Seven common mistakes in enterprise blockchain projects

Adrian Leow, senior director analyst at Gartner highlights how CIOs can avoid unnecessary failure by acknowledging common pitfalls

Gartner, Blockchain, Enterprise

Blockchain is often hyped as the next big thing in emerging technologies. But the reality is the majority of proofs of concept fail to get beyond the initial experimentation phase. The good news is that CIOs can learn from early failures and avoid common mistakes. However, simply knowing where the frequent points of blockchain failure exist can help enterprises avoid falling into the same traps.

Misunderstanding blockchain technology

For a project to utilise blockchain technology effectively, it must add trust to an untrusted environment and exploit a distributed ledger mechanism. Tokenisation and decentralisation are key elements for a useful blockchain. Private blockchain deployments relax the security conditions in favor of a centralised identity management system and consensus mechanism that obviates the trustless assumptions. To correct this, enterprises must create a trust model of the entire system to identify trusted areas versus not-trusted areas and apply blockchain only to untrusted parties.

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Assuming that current technology is ready for production use

The current blockchain market is a mixture of offerings from startups and open-source projects. CIOs should assume that most blockchain platforms are still maturing and continue with experimentation and proofs of concept, especially in the context of open source.

Confusing foundation-level protocol with a complete solution

IT leaders might think the currently available foundational-level technology is essentially a complete application solution. But realistically, blockchain has a lot of evolving to do until it’s ready to fulfill all the potential technologies. When considering a broad-scope, ambitious blockchain project, CIOs should view the blockchain portion to be less than 10% of the total project development effort.

Viewing blockchain technology as storage mechanism

Some IT leaders conflate “distributed ledger” with a data persistence mechanism or distributed database management system. Currently, blockchain implements a sequential, append-only record of significant events. It offers limited data management capabilities in exchange for a decentralised service and to avoid trusting a single central organisation. CIOs must be aware of and weigh the data management trade-offs to ensure that blockchain is a good enterprise solution in its current form.

Challenges exist in terms of business case viability, governance maturity, technology maturity, availability of skills and even an underlying willingness to alter the way the core enterprise and industry works

Assuming interoperability among platforms that don’t exist yet

Some IT leaders conflate “distributed ledger” with a data persistence mechanism or distributed database management system. Currently, blockchain implements a sequential, append-only record of significant events. It offers limited data management capabilities in exchange for a decentralised service and to avoid trusting a single central organisation. CIOs must be aware of and weigh the data management trade-offs to ensure that blockchain is a good enterprise solution in its current form.

Assuming that smart contract technology is a solved problem

Smart contracts, computer protocols that will facilitate and enforce contracts, are what will enable the programmable economy. However, at a technical level, smart contracts currently lack scalability, auditability, manageability and verifiability. Moreover, there is no legal framework currently in existence — locally or globally — for their application. Smart contracts will evolve in the next three to five years, but CIOs should be careful when developing them under current blockchain offerings and seek legal advice on their use.

Ignoring governance issues for a peer-to-peer distributed network

Blockchain governance issues can pose significant challenges to projects. Governance is not as big an issue for private or permissioned blockchains, as the “organiser” will set standards and rules for the entire platform. For public blockchain, governance is critical. Ethereum and Bitcoin have established governance, but it only addresses technical issues, leaving human behavior and motivations ungoverned.

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