Blockchain To Blockchains: Broad Adoption Enters The Realm Of The Possible, Part 2

Darshini Dalal

Eric Piscini is co-author of this blog.

Part 2 in the “Deloitte Blockchain Adoption” series

As blockchain use cases grow in scope, scale, and complexity, the need for standardized technologies, platforms, and skillsets becomes more pressing each day. Consider standardization’s potential benefits—none of which companies developing blockchain capabilities currently enjoy:

  • Enterprises would be able to share blockchain solutions more easily and collaborate on their ongoing development.
  • Standardized technologies can evolve over time. The inefficiency of rip-and-replace with every iteration could become a thing of the past.
  • Enterprises would be able to use accepted standards to validate their PoCs. Likewise, they could extend those standards across the organization as production blockchains scale.
  • IT talent could develop deep knowledge in one or two prominent blockchain protocols rather

Unfortunately, there are currently no overarching technical standards for blockchain, and it is unrealistic to think we will get them soon, if ever, across all use cases. For CIOs, this presents a pressing question: Do you want to wait for standards to be defined by your competitors, or should you and your team work to define the standards yourselves?

For financial services giant JP Morgan Chase, sitting on the sidelines while others in the financial sector developed blockchain standards was not an option. In 2017, the firm launched Quorum, an open-source, enterprise-ready distributed ledger and smart contracts platform created specifically to meet the needs of the financial services industry. Quorum’s unique design remains a work in progress: JP Morgan Chase invited technologists from around the world to collaborate to “advance the state of the art for distributed ledger technology.”

Not all IT shops are in a position to emulate this strategy for influencing the development of blockchain standards. But there are steps that CIOs can take to promote standardization within their companies and industries rather than waiting passively for universal standards to emerge. For example, by plugging into external developer ecosystems, IT shops can begin influencing standardization discussions and exchanging best practices with like-minded organizations. Internally, CIOs can empower their teams to make decisions that drive standards within company ecosystems. Finally, in many organizations, data management and process standards already exist. Don’t look to reinvent the wheel. Apply these same standards to your blockchain solution.

Integrating multiple blockchains in a value chain

In the future, blockchain solutions from different companies or even industries will be able to communicate and share digital assets with each other seamlessly. For organizations whose use cases turn on blockchain ecosystem diversity and scalability, the potential benefits of integration are clear: Having more partnerships within a blockchain ecosystem can drive greater value and boost blockchain ROI. Likewise, interoperability can make it possible to customize and enhance blockchain solutions without rendering them obsolete.

Unfortunately, many of the technical challenges preventing blockchain integration persist. Different protocols—for example, Hyperledger Fabric and Ethereum—cannot integrate easily. Think of them as completely different enterprise systems. To share information between these two systems, you would need to create an integration layer (laborious and painful) or standardize on a single protocol.

Even if the technical challenges were solved, connecting two blockchains is much harder than connecting two networks. Why? Because with blockchain integration, you are connecting two value networks that may not necessarily talk to each other. This means that when transferring digital assets from one blockchain to another, you must be able to transfer the first blockchain’s value set of all its past transactions as well. You must also be able to guarantee that the data packets point to the same places in both blockchains, which helps maintain data integrity and auditability.

Right now, the Hyperledger Foundation and others are working to establish technical standards that define what constitutes a blockchain, and to develop the protocols required to exchange assets. These efforts will continue, and as they do, convergence of protocols will likely accelerate and standards emerge. Likewise, interoperable technologies will eventually mature, with new protocols that support communication between different technologies becoming broadly available.

Until then, organizations can enjoy some integration benefits by working within a consortium model in which all participants deploy the same solutions and protocols. (When integration challenges are solved, those already sharing common processes and standards within a consortium may enjoy the competitive advantage of momentum.) There are also bridge technologies available that make it possible to move digital assets between blockchains. Think of the process like this: You move digital assets from Point A to Point B in a car. At Point B, you transfer the assets from the car to a train, which takes it to its final destination at Point C. It’s inelegant, but it can deliver the desired business outcome.

Part 3 in this series will explore the risk implications of adopting blockchain.

Contact Darshini Dalal at ddalal@deloitte.com.

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This article originally appeared on Deloitte Insights and is republished by permission.


Darshini Dalal

About Darshini Dalal

Darshini Dalal, a technology strategist with Deloitte Consulting LLP, has deep implementation experience with complex large-scale technology transformations. She leads Deloitte's U.S. Blockchain Lab, and focuses on creating immersive experiences to help clients understand not only the applications but also implications of blockchain technology across a variety of business issues that plague today’s transaction fabrics. Darshini helps clients define their vision statement and translate this vision to reality by designing the next generation of systems and platforms.