Executive Guidance

Get to Know
Blockchain
Unlock the value for yourbusiness, now and tomorrow© 2019 Gartner, Inc. and/or its affiliates. All rights reserved. CM_I_705610

Foreword by David Furlonger and Christophe Uzureau

The promise of blockchain
Digital advances have enabled businesses tostreamline a plethora of interactions between
customers and value chain partners. Yet many
information-heavy processes still require multiple
entities to exchange private documents, and themethods for doing so remain unsecure, error-prone
and fraud-ridden.
As a real-world example, consider the information required
to allow a piece of real estate to change hands from one
owner to another. From the buyer’s mortgage and insurance
documents to the property’s inspection report and title
review, these details contain personal information abouthigh-value assets — some of it redundant and some ofit unneeded by certain parts of the value chain. And yetthese documents, which are reviewed manually, arepassed around via email or placed on a third-party portal
outside the control of the buyer and the seller.
Sweden’s Lantmäteriet, the government agency responsible
for regulating real estate, believes there is a better way.
The agency is building a blockchain solution to connect the

Get to Know Blockchain

various participants of the real estate value chain. Buyers,
sellers, mortgage lenders, real estate brokers and agents,
law firms, property developers and private buyers will havetheir interactions with the agency streamlined. The goal isto reduce the time delays and information security issues
that breed fraud and high processing costs in the real estate
sectors. The Lantmäteriet estimates a potential annual savingsof $106 million.

Immature solutions are temporary
Real estate is just one industry among dozens looking toblockchain as a solution to the challenges and opportunitiesof doing business in digital environments. The technology
promises to allow any individual or commercial entity inthe world to safely transact with any other, without needinga bank, insurance company, logistics provider or otherintermediary between them.

Blockchain allows any individual orcommercial entity in the world tosafely transact with any other without
an intermediary.

2When this promise is realized, it will enable dramatic
expansion of markets; it will provide better tools to manage
expensive and opaque processes; and it will enable trade ina broad range of assets that, until now, couldn’t be effectively
represented, priced or traded with existing means. The
technology could generate as much as $3.1 trillion in new
business value by 2030.

For readers who plan to wait until blockchain evolves
further along the Gartner Blockchain Spectrum, we urge
you to reconsider. Blockchain is not a way station on theroad to increased digitalization. It is a paradigm shift in how
businesses, customers and partners interact and exchange
value. The time to develop the in-house skills needed to build
and manage blockchain platforms is now. Equally important
are the additional organizational and leadership capabilities
needed to engage in this new way.

 artner predicts blockchain couldG
generate as much as $3.1 trillion in new
business value by 2030.

Those who wait until the later phases of the Gartner
Blockchain Spectrum to engage will be shut out ofopportunities to learn, earn value and influence blockchain’s
development in the value chain.

The current practice of building and using blockchain isimmature, however. Many solutions called “blockchain” on
the market today only incorporate some of the elements ofthe technology, and therefore only realize some of its value.

To help you understand blockchain and how to unlock yourshare of its value, this Executive Guidance will clarify whatblockchain is, what it enables businesses to do that can’t
be done with other technologies and how it will continue
to evolve over the next 10 years.

The dominance of these immature solutions is temporary.
Blockchain will quickly mature and evolve along the Gartner
Blockchain Spectrum — from the current-day blockchaininspired solutions that include only some elements, tothe fully realized blockchain-complete solutions we expect
to see beginning in 2023, and the enhanced blockchain
solutions by 2030 that will incorporate the Internet ofThings (IoT) and artificial intelligence (AI).

Get to Know Blockchain3

Contents
CHAPTER 1

CHAPTER 2

CHAPTER 3

05

10

15

What Is Blockchain?

The Gartner
Blockchain Spectrum

The Blockchain Society

What Is
Blockchain?

What Is Blockchain?

Blockchain as a paradigm shift
In its simplest terms, blockchain makes it possible for two
or more people, businesses or computers that may or
may not know each other to exchange value in digital
environments without having an intermediary like a bankbetween them validating and protecting the transaction.

Blockchain will move the world economy
away from the slow, expensive, analog
methods used since the 19th century to
mediate financial transactions.

The potential impact on business volume is massive.
Imagine all the business deals your firm won’t or can’t dotoday because you don’t know who is on the other end of
the transaction and can’t be sure they own the assets theywant to trade. For millions of potential trading partners,
asset types and transactions, that uncertainty will cease
to matter. The blockchain will identify participants andensure all elements of a transaction are valid. It will enforce
its rules and ensure everyone holds to them. If its potential
is realized, blockchain will move the world economy awayfrom the slow, expensive, analog-based methods we haverelied on since the 19th century to establish identity andlegal status in financial transactions.

