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Enterprise blockchain adoption is happening. Here’s why you don’t see it

Posted: 28 June 2019 4:25 pm News

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Some of the world's largest businesses are already using live blockchain solutions.


Key points

  • Live blockchain solutions are already being used by many of the world's largest businesses.
  • Governments are exploring blockchain at all levels.
  • Commercial realities, excessive hype and competitive jockeying in the nascent industry keeps significant developments under the radar.

If you want to see the current state of the art in big deal enterprise blockchain, you have to look at where private chains meet public chains with so-called "hybrid" blockchain solutions.

One reason for this is because the seriously sophisticated players – your governments and Fortune 100 companies – have too many existing systems to just tear everything out and start again.

"A year ago, the team, we decided that the world will be hybrid," said one expert. "The world is not going to change. It will pretty much always be hybrid. New tech takes too long to adopt on its own, businesses want to integrate new systems with old... If you can provide a bridge, you're a winner. If blockchain does get traction, the market in 10 years will mainly be hybrid."

Another reason is because public blockchains just aren't a safe repository for critical data, and the future is unpredictable. Serious blockchain plans require those segregated layers so you can optimise all the moving parts at each layer, and don't have to depend on those unpredictable public layers except when you want to do something that specifically requires it.

"People think [businesses] are recording everything on a public chain, [but it's] not going to happen. For many, many years, mission critical companies - like the governments - have been fearful of putting data on what they can't control," the expert said. "What one government agency asked me; what happens when quantum computers become mainstream? Can all data on public chains be hacked? Probably, yes."

"It may well be that Google, Huawei, the Chinese Government and NSA might have production versions of quantum computers to hack any public code, including public blockchains. We see the world slightly differently. Data will always be held on the most secure devices."

"Many clients understand what the potential of public blockchain is, but it will be many years before clients move mission critical infrastructure onto public chains just in case it doesn't pan out. If you're going to share data between a immutable interface layer, you need a hybrid chain."

Serious blockchains for serious people

The expert is Phil Zamani, CEO of Blocko and Aergo.

Blocko is a Samsung-backed blockchain firm that's currently swimming in the deep end of the industry, with a several-year history of building private blockchains. Aergo is essentially the name of its blockchain suite, which includes both private and public blockchain layers.

Today Blocko's current and prospective clients include Hyundai Kia motors, G7 governments, one of Europe's largest telco companies, one of the world's largest insurers and several dozen others, with blockchain projects in various stages of completion.

It's where the gritty, technical and dry blockchain solutions are going down, which makes it a fascinating place to see what the highest-end of enterprise-grade blockchain solutions really look like, if you're into that kind of thing.

Hyundai Kia blockchain


  • In short: Hyundai Kia is a sprawling conglomerate with lots of disparate systems. A permissioned blockchain layer let it tie together disparate ID systems in a more cost-effective way than alternatives. It's also digitising documents onto a private blockchain and hashing them onto a public blockchain for tamper-proof and immutably time stamped record-keeping.

Blocko worked on at least two specific blockchain applications with the Hyundai Kia group.

"Hyundai Kia - most people think they’re just an automotive company. But they're a conglomerate. They build highways, hospitals, even nuclear power plants," Zamani explained. "Each division had its own sign on credentials, mainly though Active Directory. No single sign on capability across the group. They either had to pop up a lot of money to Microsoft to update, or replace it with something else. Both would be non-starters."

"They turned to Blocko and said, is there any way we could use permissioned blockchain - almost like glue - to create a single sign on capability?"

Essentially, the plan was to use a permissioned blockchain to tie together all those separate ID silos in a way that works with all the existing systems.

"It's an unusual application, capturing a quite a complex piece of IT infrastructure, namely ID management," Zamani said. "We created a private instance that would feed in and be fed by several active implementations to create a new source of truth. Every login would be tested before entry was granted- a single uber active directory using blockchain. The reason that's interesting is because it taps into actually quite complex tech, namely Active Directory."

Basically, Blocko created a lot of blockchain "glue" that the organisation could run between its many disparate parts and connect to its existing systems, in this case Active Directory. This particular test also showed that Blocko's block-glue could be heavily customised to work with different ERP or CRM systems, to meet different government requirements for data management, and that Blocko could work at API level.

By proving that its permissioned blockchain could tie into existing business systems, Blocko ticked a crucial box.

The company has also been using blockchain for digitising documents.

"Kia has been document stamping, time stamping, converting manual documents - many thousands of them - into digital formats which are then hashed against a public chain," Zamani said. "We gain two things: We don't have to duplicate file storage, [and] once it's been validated and hashed on private chain there's no way of tampering with it."

"Both use cases were good proving grounds for showing that blockchain can be deployed across quite complex, large distributed organisations like Kia and Hyundai," Zamani said. "We did them because they were prepared to pay a high amount of money, and it was an interesting experiment - a proving ground."

Why use an Aergo permissioned blockchain?

