Forecasting the future of blockchain
It can be difficult to sort between the hype and the real potential of blockchain. In this article, Dr. Srinath Perera and his colleagues take a systematic approach to evaluate the technology.
Blockchain has been capturing the imagination of businesses and government organizations, alike.
But it can be difficult to sort between the hype and the real potential of this technology. With that in mind, my colleagues and I wanted to take a systematic approach to evaluate it. To do so, we have used the Emerging Technology Analysis Framework (ETAC), which takes a broad view of emerging technology by probing impact, feasibility, risks, and future timelines.
Following are the key observations from applying ETAC to our analysis of blockchain’s potential and viability.
Blockchain provides an immutable decentralized ledger, which can be used to improve trust. The demand for this capability is growing as organizations become more digitally driven. Today, there are three primary ways in which blockchain ensures trust.
First, by building on two World Wide Web Consortium (W3C) specifications: decentralized Identifiers (DID) and verifiable claims, blockchain can provide each participant with an identifier and means to manage verifiable claims. Examples include certificates of a person’s name, education qualification, and birthday, among others. This enables two parties, who do not know one another, to verify each other and know their attributes. It lets us replace current alternatives to trust that are time-consuming, expensive, and weaker, such as intermediaries and government inspections.
Blockchain also provides a way for multiple parties to communicate or work together in an auditable manner. This again removes costly processes (e.g. lawyers or other intermediaries) to establish trust between two parties. Finally, blockchain is decentralized where no single user or small group of users can change the blockchain. This decentralized nature gives us a trustworthy approach for building ultra-critical systems.
Collectively, these three approaches reduce costs and increase the agility of our systems.
Challenges and risks
Despite its benefits, blockchain carries several challenges and risks. What we call challenges are technical limitations, which are likely to be fixed in the future. For blockchain, we have identified four technical challenges: limited scalability and latency, limited privacy, storage constraints, and unsustainable consensus.
In contrast, risks are inherent to the nature of the blockchain and are unlikely to change. For blockchain, we’ve identified five risks, which are associated specifically with bitcoin. These include irrevocability, regular absence, misunderstood side effects, fluctuations in bitcoin prices, and unclear regulatory responses.
The extent to which the use of blockchain is limited by its associated challenges and risks vary by use case. The rest of this article reviews common blockchain use cases and our conclusions about the most viable applications.
Zooming in on use cases
While doing our research, we soon understood that blockchain can serve many roles. However, we were able to identify 10 main categories of blockchain use cases, and we have used these as the focus of our evaluation.
Then, for each of the ten use cases, we have identified which of the challenges and risks described earlier are associated with both public and private implementations. The following chart summarizes our conclusions.
The chart’s X-axis shows risks, and Y-axis shows implementation challenges. Risks and challenges affect different use cases differently, and the chart places each use case into one of the four quadrants based on how it is affected.
As the bottom-right quadrant shows, we believe blockchain technology is ready for applications in digital currency, including initial coin offerings (ICOs); provenance, e.g. supply chains and other B2B scenarios; and disintermediation. We expect that these use cases will start to occur in the next three years.
By contrast, in the left-bottom quadrant, ledgers (of identity, ownership, status, and authority), voting, and healthcare are only feasible for limited use cases where the implementation limitations in achieving scalability and latency, privacy, storage, and consensus do not hinder them.
As the left-top quadrant shows, with other use cases—notably lightweight financial systems, smart contracts, new internet services, and autonomous ecosystems—blockchain faces significant challenges. Among them are the performance, irrevocability, the need for regulation, and the lack of census mechanisms. These are hard problems, and it could take at least 5 to 10 years to find answers to those problems.
If you are looking to adopt blockchain, the categorizations outlined here can act as a guideline. For example, work in use cases that need breakthroughs should plan for a long-term investment, allowing for these advances to occur. Furthermore, by analyzing the use cases in terms of challenges and risks, you will avoid unexpected problems at later stages. You can learn more about these risks and challenges, as well as the categorizations, in our recently published paper, “A use case centric survey of Blockchain: status quo and future directions.”