, there are five key challenges that need to be overcome to take this technology to the Industrialized stage. Those five challenges have been discussed below.

Latency

Latency in the Blockchain context is the time it takes for transactions to be confirmed on the Blockchain (which is the time between the creation of the blocks of data and their subsequent confirmation and verification in the Blockchain). What this means is that unlike conventional transaction processing systems used for credit cards and banking, adding records to a Blockchain is more analogous to an airline reservation and similar booking systems that commit orders to a database and may take several seconds. As technology advances, the speed of systems will improve and Latency may not be a hindrance.

Lack of regulations and frameworks

As is the case with all emerging technologies, Blockchain regulation is still a grey area as far as robust frameworks to leverage it go. There are some emerging frameworks but nothing that is definitive and robust. One major implication of lack of regulation is in the area of dispute resolution. This may not exactly be a showstopper but leads to caution in foraying too much into this domain. As regulative legislation evolves and matures, so will the adoption of Blockchain technology on an Industrial scale.

Energy Consumption

It is open knowledge that a huge amount of processing power is required to verify Blockchains. This cost is significant and is one of the reasons that large server farms that process these transactions are in geographies where energy is cheap and ambient air temperatures are cool (like Iceland, Siberia, Scandinavia etc.). But with the big focus on global warming and sustainability, there is a growing concern on the impact of such technologies on our natural ecosystem.

Data Quality

Another big challenge is the ability to capture the data as close to the source as possible to ensure its accuracy. Companies and supply chain leaders will have to ensure more audits of data quality, which is essential for many of the merging systems and technologies to work effectively. Regular, random quality checks can be carried out on data across the supply chain at regular intervals to avoid the issue of false data corrupting trust in the information

Lack of Knowledge

Again, since the technology is emerging, expertise in this technology is limited to professionals who have led projects for early adopters. As the number of adopters grows, the market will have more individuals who have actual experience implementing this technology. We have many use cases and some implementations as well. But the key aspect is to observe the long-term sustainability and usefulness of those projects to understand if they are actually delivering value beyond the current cosmetics.

What does this mean for SAPinsiders?

Blockchain is a promising technology but not for every industry and company. A key aspect is to understand this. If you want to explore if this technology is useful for your organization and operating model, perform an evaluation exercise and build a grid of the areas where it can create differentiating abilities. Note that the keyword here is “differentiating abilities”. If it just replaces a technology you already have, without significantly transforming the way you do business, you may want to re-think if there is really use for blockchain technology for that scenario.

You don’t always have to build these capabilities internally. There are third-party blockchain platforms coming up on a daily basis and chances are, there is one out there for your unique use. Examples of such platforms in the domain of the supply chain are ample. You can find some of them listed here, though many more that are more exciting is on the anvil and someone needs to come up with a more inclusive and comprehensive list.

8 Blockchain Startups Disrupting The Supply Chain Industry

The key aspect is to make that buy vs build decision based on your unique circumstances. And if you really want that technology in-house, can you acquire a blockchain platform that aligns with your unique nuances? Again, as an example, if you are a hyperscaler, a couple of good blockchain platforms are really good candidates for acquisition that can help you build blockchain integrated AI solutions, specifically in the area of the supply chain, for your customers.


 

 


 

 

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