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Western countries risk being left behind by China in race for the development of blockchain.
Four out of five executives (84pc) in Ireland surveyed by PwC say that blockchain initiatives are underway but warn that trust and regulation are holding back the technology’s development.
The technology, which underpins emerging digital currency, virtual currency or cryptocurrency, consists of blocks that hold timestamped batches of recent valid transactions, which form a chain, with each block reinforcing those preceding it.
‘Blockchain by its very definition should engender trust. But, in reality, companies confront trust issues at nearly every turn’
– RONAN FITZPATRICK
The technology has the potential to radically transform IT as well as a myriad of different industries.
New research from PwC – Blockchain is here. What’s your next move? – surveyed 600 executives in 15 countries and territories on their development of blockchain and views on its potential.
The report indicates that blockchain developments are accelerating globally, opening up opportunities including reduced cost, greater speed, and more transparency and traceability.
A quarter of executives report an implementation pilot in progress (10pc) or fully live (15pc). Almost a third (32pc) have projects in development and a fifth (20pc) are in research mode.
Breaking the chains that bind
The US (29pc), China (18pc) and Australia (7pc) are perceived as the most advanced currently in developing blockchain projects. However, within three to five years, respondents believe China will have overtaken the US (30pc), shifting the early centre of influence and activity from the US and Europe.
The survey reflects the early dominance of financial services developments in the field, with 46pc identifying it as the leading sector currently and 41pc in the near term (three to five years). Sectors identified by respondents with emerging potential within three to five years include energy and utilities (14pc), healthcare (14pc) and industrial manufacturing (12pc).
Despite the technology’s potential, respondents identified trust as one of the biggest blockers to its adoption. 45pc identified it as blocker to adoption, while 48pc are wary of regulatory uncertainty.
One in three of those respondents who reported little or no involvement with blockchain cited the reasons as cost (31pc), uncertainty over where to start (24pc) and governance issues (14pc).
“What business executives in Ireland and around the world tell us is that no one wants to be left behind by blockchain, even if at this early stage of its development concerns on trust and regulation remain,” said David Lee, PwC Ireland technology partner.
“A well-designed blockchain doesn’t just cut out intermediaries, it reduces costs [and] increases speed, reach, transparency and traceability for many business processes. The business case can be compelling, if organisations understand what their end game is in using the technology, and match that to their design.”
Enterprise software platforms that are the engine for company operations such as finance, human resources and customer relationship management are beginning to integrate blockchain. For example, Microsoft, Oracle, SAP and Salesforce have all announced blockchain initiatives. In the future, many core business processes will run on – or interoperate with – blockchain-based systems. Using blockchain in concert with enterprise resource planning platforms will enable companies to streamline processes, facilitate data sharing and improve data integrity.
“Blockchain by its very definition should engender trust,” said Ronan Fitzpatrick, digital director at PwC Ireland.
“But, in reality, companies confront trust issues at nearly every turn. Failing to state a clear business case from the outset leads to projects stalling. Businesses needs to put more effort into building into their design how they can tackle trust and regulatory concerns.
“Creating and implementing blockchain to realise its potential is not an IT project, it’s a transformation of business models, roles and processes. It needs a clear business case, an ecosystem to support it, with rules, standards and flexibility to deal with regulatory change built in.”