In the envisioned Aergo ecosystem, intra-company permissioned blockchains work as convenient middleware between whatever existing systems a company has, and the public blockchain. In some cases its only purpose might be to serve as a gateway between the public blockchain and whatever it is that a company wants to connect to the public blockchain.

If a business wants to pick up some of the additional benefits of blockchain in that layer, that's also an option.

For example, in the case of sprawling multifaceted organisations like Hyundai Kia, a permissioned semi-decentralised internal blockchain architecture may help iron out intra-organisational trust issues while presenting a single, easily-accessible source of truth once you start pulling data out of its silos. Or, businesses or consortiums might rope each other into permissioned blockchain arrangements for the purpose of inter-organisational data sharing.

As a fully open source system, for both its public and private blockchain implementations, Aergo is aiming to become something of an industry standard.

One of the top five insurance companies


  • In short: One of the world's top five insurers is digitising its ample data and analysing it with machine learning for a competitive edge against tech companies entering the space. It can keep hoarding the precious data, while also performing computations on it on a private blockchain, which can then be connected to a public blockchain. That way it can monetise and share certain lessons with third parties without disclosing the data itself.

Another potential client is a large insurer, Zamani said.

"One of the top five global insurers; they know it's only a matter of time before Apple or Amazon or Alibaba enters the market with insurance policies. This insurer decided they need to be ready to respond to any changes in the market, and the only way they could really do that was by capturing more of their intelligence data."

"Insurers are notoriously old fashioned, but for about 18 months this company's been capturing data and learning from it using AI. They've digitised most of their know-how in the last 18 months. The insurer captured the data and has enough that they want to build a private blockchain. [They] copy the information onto a private blockchain they manage - they control everything on the chain."

"They want to connect this [private chain] to a public chain, to give it the ability to talk to third parties. We call that "anchoring" in our world. You "anchor" transactions that are on a private chain onto the public chain. They very much see the public layer as an interface for their data to the outside world."

"Information would not be put on the public chain. Anchoring is a really useful tool for them to share data with third parties without disclosing the data itself."

One of the top three car tire manufacturers


  • In short: Car tire manufacturing is subject to a very wide range of variables which affect the final product. By digitising all the variables that go into a batch of tires and assessing them against the final product with the help of AI, you can get an exceptionally valuable trove of data and a recipe for consistently better tires. One manufacturer is looking at blockchain as a way of selectively and securely sharing information with partners up and down its supply chain and from other industries.

"Exactly the same use case is being developed with a completely different company; car tires - one of the top 3 car tire manufacturers. What people don't realise is car tires are an imprecise science. It's a chemical problem. They have difficulties with consistency. The chemicals arrive from different locations in different plants with different transport characteristics. The machinery they use in each plant is not exactly the same."

The usual procedure is to look at what makes the best tires, and to then try to reverse engineer the steps that went into it based on all the manufacturing variables involved.

"Many tire companies like them fix the problem with human knowledge. They have the knowledge captured in their manufacturing process. For the past two years they have been copying the steps. So, take a car tire that is highly reliable based on October 2018 manufacturing - look at all the details. Was the employee working an 8 hour shift? Did the car tires arrive from this location or that location?"

"They started to slowly use an AI to analyse their data. They realised this data is very valuable, not only for themselves but also people up and down the supply chain."

"It's also like the insurer realised; a lot of this data can optimise their overall supply chain."

A large telco


  • In short: A large telco wants to use blockchain to build a more automated bandwidth marketplace, because it's currently done largely by hand which is a complete pain.

"A large telco provider - from one of the top countries in the world - not a top 7 but a G10 - they're using it to codify what they call roaming."

"Telcos typically resell their roaming to third parties or other contractors. In the UK you have over 1,000 companies you can buy network capabilities from. Those contracts are all negotiated based on how much bandwidth you want to buy, and what timeframe, what quality, what service level and what price."

"This telco had serious problems negotiating literally over 1,000 contracts, it was all manual. They wanted to automate this with smart contracts. They back-ported their last 3 years of roaming agreements and put them onto a private chain. This helps them renegotiate contracts, because they have templates."

The reason you want a blockchain for this, rather than just making some templates for internal use, is because you later have to reconcile how much bandwidth was actually used, account for any discrepancies that emerged and then settle up.

"When you sell a roaming service to a subsidiary, they have to reconcile how much bandwidth was actually used. They actually use a clearing house to translate this. These processes are human intensive, a pain in the backside and they don't want to do this."

"In effect they try to capture all the parameters used for roaming, and put it into smart contracts so they can auto-sign and auto-payout with no way of abusing it."

A G7 and G10 government


  • In short: The government in the same country as that telco is exploring a hybrid blockchain IOT mesh network that can securely and safely capture and monetise data as it passes through the network, in a tamper-proof way.

"The same telco has enough proof of experience with blockchain that they've been talking with their government."

"This is the largest telco in that country, and this country is very manufacturing-centric. They have lots of factories who are starting to use smart technology, they’re also trying to become one of the leaders in autonomous vehicles."

