How Good is your Blockchain Coffee?
Monday, September 24, CFO Services co-hosted ‘Future applications of blockchain’, an expert panel discussion on the business impact of blockchain technology. Moderated by CFO Services’ Cristof Van Laer, the panel discussed the blockchain impact on data, financial and physical streams. Thomas Marckx, co-founder of The Ledger, briefly introduced blockchain to the audience. Each of the panelists then made a two-minute statement on one of the streams.Toon Borré, Expert practice leader Data to Insight, held a brief statement on the technology's place in the hype cycle.
In this article you will find an edited and abridged version of Toon Borré's statement and the subsequent panel discussion. Panelists at the event were William De Vos, innovation manager at DP World, Nico Wauters, co-founder and CEO T-Mining,Thomas Marckx, co-founder of TheLedger and Toon Borré. The panel was chaired by Cristof Van Laer.
'Blockchain as a solution to everything'
Statement by Toon Borré, Expert practice leader Data to Insight TriFinance at the 'Future applications of blockchain' event
Nobody likes to keep logs. A log is actually a systematic record of incidents and facts, showing what happened over time in a system, SAP or the likes. So, everybody turns off logging.
When I was asked a couple of years ago to do some process mining at a big pharmaceutical company, they asked: ‘Can you look at how things happen in our organization? How do we get to a certain point? Where did we actually lose time?’ The biggest problem, however, proved to be creating the data, because everybody turns off logging. The first thing every database administrator does is saying: ‘logging is slow, let’s switch it off’. That means you can only see the current state of a certain element and not the way this state was created in the dataset.
With blockchain, we actually solve that problem. Blockchain is event-based. Every time something happens, a ‘log entry’ is created. This step cannot be removed. It is there for ‘eternity’, meaning: as long as the network is running. From a process mining perspective, this is really smart, because finally, I don’t lose 80 percent of my time messing around with data or creating the data I want to analyze. I can actually use 80 percent of my time analyzing that data, creating insight.
The only problem is: not many companies are using distributed ledgers already. People say: ‘IBM is using it’ or ‘SAP is working with it’. Yes, on their systems. Companies like IBM or SAP are investigating if they can use the technology without performance issues at this moment in time. We are making steps.
Technology is just... technology
What we are seeing right now is that a lot of companies are considering new technologies, be it internet of things, blockchain or AI. It is crucial, however, that a company decides where it wants to go to. That it develops a strategy. I’m a child of the internet. I was there when we started it in Belgium. I created one of the first internet providers here, Skynet and it’s crazy to see what we ended up with.
In the beginning, everybody just wanted to play with it. But they forgot one thing: ‘Technology is just technology.’ If you don’t have a strategy to use it in your organization, it is just a toy. A toy badly used, will not work. These days, it’s the same old story with blockchain. People just don’t understand blockchain. They ask: ‘Where can I see a blockchain?’ Honestly, you will never see blockchain. You will see the advantages of it, being able to trace back transactions, but most of you will never see blockchain in your daily life.
So, for an organization it is always smart to consider blockchain, but jumping the hype is not a great idea.
Into the Trough of Desillusionment
In its latest technology hype cycle, Gartner puts blockchain past the Inflated Peak of Expectations and close to entering the Trough of Disillusionment. They estimate a 5-10 year timescale it becomes mainstream and applicable at a large scale. In this world, 5 and 10 years is like a lifetime. Quickly explained: In the Innovation/Trigger phase of a hype cycle, something new develops, early adaptors jump on the train. At the height of the Innovation/Trigger phase, practically everybody thinks the new technology can make coffee, or whatever you want it to.
At a certain moment in time, blockchain was a solution to everything. That magic power has now been transferred to AI. People think AI will solve everything or destroy everything. But ‘AI is stupid’. That’s not what I say. That’s what I heard an AI expert say. AI is interesting to play with and it has huge potential, but it is not there yet. We need more data to play with.
As soon, however, as you pass the coffee-making phase, everybody starts to realize that you can’t make coffee with it. People start to forget what blockchain could actually do for them. Although it’s a low level technology in the sense that you will never see it, it will drop from public grace. With the scarce number of solutions that exist today, that seems to be happening already.
