Not all blockchains are created equal, according to Carlos Arena, Director of Business Development at R3.
In a recent webinar called “Blockchain and Cryptocurrency Part 3: Perspectives from R3,” Arena breaks down why blockchain has traditionally been seen as an application for the financial services industry and how new versions of distributed ledger technology are being developed to broaden its reach.
“For regulated financial institutions, we are much further along the hype cycle,” Arena says. “With other industries, we are still identifying the correct problems or use cases that can leverage the benefit of the technology.”
The rapid growth of blockchain
While it’s true that project maturity of blockchain is varied by industry, the outlook for the broader economy remains promising. Markets and Markets predicts the blockchain market size will grow to $7,683.7 million by 2022, at a CAGR of 79.6 percent. Considerable efforts are already being made in supply chain and healthcare.
As use cases are developed for other industries, one of the biggest fears for businesses is that updating existing infrastructure to incorporate distributed ledger technologies will take significant time and money.
“Companies have been making very important investments to improving their technology, and adding a new layer [like blockchain] is something some are reluctant to do,” Arena said.
Moreover, aligning key stakeholders among regulators and competing interests will require new levels of collaboration that have henceforth been rare in many industries. This is why consortiums are essential.
So, what is R3?
R3 is a blockchain platform provider and NetSuite customer who organizes groups of banks, financial institutions, regulators, trade associations, professional services firms and technology companies to engage in productive discussions about blockchain development.
“What we are trying to do at R3 is incorporate all of these different parties into an environment where we bring in the requirements from legacy systems, competitors, and regulators to make sure that whatever is being built complies with the needs and wants of each of these groups,” Arena said. “Without the collaboration of all three, we will not move forward and the true benefit of blockchain will not be realized.”
Benefits of blockchain can vary across designs
“There is a very important misconception in the market that all blockchains are the same,” Arena said. When considering the challenges that you are trying to solve, it’s crucial to think about the capabilities and design of a solution to ensure that they apply.
R3 developed its own platform, Corda, because other blockchains were not suitable for business use cases. For instance, most blockchains lack the privacy that is required in the average enterprise deal, he said.
Disadvantages of traditional blockchains
“Traditional blockchains prevent double spends by revealing every transaction to everyone,” Arena said. This is of course not practical in most cases, where it is often illegal to share information like confidential customer data, high value trades, or a company valuation in an M&A deal.
Additionally, traditional blockchains are slow. “A single block for bitcoin is born every eleven minutes.” In the financial services industry where millions of transactions take place every second, this is not acceptable.
How Corda is paving the way to broader adoption
Corda, Arena claims, is different in that it solves for these key issues. Corda is the only blockchain platform designed from the ground up with privacy and interoperability at its core. Because of these qualities, Corda moves beyond bitcoin and can apply to the broader financial services market, as well as healthcare, commodities and more.
Though platforms like Corda are paving the way towards broader adoption, Arena cautions that there are still many instances in which a shared database may be a company’s best option.
A lot of the negative hype around blockchain is caused by people contemplating projects that just don’t make sense for the technology. Scott Derksen, Sr. Director of Business Development at Oracle NetSuite, joined Arena on the webinar and offered insight into when blockchain might not make the most sense.
“With blockchain, you have certainty around shared truth that is immutable—and that the logic of your contract is built into your shared system,” Derksen said. “If you don’t have a project that will derive value from those two things, you may have an IT project that isn’t actually a fit for blockchain.”
R3 has an extensive portfolio of projects that are currently being worked on to bring distributed ledger technology to the broader enterprise market. Many of these projects will move from dummy data and sandboxes into real applications during 2018.
Missed this webinar? Watch the recording to learn more about R3’s portfolio and to hear more insights around blockchain application for enterprise business.
Interested in attending the final installment of our four-part series on blockchain? Register for the next webinar which takes place on Wednesday, May 16th. You’ll learn how NetSuite customer Solar Site Design and Energy Blockchain Network developed and implemented a successful blockchain solution for their business. During this session, you’ll see a high-level demo of their use case and learn tips for your own exploration.