"The government asked for telcos to build a mesh network to connect IOT devices. Data must be secured and monetised. They're looking to use Aergo as the private chain, and use the public chain as the interface for that.

"We're building a variation of Aergo for IOT sectors. It's called Aergo Lite."

"They're talking to us about potentially helping build a grid network. Capture the data so it's now anonymised and protected. Make the data so it's not hackable and controlled by the owner. They all see the benefits of anchoring data to the public chain. Why? The public chain cannot be hacked. Even the government cannot hack the public chain."

"We also have a discussion with a G7 government that is experimenting with where blockchain could help in a number of government projects. One of them is to secure government healthcare records, so data can be shared across different geographies - but also looking for private blockchains that can be used for security purposes."

Why all the secrecy?

So, if you have all this serious blockchain work going on, why is it all so secretive?

Part of it is the normal hesitance on the client's side to publicly acknowledge that they're the first into the space, Zamani said. The industry is in an awkward phase where the front-runners are already banking on blockchain, and in more and more cases actively using it, but they still aren't ready to reveal all the details.

Meanwhile, most others are still casting around for examples of enterprise blockchain adoption, and obviously not seeing it yet on account of all the secrecy. It's still a deeply competitive space filled with lots of manoeuvring.

"We've had situations where some people involved with blockchain stepped out of line, made statements about what were using blockchain for and got fired," Zamani said.

And then there's the simple marketing element. Like every other cryptocurrency, Aergo is trying to get the word out in a crowded space. And let's be honest, that's probably one of the main reasons you're reading this right now. This is not a sponsored article, Finder was not paid for this piece and the author has no financial interests in Aergo, in case you're wondering.

It probably doesn't help that Aergo is primarily based in South Korea, as you might glean from Aergo's list of partners like Lotte Card, Hyundai Kia and Samsung. This puts up some language barriers in advertising, and as Zamani said it also means there's relatively little inclination towards self-promotion in the Aergo and Blocko workplace culture.

Another big part of the reason is simple industry competition, which is sandwiching Aergo in particular quite tightly because it's entering both the public and private blockchain space.

Blockchain firms themselves don't always want to let slip who their clients are or who they're in talks with, because that's a good way to get them stolen away. And for a smaller firm like Blocko, which is up against names like Amazon, Microsoft and IBM on the private blockchain side, it can be risky.

Spreading "FUD" about rival projects is still common even in the private blockchain sector, Zamani noted, and inviting FUD when you're going after large government and enterprise clients can be expensive in both money and time. As Zamani said:

"These clients are not easy to work with. It typically takes three months to even build a relationship."

You also have a similar sort of competition on the public side of the blockchain. And in some ways it's even worse, given the additional winner-takes-all dynamic in play there.

"It's an IOT project - they've been out a year and a half longer than us - they recognise what we're doing and say we can probably work together. But ultimately somebody's going to have to give in. Who's public blockchain are we going to use? Whose will be the one projects will anchor to?"

"There will be more private blockchains than people realise. The truth is there will be more private blockchains, but they’ll have to anchor with certain public blockchains. The public blockchains that win will be the ones that are truly open, truly collaborative and have the scalability."

Competing for a slice of the blockchain

Aergo's public chain is a commercially interesting beast. It's a delegated proof of stake (DPoS) chain, but it's built with a strong eye to reliability, performance and useability that hasn't always been present in other DPoS projects.

"In Blocko and Aergo, the DPoS algorithm will be on 23 block producers (BPs)," he explained. "100 candidates, 23 picked. The end game will be BPs as hosting providers or telcos. They understand GDPR, uptime, operational frameworks... It's run by enterprise-grade companies, not people who buy tokens in China. In our end game we want the BPs in Aergo to be distributed telecoms and hosting providers."

The telcos have the experience and capabilities Aergo wants for its public blockchain block producers. And Aergo has something they want too, Zamani reckons.

"Many people laughed at Bezos when he started cloud. But when it happened, all the telcos with large capabilities started copying Amazon. All these telcos built these cloud infrastructures."

Success rates for those telco cloud solutions have varied by country, but in the USA and many others, their failure is legendary. Now, blockchain presents a rare opportunity for hungry companies to carve themselves a slice of the next generation of the Internet.

It's not just about being a block producer on the public Aergo chain. It's also about hosting for the countless private blockchains that will be roaming the world in the near future.

Blockchain today is kind of like Linux in 1998, Zamani said. That was when Oracle and many other big companies first announced support for Linux.

"They said we think Linux is viable. The moment they did that, suddenly customers were interested. They said, "if Larry [Ellison] is saying this, it must be mature. Look back at the last year - everyone's talking about blockchain. If history doesn't repeat, but rhymes, blockchain is only a matter of time."

"It's now a race for the companies who can take a leap of faith to take advantage - and a race for companies like us."



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Disclosure: The author holds BNB, BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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