Gartner Application Strategies & Solutions Summit

Summit 2017
4 – 6 December 2017 / Las Vegas, NV

Blockchain for Architects: Introduction

to Blockchain and Blockchain Platforms
for Enterprise IT
Paul Vincent

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Blockchain — Still at Mega Hype?
expectations
Initial Coin Offering Distributed Ledgers
Blockchain (in China)
Blockchain in Government Blockchain in Banking and Investment Services
Internet of Things
API Economy
Blockchain

Quantified Self

Cryptocurrency and Blockchain Regulation

Blockchain in Education
Blockchain in Life Science
Blockchain in Insurance
Decentralized Autonomous Organization
Blockchain in Utilities
Blockchain in Healthcare Complementary Currency
Blockchain in Supply Chain Cryptocurrencies
Blockchain in Manufacturing Digital Commodity
Blockchain for CSPs Exchanges
Smart Assets
The Programmable Economy Blockchain-Based
ACH Payments
Smart Contracts
Digital/Cryptocurrency Fiat Stable Cryptocurrency Green Money
Ricardian Contracts Bitcoin
Blockchain in Oil and Gas Blockchain in Retail

Blockchain for Customer Service

As of August 2017
Peak of
Innovation Trough of Plateau of
Inflated Slope of Enlightenment
Trigger Disillusionment Productivity
Expectations

time
Years to mainstream adoption: obsolete
less than 2 years 2 to 5 years 5 to 10 years more than 10 years before plateau

Ref: From "Hype Cycle for Blockchain Business, 2017," 10 August 2017 (G00332628)
1 © 2017 Gartner, Inc. and/or its affiliates. All rights reserved.
Blockchain — Still at Mega Hype?
expectations
ICO Initial Coin Offering
Blockchain (in China)
Blockchain in Government
Distributed Ledgers
Blockchain in Banking and Investment Services
Internet of Things
API Economy
Blockchain

Quantified Self

Cryptocurrency and Blockchain Regulation

Blockchain in Education
Blockchain in Life Science
Blockchain
Blockchain in Insurance
Decentralized Autonomous Organization
Blockchain in Utilities
Blockchain in Healthcare Complementary Currency
Blockchain in Supply Chain Cryptocurrencies
Blockchain in Manufacturing Digital Commodity
Blockchain for CSPs Exchanges
Smart Assets
The Programmable Economy Blockchain-Based
ACH Payments
Smart Contracts
Digital/Cryptocurrency Fiat Stable Cryptocurrency Green Money
Bitcoin
Ricardian Contracts Bitcoin
Blockchain in Oil and Gas Blockchain in Retail

Blockchain for Customer Service

As of August 2017
Peak of
Innovation Trough of Plateau of
Inflated Slope of Enlightenment
Trigger Disillusionment Productivity
Expectations

time
Years to mainstream adoption: obsolete
less than 2 years 2 to 5 years 5 to 10 years more than 10 years before plateau

Ref: From "Hype Cycle for Blockchain Business, 2017," 10 August 2017 (G00332628)
2 © 2017 Gartner, Inc. and/or its affiliates. All rights reserved.
Key Issues

1. Understanding bitcoin's success

2. What are blockchain solutions?
3. Where to look for your blockchain project?

3 © 2017 Gartner, Inc. and/or its affiliates. All rights reserved.

Key Issues

1. Understanding bitcoin's success

2. What are blockchain solutions?
3. Where to look for your blockchain project?

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What Is a Bitcoin Blockchain?

