Fabio Chesini, senior research director at Gartner, said more and more people are adopting blockchain, and there is no doubt in it, but there are four major points that will not solve business problems and a stakeholder should seriously focus.

After the efflux in blockchain technology and rapid adoption of technology by businesses, classic blockchain features have been authorized for specific purposes like data distribution, decentralized governance, digital asset tokenization, and smarter contracts. Executives and IT leaders who focus on digital transformation adopt classic blockchain features as a major point to solve problems. Businesses do adopt blockchain-enabled solutions at scale to fight against business cases. The blockchain consultancies and start-ups that lead the market push to move beyond pseudo-anarchic cryptocurrency origins encourage business-oriented models to employ blockchain. As organizations look towards blockchain-enabled solutions, executives and IT leaders must consider the lessons learned through deployment and identify the success. 

Let’s discuss the four major blockchain points 

• Data distribution

Blockchain helps accumulate business data, message storage, and exchange required by the multilateral business. A blockchain shared ledger should not be mistaken as a fully functional database distribution as it is limited in its design and not intended with purpose. Replicating huge files such as invoice records and complex records across dozens of servers in a blockchain ecosystem makes little sense, and transaction sync time increases dramatically. So the required storage and networking will drain the IT budget despite using cloud services.

Points to consider by executives and IT leaders

• It leaders should focus on blockchain’s potential to drive more data standardization and ignore blockchain cost-saving and efficiency.
• Blockchain is just a tool to mitigate data fragmentation with other parties, and it does not solve or simplify the whole data management requirement of a company.
• There is a difference between data distribution and data sharing consistency, thus holding separate blockchain supplier discussions.

• Decentralized governance

Supporters and experts praise the indented benefits of blockchain, which have no central authority or governance. The real fact is most ecosystem owners such as Amazon or American Express yield or share control of their network to either all or few participants. Due to proprietary, complexity, and coordination interests. Due to this, executives and IT leaders should keep following things in mind.

• Governance is crucial, so put it at the start of any blockchain initiative and determine that rules will be enforced separately or self-enforcing in the blockchain.
• To eliminate intermediation, blockchain decentralization is not a silver bullet and will not come useful in the commercial interest of ecosystem leaders.
• Decentralization comes in use in finding new ways of cooperation and sharing among different parties. It is an important tool to eliminate intermediation.

• Digital asset tokenization

Like public blockchains, a blockchain can handle metadata that represents a digital asset. There are key impediments for private/permission blockchain to become an alternative to existing technologies and evaluate or address the custody for a given asset class in value exchange services. Digitally a public blockchain can represent asset value in many forms, including money, time, utility, services, and others. Global liquidity democratization is the ability to digitally represent and exchange value on the top of a public blockchain. This new way teaches organizations to examine digital asset tokenization as a new business opportunity known as tokenomics. With more frictionless banking and payment services, the new global access enables decentralized financing and investment. The decline in transaction fees provides more frictionless banking and payment service. Here are a few points that executives and IT leaders should consider.

• By stimulating the public blockchain environment, conduct a proof of concept in the private domain. Also, show evidence of liquid, illiquid, and nonfungible assets.
• Use liability management to lower expectations on blockchain’s magical bullet approach and use current custody and value exchange requirements. Eliminate well-established intermediaries in the asset management value chain.

• Smarter contracts

Smarter contracts on private permission blockchains enable more efficient management of business processes legal agreements and support programmable tokens. In reality, blockchain intelligent contracts may reduce the requirement of a middleman such as lawyers. The hype surrounding smart contracts is often due to dropped role of attorneys in making agreements and negotiating disputes. Moreover, lawyers continue to get involved in this process and protect clients through legal language. Blockchain-supported contracts will not have any impact on this attorney role. The contract is evolving, and this is happening through blockchain consortia in payments, trade, and supply chain finance space. Blockchain technology is the catalyst for discussing new and better cooperation among partners and competitors. Noncompeting participants improve their ability to engage through this technology and enter into broader digital ecosystem value exchange. Organizations looking to solve business problems and manage legal contracts are streamlining business processes using traditional technologies, and only 10% is being handled on-chain in a private permission environment. Smart contracts enable agreement efficiency and optimization across contractual participants. It is a long way from the praised idea of radically transforming legal documents, lawyers’ critical role, and current business models. IT leaders who are focusing on digital transformation should focus on the following points.

• For standardizing and improving contract management, a business should lower expectations and use private permissioned blockchain. Blockchain-inspired smart contracts will have minimal impact on reducing contractual disputes and removing lawyers’ role in settling disputes.
• Smart contracts refocus business leaders on public blockchain for notarization and tokenization use cases.