Opportunities and Critical Points of Adopting Blockchain Technology in Central and Eastern European Region
In January 2018, IDC published its first numbers sizing blockchain technology across various regions and industries. To outline current trends on the Central and Eastern European (CEE) market, we asked Mohamed Hefny, systems and infrastructure solutions program manager with IDC, a few questions.
Q. Blockchain is a relatively new term, which is often connected with internet security as well as trust achieved by building ledger blocks on each record in the database. Do you have any of your own definitions that could explain blockchain in an easy way your own, or a more simple explanation of blockchain?
A. Securing records in a chain of blocks, as a concept, goes back more than 25 years, but it started to gain momentum with the implementation in cryptocurrency about 10 years ago.
IDC defines blockchain as a data store that represents a digital ledger of records (blocks) that are cryptographically linked (chained). The result is an immutable and sequential set of records that can be used to drive new business and efficiency.
To simplify it, imagine buying a used item from eBay without the need for eBay to intermediate and take a cut from your purchase, or transferring money abroad without the need for a bank to take a day or two validating, handling, and charging fees on this transaction. Imagine how much time and money this technology could save.
Q. With so many disruptive technologies, is it blockchain's time now? What are the limitations?
A. In theory, the technology has no limitations except for network size and user integrity. However, its complexity is challenging.There are few standard solutions, and for potential clients it is like sailing into uncharted water, and the reliable tech giants are not there to help yet. It is also developing according to need in various domains, more like a custom solution. And above all, there are no rules or regulations to organize the domain.
Q. I often see blockchain associated with the finance and healthcare sectors — but how do you see adoption progressing in other vertical markets?
The public sector is heavily encouraging and investing in the technology. In Poland, for example, the National Centre for Research and Development, the implementing agency of the Ministry of Science and Higher Education, created the Polish Accelerator of Blockchain Technology, a €2.8 million program to support blockchain projects for a range of public institutions… including ministries, public agencies, hospitals, and critical infrastructure companies.
Despite the lack of telecommunications use cases, telcos can certainly invest in the future by focusing on the security, identification, transaction, and other aspects of the technology, especially given sector players are major investors in cloud and the heaviest spenders on tech in the region.
Q. Could we say blockchain is a universal solution that can fit to any product or service?
A. The way I see it, there are various solutions, including custom, tailored designed and use-case specific. There is not yet a single platform that works as passe-partout in all cases. Central and Eastern Europe is responsive to success stories, so I expect that when major banks in Western Europe adopt a specific blockchain solution, banks in our region will subsequently implement the same. I saw this happening with virtualization and cloud. But in this case, it would be sector specific.
Q. What about data on infrastructure-as-a-service (IaaS) providers. Is blockchain a part of their services?
A. Yes, big players such as Amazon, IBM, and Microsoft are demonstrating how easy it is to build a distributed ledger platform on their clouds. Blockchain is not that easy, but industries like telecom and gaming, which serve millions of subscribers and extend their services to the cloud anyway, are certainly benefiting from IaaS.
Q. Will the enhanced security of blockchain translate into a competitive advantage? Or will such security become obligatory for any digital record?
A. Like any digital transformation technology, the biggest driver will come from the need to remain competitive. Blockchain is not only about security, it's also about transparency and eliminating mediators, which translates to cost effectiveness and higher return on investment for both vendors and end users. Those service providers that ignore the technology — and overlook fortifying, enhancing, and accelerating their services with it — will be left behind.
Q. Do we already have some main blockchain vendor players in the CEE market?
A. Tech giants such as SAP and IBM are testing the water, especially the latter with public- and finance-sectorpilot projects. However, blockchain brings a huge opportunity to startups in the CEE region, where government support and advanced skills can offer a fertile ground for things to really happen. DX is about fast progress and agility — the tech giants’ size and legacy is not an advantage here!
Q. Is it mostly hype at the moment? In the CEE region, there are many governments that have made strong commitments to blockchain (Estonia and Ukraine, for example), but is this something that is really being discussed and planned for among end-users right now, or are CEE companies taking a wait-and-see approach?
A. Blockchain is often confused with the volatility and craziness of cryptocurrency, even among technology professionals and enthusiasts. This is related to the nature of trading and mining those currencies as a product, and not to blockchain as technology. Development and adoption levels for blockchain vary across the CEE region, from initiatives and discussion (such as how the technology can help to end child trafficking in Moldova), to successful tests and being on track for implementation (one of Poland’s largest banks is using the technology for its data storage system). Other real use cases include the aforementioned central government voting application in Russia, and another of the biggest banks in Poland being on track to implement a blockchain document management system. And these examples are just the drops before the rain.
Q. In 2016, Colombian expats voted in a plebiscite for a peace treaty, using a digital platform powered by blockchain technology to validate and authenticate each vote. We have just had Czech presidential elections, and it would be so easy to vote via smartphone. Perhaps next time… or do you think my expectations are too high?
A. Yes, the next presidential election can be blockchain-based, developed by a local startup, in the local language and with locally relevant customization. The only obstacle would be the political will and bureaucracy.
This is not only applicable to presidential elections, but to any voting system that aims for transparency and security for shareholders, members of parliament, or citizens. This is the case with the city of Moscow, where blockchain was applied to the Active Citizen app-based portal, which is allowing the city's residents to vote on and audit the results of municipal projects.
Interview was conducted by Ivana Slaharova, Senior Research Analyst, Customer Insights & Analysis, CEE Region.