Technical solutions are around the corner, we are playing with it and we are seeing progress, but it’s not there yet. It’s a phase we have to go through.
And then, completely at the bottom of the Trough of Disillusionment, expectations will drop to their lowest point. It will be a rare bird who is interested in the blockchain technology. Media will have almost forgotten it. The big risk is that blockchain might drop from public interest, with the technology not being able to prove its advantages.
Blockchain for me is very interesting because it evolves into a new way of analyzing data and because it is event based. If we can solve, quickly, the problem of storing the data in an efficient way, I’m all for it. But keep in mind, it’s just a piece of technology.
A little anecdote to end: a Dutch city was elected most innovative city in the Netherlands, because of their blockchain solution. There was only one small issue with that solution. The solution was built by a student who did his thesis on blockchain. Therefore, everybody thought his solution was using blockchain. Only:the solution did not use blockchain but a simple database.
Cristof Van Laer: 'Thank you Toon. That’s quite a statement. Nico, any comments?'
Nico Wauters: 'Just one for the moment. AI, is next to blockchain, pretty hyped. When I went to university at the end of the eighties, machine learning was a very hot topic. So, we are now 30 years further.'
Toon Borré: 'Exactly, I would even say more. AI is from the forties and fifties, when scientists developed it. They just lacked the calculation power to develop it on a larger scale. The GPU did an amazing thing for AI… We will need something similar for blockchain. Maybe even a different way of approaching it. I’m actually a fan of the HashCraft approach, but we need finer technology solutions. To get blockchain off the ground, we need more powerful technology and we must change the way people think and work. You need size to make blockchain work. Are we smart enough to fix the technology part? I think so. Are we intelligent enough to get around the table and agree on a large network? Humanity has sometimes proven that we lack intelligence, so let’s hope we are wrong this time.'
Thomas Marckx: 'That’s exactly right what you are saying. I’m not a good salesman, because I always say you never need blockchain. You can actually solve everything with central systems. But not everything is solved with central systems. Why? Is it because engineers can’t fix it? No, it’s because businesses and people don’t want to work together that way. I sometimes say blockchain is 20% technology and 80% business and I stand by that statement. It’s a business revolution more than it’s really a technology revolution.'
Blockchain as an image builder
Toon Borré: 'The different elements that form blockchain are not new. We are just ‘repackaging’ old elements, making them work together, giving them a fancy name. Nice marketing job. We could have built blockchain twenty years ago. From an intelligence point of view, we had the knowledge. We only didn’t have the calculation power.'
Cristof Van Laer: 'Why do companies keep on investing in proof of concepts? Or what would you consider a good implementation? Which indicators are there to distinguish a good proof of concept that at a later stage could scale up and become a real, valuable, game changing blockchain solution?'
Nico Wauters: 'Why are organizations investigating in proof of concepts? Not really to prove that the technology is working, but just to learn to work together. Sit around the table and join to work on a solution. For that you need a proof of concept. It requires a mental shift.'
William De Vos: 'Why do a lot of companies invest in blockchain? Marketing plays an important role there. As you see on the hype cycle: if you work with blockchain, you get the news and the press. People are here as well tonight, to hear about blockchain. It lives. That’s why a lot of companies invest in it. It’s an image builder as well as a solution to a certain problem.'
Toon Borré: 'The only problem I see is that many companies just want to use blockchain because it trendy to use blockchain, whereas they should think about using blockchain to solve an existing problem. That’s a huge issue. I think it was Deloitte that reported on the number of blockchain projects that end with slideware. Slideware means you make a great presentation showing how it works. And then you stop. The report said 82% of blockchain projects ended with slideware.
I’m just wondering, is it something the other panelists see as well? That a lot of companies invest in blockchain project, but don’t go the extra step, because of the lack of a business case or because of the alternatives that prove that blockchain is not the only solution. Is that something you see as well?'
Looking for the Killer App
Thomas Marckx: 'We have done around twenty pilots in the last two years. We mostly work for consortia, using these prototypes to showcase how the collaboration might work and can work, mainly to show how the technology is evolving in companies that really invested in blockchain. Organizations want to learn about these processes.
