Blockchain’s ‘Troughs of Disillusionment’ Are Really The ‘Trenches of Deployment’

I noticed many familiar faces disappear from the enterprise blockchain conference scene in 2019. What happened to all those people who were talking so confidently in 2017 and 2018 about how DLT was going to change the world? Was their absence proof that we truly are deep into the blockchain “trough of disillusionment”? Happily, no. From my vantage point as CTO of one of the leading enterprise blockchain firms, my abiding memory of 2019 will be of the year of deployment: where countless firms were hard at work – quietly, steadily, but relentlessly – fighting in the trenches to bring their solutions live. And I think that makes the story of 2019 way more interesting than one may have first imagined…

Exploding into consciousness in the business world back in 2015, a casual observer could have easily assumed the almost manic levels of hype and media coverage meant blockchain was already being used for everything in business from issuing insurance policies to processing international payments.

But, in reality, only very recently – after years of intense innovation, fine-tuning and reinvention of the original blockchain concept – has this technology become ready to be deployed on the scale required to fully transform the operations of entire industries. And this has all been happening away from the glare of public scrutiny.

And so you’d be forgiven for thinking that 2019 was the year in which

everything stopped. But you’d be wrong. 2019 was the year of build-out, deployment and testing. And, as we enter 2020, the hard work is about to pay off…

Deployment mode: on

The nascent enterprise blockchain industry has sometimes fallen victim to the same fate as the boy who cried wolf. We’ve been hearing about the potential for blockchain to solve all sorts of business challenges for years now – so where are the tangible examples of the technology in action in the real world?!

One key insight emerged a few years ago that underpins platforms such as the one my team built from scratch. It is that the main breakthrough of public blockchains – censorship-resistant digital cash – is fundamentally different to the problem that the same underlying techniques can solve for business, which is the need to transform the economics and operations of entire markets, in the way that the first IT revolution transformed individual firms.

It’s almost as if the blockchain era has unleashed two parallel revolutions.

And, as a result, a blockchain for business needs to be a very different beast to the original public blockchain platforms underpinning networks such as Bitcoin and Ethereum. While hugely popular, the public blockchains were an inspiration to those of us building solutions for business but they could never have been the basis of those solutions. The requirements are just too different. So it has taken time to build platforms – such as Corda and others – that meet the needs of business.

I’ve discussed previously the reasons public blockchains are an inappropriate foundation upon which to solve market-level business problems – finality, privacy, the list goes on. So rather than going over old ground, let’s look at how purpose-built enterprise blockchain technology is now tackling some of the most persistent challenges in industries as diverse as insurance, healthcare, gold, oil and gas, finance and more. 

So in what follows, I share a few war stories. We can learn a lot from the challenges we face along the way.

Fixing a broken reinsurance market

If any area of the global financial markets is in urgent need of transformation through technology, it’s the reinsurance market. At heart, the idea behind the market is simple: if you’re an insurer, what do you do if the risks you’ve taken or are being asked to take are too big or concentrated for you to shoulder alone?

You might want to find other companies to share the risk with you, for a fee. Or perhaps you’re happy to shoulder the entire risk for “normal” eventualities, but have some other firm step in if a loss exceeds a rare but otherwise catastrophic limit.

The reinsurance market provides insurers with a way to find firms with whom they can offload, share or otherwise repackage risks that they simply couldn’t handle alone and, in so doing, help customers – firms and individuals – get access to protection, at competitive prices, that would otherwise be impossible for them.

But the market relies on archaic, labour-intensive manual technologies, such as fax, email and telephone, as the means of communication and information exchange between the thousands of stakeholders involved in quoting, negotiating and finalising these complex deals. Indeed, if you’ve ever spent time around the Leadenhall Market area of the City of London, you’d think you’d stepped into a historical period drama, as brokers walk around with huge bundles of paper under their arms! As a result, market participants are saddled with painfully slow processes, heavy administrative burdens and a crippling lack of visibility into critical policy information.

Many industry participants agree that the market is hugely inefficient, but these challenges aren’t new. In fact, the reinsurance market’s vast communication inefficiencies have been a prevalent issue for decades, despite repeated attempts to fix it using various technologies.