 Bitcoin ledger records transactions

Distributed Ledger of Bitcoin Transactions (Tx)
 The most proven
+ most distributed ledger!
"Genesis Block Block Block Block
Block" of Tx of Tx of Tx of Tx  Chain of transaction records, grouped
in blocks, never ending,
chronologically ordered chain
Ledger Replicated Across Peer-to-Peer Network  Trust through massive replication
across network
Node  Process for consensus — "shared
Node
truth" — is proof of work/"mining"
Node
Node
Node  Optional extension of programmatic
Node
behavior attached to transactions
Node Node
("smart contracts")

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Bitcoin = Blockchain Success

 100,000 merchants allow bitcoin payments

 134Gb sized ledger

>17M >300K >$80B

wallets TXs per day managed
TXs = Transactions
Source: "Blockchain, Market Capitalization" (https://blockchain.info/charts/market-cap)
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Bitcoin — Currency or Investment?

Source: https://coinmarketcap.com/currencies/bitcoin
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Versus Tulip Market, C17th

See: Tulip Mania

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Bitcoin Blockchain Technology Issues

 Not a true distributed database

 Consensus mechanism
to determine creator
of next transaction block
is expensive
 Transaction block + chain
replication + miner
mechanism limit performance
 Centralization of processing

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Bitcoin Limitations

5Q 18
(10 )
<3.3 TPS hashes
80%
in practice processed of mining is
per sec by 4 miners

Hard
forks!
Segwit2X, Bitcoin
Cash, Bitcoin Gold …
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"Blockchain Fever" Continues

$176 B
Est. business-value-add
of blockchain by 2025

Source: "Forecast: Blockchain Business Value, Worldwide, 2017-2030" (G00325744)

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Key Issues

1. Understanding bitcoin's success

2. What are blockchain solutions?
3. Where to look for your blockchain project?

12 © 2017 Gartner, Inc. and/or its affiliates. All rights reserved.

Blockchain Principles

History of
events/transactions
represented
across blocks
Cryptographically linked,
Decentralized
time-based,
consensus blocks of records
Previous blocks mechanism
cannot be altered
without rewriting all
subsequent blocks Distributed Ledger
Blockchain
Distributed P2P Network

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… Leading to Blockchain Use Cases
Industry Use case examples — some in trial status
 Decentralized Trust
Healthcare Medical records and clinical trials
 Valued Digital Assets
Trade finance, shipping, logistics and provenance
Supply chain
 Fine-Grain Dynamism
Voting records, registry of property ownership,
Government
citizen identity and digital currency

Intellectual property assets by musicians, lyricists,

Media industry
choreographers, authors and other creative

Real estate Property transactions

Transactions about oil and gas extraction, refining,

Energy sector
and distribution

Source: "The Disruptive Potential of Blockchain Technology" (G00327607)

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Blockchain: Volatile Market With Overlap and "Coopetition"
Infrastructure Software

Professional Services

Smart Contracts

Financial Services

Boutique Services
Distributed Ledgers

~90 "blockchain" platforms today!

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Requirements for Enterprise Blockchain

 Scalable to global economy

 True open source from inception
 Well-specified protocol with multiple independent implementations
 Modular architecture and open APIs enable ecosystem
No Platform Today Covers These
 Battle-tested via public blockchain deployment
 Transparent governance with agile effective response to threats
 Configurable for private or hybrid blockchain
 Bug-resistant smart contract capability
 Ecosystem of third-party tools and frameworks

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Example Blockchain Platforms

Ethereum Web Client

Browser App
Transactions

Key Generation

Networking/JSON-RPC
Server
Core Ethereum Blockchain

P2P Ethereum Wire Protocol

Decentralized
Network

JSON-RPC = JavaScript Object Notation-Remote Procedure Call; P2P = Peer-to-Peer

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Example Blockchain Platforms

Ethereum Web Client

Browser App
Transactions

Hyperledger Key Generation

Networking/JSON-RPC
Server
Core Ethereum Blockchain

P2P Ethereum Wire Protocol

Decentralized
Network

JSON-RPC = JavaScript Object Notation-Remote Procedure Call; P2P = Peer-to-Peer

18 © 2017 Gartner, Inc. and/or its affiliates. All rights reserved.
Example Blockchain Platforms

Ethereum Web Client

Browser App
Transactions

Hyperledger Key Generation

Networking/JSON-RPC
Server
R3 Corda Core Ethereum Blockchain

P2P Ethereum Wire Protocol

Decentralized
Network

JSON-RPC = JavaScript Object Notation-Remote Procedure Call; P2P = Peer-to-Peer

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Strategic Planning Assumption

By 2025,
FIVE distributed ledgers
will be "mainstream"
commerce platform enablers.

