StartKryptowährung NewsThe transparency challenge of blockchain in organizations

    The transparency challenge of blockchain in organizations


    In the past decade, Bitcoin, Ethereum, and other cryptocurrencies have swiftly made their way from a few cypherpunks’ revolutionary vision to a now almost mainstream family of financial assets and decentralized applications. For instance, the investment bank Morgan Stanley recently announced that it now offers their wealthy clients Bitcoin or other crypto exposure, while the investment powerhouses Goldman Sachs and JP Morgan have even started working on the full provisioning of cryptocurrency investments opportunities to their clients (Mason, 2021; Ponciano, 2021). Moreover, many blockchain-based digital assets or tokens with, for instance, the purpose of low volatility (stablecoins) and access to services (utility) (Oliveira et al., 2018) are booming in what has become popular under the term decentralized finance (DeFi) (Zetzsche et al., 2020). In general, the opportunities related to blockchain-based financial markets and tokenization are now regarded as a key trend for the economy (Alt, 2020; Sunyaev et al., 2021). IS researchers have early also investigated the opportunities of adopting blockchain technology beyond the financial sector and expected substantial improvements, e.g., in terms of data immutability, interoperability, and traceability (Beck et al., 2018; Ferdous et al., 2019). Moreover, the opportunity to enforce rules between business parties on a blockchain can facilitate a new level of trust and, to some extent, make blockchains a substitute for intermediaries (Alt, 2020; Beck et al., 2017; Bons et al., 2020). Researchers and practitioners have explored blockchains in numerous publications and prototypes within, among others, supply chain management (Gonczol et al., 2020; Queiroz et al., 2019) and the energy, health, mobility, and public sector (Andoni et al., 2019; Fridgen et al., 2019; Shi et al., 2020; Warkentin & Orgeron, 2020).

    However, compared to the momentum of blockchain applications in cryptocurrencies and DeFi, adoption in industry and the public sector seems to move considerably slower. For instance, besides a few successful, productive solutions (Lacity & Van Hoek, 2021), we have not yet observed the anticipated widespread disruption of digital supply chain management. Considering the large number of publications and businesses’ significant efforts to develop blockchain-based solutions beyond the financial sector (International Data Corporation, 2021), the visibility of successful blockchain applications seems relatively limited. During the Covid-19 pandemic, we also saw many blockchain-related projects being placed on hold or quit, possibly owing to a lack of success and the shift in priorities toward other projects that promise short-term savings or that open new business opportunities. Insights from large consultancies support this observation. For instance, Deloitte recently found that the mortality rate of blockchain projects pursued by organizations is around 85%, and even 92% when taking into account all blockchain projects on GitHub (Deloitte, 2021). Further, large technology companies such as IBM and Microsoft have announced a reduction in their blockchain engagements (Allison, 2021). A high failure rate for large and complex IT projects is not surprising per se (Whitney & Daniels, 2013), and an even higher failure rate may be expected owing to a certain level of blockchain hype associated with financial speculation in the context of cryptocurrencies and DeFi. Nonetheless, the observation of unexpectedly slow developments regarding blockchain adoption beyond concepts and prototypes has already led to disillusionment and nascent research on why blockchain technology has to date failed to meet the high initial expectations in the context of supply chains (Sternberg et al., 2020). Given that particularly the connecting of today’s fragmented information silos in supply chains was regarded as one of the very promising use cases for blockchains (Azzi et al., 2019; Queiroz & Wamba, 2019; Roeck et al., 2019; Saberi et al., 2018), the lack of productive solutions there is particularly surprising.

    Table ​Table11 features a summary of challenges that organizations face in blockchain adoption. In this paper, we argue why we consider excessive transparency one of the key reasons for the observable lack of blockchain adoption. Building on previous work, we discuss why the replicated processing of data in blockchains often conflicts with organizations’ policies and regulations associated with sensitive business and customer information (Kannengiesser et al., 2021; Pedersen et al., 2019; Toufaily et al., 2021). The impracticality of deleting data ex-post from a close to immutable ledger further aggravates these issues (Rieger et al., 2019). Initial calls for research into the privacy implications of blockchains have pointed out that researchers should explicitly consider issues associated with the exposure of sensitive information (Rossi et al., 2019). In this context, Kannengießer et al. (2020), for instance, have already contributed to a more detailed understanding of the related trade-offs from a technical perspective. Yet, we found that transparency-related discussions are often restricted to personal information and the GDPR’s right to be forgotten (Schellinger et al., 2021) or not considered a substantial challenge (e.g., Lacity & Van Hoek, 2021). Some researchers even consider blockchain as a suitable technology to increase privacy (e.g., see the overview in Karger, 2020). During our involvement in more than 10 projects in the mobility, energy, and public sector in the last three years in which we designed, implemented, and evaluated blockchain-based solutions, we initially encountered similar perspectives among stakeholders, which also aligns with the findings by Platt et al. (2021). In these projects, the exposure of sensitive information often made scaling blockchain-based applications from initial proofs of concept to larger ecosystems very difficult, required substantial architectural changes, and caused increased complexity or restricted the originally intended scope.

    To provide a shared understanding of the application areas of blockchain technology that we use to illustrate the consequences of excessive transparency, we first introduce some background on blockchain technology, derive common use case patterns, and list examples for the sensitive information involved. We then point out the fundamental transparency challenge affecting many of these patterns and the corresponding difficulties developers and decision-makers face in businesses and institutions when conceptualizing or scaling corporate blockchain applications. We also illustrate to which extent permissioned blockchains and some recent developments in the practical use of cryptographic tools may help mitigate the transparency challenge. We close by summarizing our main results and identifying avenues for future research.

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