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Blockchain’s next frontier: Shaping the business model

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  • Blockchain’s next frontier: Shaping the business model

    The story of blockchain market adoption closely resembles the path taken by other disruptive technologies: an initial industry explores what is possible, others give form and substance to what is plausible, and the marketplace helps define what is practical. It’s no longer a question of whether the technology will work—it does work. What’s at play now is how each industry will tailor blockchain adoption to meet its needs.

    Collective sentiment about blockchain is on the rise, along with meaningful implementations in the public and private sectors. At the same time, a new era of maturity is setting in—one in which organizations proceed with greater intention and seriousness as they tackle the challenges that come with adopting disruptive technologies.

    Some of these challenges are rooted in the development of blockchain and distributed ledger technology: processing speed and scale, interoperability, and tech stack maturity, among others. Because of their technical nature, these challenges are likely more recognizable and understood within a context like blockchain that is inherently technical. And while not entirely resolved yet, progress is being made.

    As blockchain and digital asset adoption increase, new and different kinds of challenges are coming into focus—challenges that underscore the operational implications that follow from market adoption. We categorize these new market challenges as the following:
    • Early tech-heavy focus: Overemphasis on technology development and deployment.
    • Multi-party operating models: Legal and governance mechanisms that facilitate interactions, such as contracting, dispute resolution, and third-party assurance, have not caught up.
    • Regulatory clarity: Policies need to be studied and constructed to align with new digital business models.
    • Geographic variability: Different geographies are taking a range of positions within the context of blockchain and digital assets.
    • Professional services guidance: Despite limited guidance on accounting and auditing, the profession needs to evolve with the technology.

    Early tech-heavy focus. It’s understandable that the early focus of an emerging technology like blockchain should be on development more than the pressing market challenges that impact longer-term adoption. But a tech-heavy early focus may make it harder to resolve other market challenges that impede lasting adoption and make them more pressing as the technology matures.

    Multi-party models. Any discussion of market challenges within the context of blockchain should also include multi-party business models. By its very nature, blockchain represents a multi-party solution transforming a process that was linear, siloed, and point-to-point into a distributed peer-to-peer form of governance. Blockchain democratizes information and access to it.

    Despite their many potential benefits—including cost savings, sharing of risks, and removing friction from years of inefficient processes—peer-to-peer models often take longer to deliver return on investment. They require a new way to share information and create value and evoke an array of issues to overcome, from data ownership and privacy to governance to financing to civil/criminal liabilities and beyond. This is true even in a vertical supply chain ecosystem, where interests are more naturally aligned, similar to the industry-focused platforms developed by IBM.

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