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Key Issues

1. Understanding bitcoin's success

2. What are blockchain solutions?
3. Where to look for your blockchain project?

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Blockchain Benefits
Traceability of Records

Improve Trust

Immutable Records

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Smart Contracts: Be Careful What You Wish For

 The Smart Contracts Goal:

 Removal of manual intervention and oversight, e.g., from legal counsel
 Reduction in associated legal costs, fees and process (time)
 Speed of contract creation and execution
 Automated transfer of funds via computer recognizable/definable events
 Flexibility in contract execution

A legally binding, digitally manifest agreement with the power

to re-engineer itself dynamically, depending on the terms
and conditions of the market/commercial context to which it
applies, via the implementation of an implicitly encoded set
of rules without the need for human intervention or oversight.

Source: Finite and Infinite Games (James P. Carse)

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Considerations for Blockchain Projects

1. Is there a community consensus for participation in a system of trust?

2. What business benefit can be derived from a decentralized, distributed
system of trust among partners/peers/suppliers/customers?
3. What user experience is required in a decentralized, digitally distributed,
application context?
4. Do the organization's risk management and legal policies and processes
accommodate the use of smart contracts?
5. Are large blockchain R&D projects in China + Japan a competitive threat?
6. How will digitalized "Things" in smart contracts regarding assets of value
impact the business model?

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Benefits Versus Costs
Access to new markets Project failure/missed expectations

System Change
Virtual asset creation/distribution
duplication management

No central point
Efficiency gains Security and privacy Operational risk
of failure

Traceability Immutability
Technology Implementation Integration
of records of records

Distributed ledger versus Partnership and ecosystem

central authority management/governance

Benefits Costs

Source: "How to Develop a Business Case for Blockchain Projects" (G00323011)

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Alternative Technologies to Consider
for "System of Trust"?
Event log:
 Append-only
Distributed (create + read)-only database:
 Cloud-scale dbPaaS
 In-memory data grid
 Hosting by trusted party

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Strategic Planning Assumption

Through 2018,
85% of blockchain-named projects
will deliver business value
WITHOUT using a blockchain.

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5-10 Years to Go Before Mainstream

Bitcoin

Blockchain

ICO

Ref: From "Hype Cycle for Blockchain Business, 2017," 10 August 2017 (G00332628)
28 © 2017 Gartner, Inc. and/or its affiliates. All rights reserved.
Recommendations

 Do the math: Consider the collaboration and leadership needs to drive

a blockchain consortium in your community of interest.
 What's the need? Will a smart contract fill the requirement?
Centralized or distributed ledger?
 Undertake measured R&D/innovation POCs:
– Realistic use case

 Consider exploiting an existing blockchain framework:

– Considerations are messaging standards, distributed vs owned ledger, security, APIs

 Be wary of too much investment too soon

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Ride the Wave or Get Swept Along?
Traceability of Records

Improve Trust

Immutable Records

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Recommended Gartner Research

 How to Determine If You Need a Blockchain Project, and If So,

What Kind?
Rajesh Kandaswamy and Fabio Chesini (G00320247)
 The Evolving Landscape of Blockchain Technology Platforms
Ray Valdes, David Furlonger and Rajesh Kandaswamy (G00315765)
 Practical Blockchain: A Gartner Trend Insight Report
David Furlonger and Ray Valdes (G00325933)
 Understanding Blockchain Platform Architectures
and Implementation Styles
David Furlonger, Martin Reynolds and Ray Valdes (G00323596)
For more information, stop by Gartner Research Zone.
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