On the other hand, we are searching for a ‘killer app’, as we call it at TheLedger. Experience has taught us that working with a consortium from scratch is very time and energy consuming. It is frustrating work, because you have maybe ten parties around the table and just getting people’s agendas synchronised is hell. So it takes a year before you actually build actually something.
We mostly focus on the concept: how can you get one party build a working application that uses blockchain technology? It’s a form of what I call ‘blockchain in the basement’. Being the first mover, that party has no real advantage of using the blockchain. The next question then concerns the responsibilities of the network, assuming you would be able to start immediately from a decentralized network. Because you don’t want to have the early adopter control the entire network forever.
There is not that much competition yet, because everybody is still searching. So, you really need to have a very a good application, a killer app, a good business case to disrupt that industry with blockchain and that makes it very hard, but not impossible. That’s why we try to do it.'
Vive la France!
Question from audience: 'What about public administration or government organizations or for instance universities collaborating on research, fundamental research projects. What would be the possibilities there?'
Thomas Marckx: 'We do a lot of work for governments, mostly in Belgium and the Netherlands. Mostly simplifying certain processes. For once, we are very lucky in Belgium to have a complex system of governments, because at this moment we have layers of governments that communicate poorly. You could use a decentralized network for that. A more centralized state like France does need that. They have their centralized database that works, why would you need a blockchain for that? Vive La France!'
Nico Wauters: 'We have experienced that as well, in talking to the European Commission. They are looking at all kinds of applications, but then the big question is in which country will we put the central database? Blockchain resolves that question. You put a server in every country and jointly, we approve all the transactions.'
Thomas Marckx: 'We made an application for storing diploma data and sharing it. It was a collaboration between the Netherlands, Flanders and Wallonia and the thing is: it works. You can store diplomas, you can share them, you have visibility on when which transaction was made and then, of course we are looking at this moment how we can scale that to a European level. But then people start to ask: ‘Will that mean that Bulgaria will have unrestrained access to all the diploma data of every Flemish student or civilian?’
Toon Borré: 'You don’t trust Bulgaria?'
Thomas Marckx: 'That problem arises indeed. If you want to scale your solution to a European level, you have everyone in the European union involved. Total availability is one of the things we haven’t touched on this evening, because I think that makes projects much more complex.
There are other technologies where you don’t store any data on a blockchain. You store them locally and you store certain links on the blockchain itself. But do you think all privacy and trust concerns will be solved?'
The importance of a data strategy
Toon Borré: 'Let's also keep in mind there's so much going on right now for companies that it's sometimes too much to handle. I mean we talked about three hypes, internet of things, blockchain and artificial intelligence. I only know a couple of people who understand all three and how they work. Because it's so specific and a lot of people might know the basics but to make it work together and know everything... I think that is an additional challenge.
'Everything is going to change quicker and quicker. I see companies struggling there. They try to keep an overview of what's happening. The larger the company, the harder it is to follow throughout the company who is doing what. That's why I also I see an increased importance of data strategy.
'It sounds incredible, but many companies have never considered developing a data strategy. They have done strategy, energy strategy, sales strategy, marketing strategy… the works. But a data strategy? Companies try to get rid of silos to optimize their processes, but when it comes to data: that approach is suddenly swiped off the table. “No, we don't want to go there, because that department owns their data and they want to keep it that way…”
'Can be. But if ever you only want to consider blockchain: get rid of the silos. It's our data, not yours. It's the company's data, not yours. Blockchain will force companies and departments in big organizations to think differently. Another thing is an organization's digital legacy. The older the organization, the more old systems. Let’s take banking: if you want to earn a nice buck, learn to develop COBOL, because their mainframe AS400 system is still running COBOL. Ask a young graduate what COBOL is, and he will look at you as if you are talking about a species from Lord of the Rings. It's a dying race for sure, but that shows you how old the systems are.
'In fact, do you know why they've kept those mainframe systems? There's nothing quicker and more efficient at that moment. It is going to take time and money to replace that system. I've seen companies try to do away with new solutions and go back after a trial implementation of four years in SAP. It happens. So, what should you do? Develop a data strategy. Only having a central data strategy will enable you to really harvest the power of something like blockchain or any other technology.'