Enter enterprise blockchain.

What’s needed to fix this broken market is a way for all participants in the process of reinsuring a risk – insurers, brokers, reinsurers, service providers – to access a shared ‘golden record’ of information, rather than working with inconsistent, inaccurate, and out-of-date copies on fragments of paper and legacy systems. And to manage the complex interactions between these firms as they negotiate with each other whilst ensuring that each participant only sees the information they’re entitled to. This could help solve so many of the issues the market faces like the lack of transparency and the disproportionate length of time it takes to conclude business.

And this new way of working is happening right now.

For example, a group of leading insurers and reinsurers are going live with a solution that solves this problem for the obscure, but important, property “Catastrophe Excess of Loss” (Cat XoL) reinsurance product, which has been developed by a member-owned consortium called the Blockchain Insurance Industry Initiative (B3i). The platform puts the participants in control of the data, and allows them to interact, negotiate and place risk more securely and efficiently.

The B3i solution builds on an identity layer provided by Corda Network, secure inter-firm messaging and workflow provided by Corda, and the foundational blockchain guarantee that “I know that What You See Is What I See (WYSIWIS)”.

Since each firm’s blockchain node can be on their own premises, data that shouldn’t be shared need never leave their building, and the data that needs to be shared is shared directly with the entitled peers and nobody else. The use of an enterprise blockchain architecture means participants are not required to share the data with a third-party for distribution to other participants; it is transmitted directly.

The Trenches of Deployment

But think about the breakthroughs needed to actually make concepts like this work.

First, we need an identity layer. You need to know you’re talking to who you think you’re talking to when performing real business transactions. “Pseudonymity” doesn’t cut it. But secure and reliable identification systems don’t just emerge out of nowhere: the not-for-profit Corda Network foundation had to be established and roll out its network. This is now done. Indeed, we may look back in a few years on the work to bring Corda Network to life in 2019 as a monumental achievement: infrastructure laid down once but from which countless business networks will derive value in the coming years.

Similarly, for enterprise blockchain to reach its potential, it must be possible to deploy nodes close to where the data lives, which means making blockchain platforms work equally well on premises as in the cloud. Getting software engineered to the level where bank security teams will approve it for on-site deployment is a massively difficult process. But, just like the build-out of Corda Network, it’s something that only needs to be done once. And 2019 was the year when we did it for Corda.

And if approval is hard, actually installing software is even harder. Provisioning machines, opening up holes in firewalls and all the rest. And guess what: 2019 was also the year when many of the world’s largest banks and insurers installed and commissioned their enterprise blockchain nodes and used features such as Corda Firewall (also fully productionised in 2019) to enable secure communication with their peer firms across the public internet.

The public internet!

The common theme of 2019 was something that I think a lot of people have missed. These early enterprise blockchain projects seem to be taking longer than people expected. But a huge amount of the work was one-time foundational infrastructure build-out. Costs incurred once but from which we will benefit many-times over in the future. 2019 paved the way for 2020 and beyond.

We’re still reaping the benefits from the railroad build-out of the 19^th century and the fibre build out of the late 20^th century. Not everybody who took the risk to build it benefited. But those who followed still thank them every day.

Real change, right now

And insurance is just one example from countless industries that are already using blockchain in everyday business scenarios, optimising processes and systems that in many cases have remained stagnant for generations.

The often-quoted technology hype cycle dictates that early successes typically lead to an expectation that a technology is largely finished when, in practice, it’s often barely started at all. This was certainly the case with blockchain – and most likely because of the sheer level of excitement that something had finally come along in industries as plagued with inefficiencies as insurance that finally provided a beacon of hope. After all, who wouldn’t get excited at the prospect of retiring bundles of paper in 2020?!

Enterprise blockchain is about to enter its plateau of productivity, perhaps in record speed.  Everywhere I look, I see fundamental, reusable, generationally important infrastructure layers having been deployed in 2019. Which is why what the commentators thought was inaction and disillusionment is what those in the know understand was the year of build, deployment and roll-out. The time for real change is now.