What CIOs really need to know about blockchain | Eight tips on how to use blockchain in your business

Blockchain has been bubbling under the surface of many CIOs' strategies for several years now, but like any emerging technology, the reality of its benefits is yet to match the hype.

It nevertheless has enormous potential. CIO UK investigations the foundations of understanding the technology.

Read next: How to find and implement emerging technology as a new CIO

What CIOs need to know about blockchain: Where to apply blockchain
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What CIOs need to know about blockchain: Where to apply blockchain

Any industry that transfers information or money could distribute it with blockchain technology. That includes financial services, such as currency exchange and fraud prevention, any aspects of the supply chain where people want to know how something is produced, law firms transferring sensitive information or energy companies using smart meters.

"One of the interesting avenues for it is how a ledger-type data layer could help unify a lot of customer transactions," Capital One CIO Rob Harding told CIO UK.

The advanced cryptography can secure data and identify any reduce the costs of infrastructure, reporting, and middle-men. It can provide a single artery to connect disparate systems and improve integration without sacrificing security. Multiple parties to check and share the same information without the possibility of it being manipulated.

What CIOs need to know about blockchain: The limitations of blockchain
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What CIOs need to know about blockchain: The limitations of blockchain

Blockchain neared the peak of the Gartner Hype Cycle for Emerging Technologies in 2016, but the research and advisory firm still feels it is five-to-ten years away from mainstream adoption. There is currently much magical thinking, but far fewer examples of practical applications.

"Lots of these blockchain startups in this area at the moment have a technical white paper on why their solution is really good, rather than an actual problem to solve and users that need it," says Smith.

The possibilities may be endless but the uptake will be slower due to concerns over the structure, control, and the vast computing power required to process cryptocurrencies.

What CIOs really need to know about blockchain: Regulation
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What CIOs really need to know about blockchain: Regulation

Alastair Maughan wrote in CIO UK that regulators "appear cautiously optimistic about its potential, especially because of the potential that distributed ledgers could actually help to improve regulatory compliance tracking and reporting."

That doesn’t mean they're ready for blockchain to be ubiquitous. Standardisation and interoperability could be particularly problematic due to the necessity of collaboration across all parties involved.

The current regulatory challenges include assigning responsibility for regulation of cross-border technology that is decentralised and distributed to different parties, and the legal implications of automated or "smart" contracts. There is also the potential for algorithms to produce anti-competitive results or ledgers to make cartel activity possible.

"Although there are still technology and regulatory hurdles to leap, the possibilities are endless," Toyota Financial Services CIO Alberta Ma told CIO US. "When you have the ability to take friction out of a process and you have the capability to bring full transparency and complete immutability into a process, you open the door to many opportunities.”

What CIOs really need to know about blockchain: Establish a business case
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What CIOs really need to know about blockchain: Establish a business case

It can be difficult to make a clear business case for adopting complex emerging technology that still lacks examples of quantifiable benefits.

CIOs should analyse their need for a distributed ledger to record transactions and then investigate which companies developed relevant solutions. The benefits could include better reporting, data integrity security compliance and decision-making and savings in both money and time.

If a potential application is exposed, the first step should be to invest in a proof-of-concepts and to plan for a solution that covers the entire pathway from development to roll-out to future usage. Only invest further if you can show it will drive value.

What CIOs really need to know about blockchain: Stay informed
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What CIOs really need to know about blockchain: Stay informed

Large suppliers that have taken the lead in developing the technology may have the deepest understanding of how it can be incorporated into the enterprise infrastructure, while startups may be better at developing true innovations. Consider partnerships with both to investigate potential blockchain uses.

Keep up-to-date on any developments in the technology in general, and invest in you own personal use to better understand it by purchasing a digital wallet and then buying something with bitcoin.

What CIOs really need to know about blockchain: Start small but think long-term
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What CIOs really need to know about blockchain: Start small but think long-term

Blockchain may require you to re-architect your whole firm, but the underlying technology will need to be sufficiently developed for practical applications to be successfully adopted. Concerns remain over the scalability, storage limits and throughput capacity of the technology, and its ability to manage the volumes of information required by major enterprises.

For now, it may be wisest to investigate and experiment than to dive deeply into a technology that is still in its nascency. Risk-averse organisations and industries are advised to avoid making a major commitment to blockchain until the full implications are better understood.

That doesn't mean they should be afraid to dedicate some resources and experimenting with blockchain solutions for specific problems and to provide staff with internal training so they're ahead of the curve

What CIOs really need to know about blockchain: Use it as part of the wider strategy
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What CIOs really need to know about blockchain: Use it as part of the wider strategy

Adopting blockchain in the enterprise will only be successful when it's fully aligned with the general IT strategy.

The disruptive potential is enormous, which brings both opportunities and challenges. Using solutions developed externally is only of value if the technology meets the standards and functions of your business.

Read next: Blockchain limitations: Is the distributed ledger technology overhyped?

Copyright © 2017 IDG Communications, Inc.

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