Get to Know Blockchain

Blockchains create this trusted digital environment by
combining existing technologies and techniques to forma distributed digital ledger that captures and records theinformation needed by participants in a network to interact
and transact. The blockchain confirms who the participants
are and validates that they own the assets they want
to exchange. It then records the transaction information
to the ledger, a copy of which is independently updated
and held by each participant. Records are unchangeable,
time-stamped, encrypted and linked to each other in blocks.

Making digital processes both safe and transparent
Consider how valuable this could be for a task as universal
and mundane as filing taxes. In the U.S., a quarter of a million
taxpayers in 2017 had their refunds stolen when fraudulent
returns were filed in their name. Such a breach is possible inpart because the Internal Revenue Service relies on Social
Security numbers — which it issues and controls — to identify
taxpayers. Those same Social Security numbers must be
shared with employers, payroll processors, banks and otherthird parties. This critical key piece of identifying data lives inthe databases of dozens of companies unknown to the owner.
A system that operates on a blockchain would, by contrast,
use more sophisticated and secure methods for identity,
such as tokenized credentials or a self-sovereign identity
technology. Using these methods, a blockchain is able toconfirm the identity of a participant in a way that doesn’t
require the participant to show their ID to the entire network.
Nor does it require the recipient to keep their own copy. Allthey need is for the blockchain to confirm that the ID exists.
6

What Is Blockchain?

That same technique could make a range of activities
less susceptible to fraud, including insurance claims,
credit access and voting. Financial institutions are
already leveraging a version of this self-sovereign identity
capability to streamline trade finance documentation,“know your customer” accreditation and other costly,
redundant and fraud-riddled processes.

Blockchain identity solutions makea range of activities less susceptible
to fraud, including insurance claims,
credit access and voting.
Why blockchain?
Identity authentication as an enabler of safe trade
is just one of the benefits of blockchain. Equallyimportant is blockchain’s ability to enable more diverse
transactions — in both type and size — than is possible
with traditional centralized systems.
For generations, businesses have relied on centralized
infrastructures — such as payment systems, insurance,
delivery and logistics services, and governments — toexecute commercial transactions and manage risk. But
these systems weren’t designed to handle the kinds ofGet to Know Blockchain

machine-to-machine transactions made possible by digitalplatforms. This is true both of the volume of total transactions
and the size of the individual transactions that are now
possible as a result of digital transformation.
Single units of data, cryptocurrency, reward points or pieces
of an asset (as opposed to the whole) are a few examples ofassets that are or soon will be tradeable over digital networks.
The units could be worth less than $0.01, but they can be
traded by the millions or trillions. Current payment systems
can’t cost-effectively and securely process transactions
below a certain value, and they can’t handle the volume madepossible today by the proliferation of mobile devices andnetworked things.
Businesses need a different way to deal with new digital assets
and interactions without involving an intermediary that cancollect data on every party in the transaction and take a pieceof the value. Enter blockchain.
Blockchain not only makes new markets possible, it can also
redirect existing value flows by reducing the control that large
multinational corporations, digital platforms, intermediaries
and governments have over data.

Blockchain not only makes new markets
possible, it can redirect existing value
flows by reducing the control that
centralized systems have over data.
7

What Is Blockchain?

How blockchain works
Blockchain enables trusted interactions between unknown
participants by combining five design elements to authenticate
users, validate transactions and record that information to theledger in a way that can’t be corrupted by a single participant
or changed after the fact.

Immutability. Completed transactions
are cryptographically signed, time-stamped
and sequentially added to the ledger.
Records can’t be changed unless theparticipants agree to do so.

The five elements are:Distribution. Blockchain participants
are connected on a distributed network.
Participants operate nodes, which arecomputers that run a program to enforce
the business rules of the blockchain.
Nodes also keep a full copy of the ledger,
which updates independently when newtransactions occur.

Tokenization. Value is exchanged in theform of tokens, which can represent a wide
variety of asset types, including monetary
assets, units of data or a user’s identity.
Tokenization, or the creation of tokens,is the way a blockchain represents andenables trade in its native value.

Encryption. Blockchain uses technologies
such as public and private keys to record
data securely and semi-anonymously(participants have pseudonyms).

Decentralization. No single entity
controls a majority of nodes or dictates
the rules. A consensus mechanism
verifies and approves transactions —eliminating the need for a central
intermediary to govern the network.

Source: Gartner

Get to Know Blockchain

8

What Is Blockchain?

The five elements together make a blockchain
All five elements together define and make a blockchain.
All five are needed to create new forms of value and safely
trade them without centralized oversight.

Blockchain ledgers can’t be read,
written, deleted or changed as databases
can — and they aren’t controlled bya central administrator.
It’s also important to understand what blockchain isn’t. For
one, it’s not a database — although vendors sometimes
falsely describe it as one. Blockchains aren’t general storesfor information. Blockchain ledgers can’t be read, written,
deleted or changed as databases can.

Get to Know Blockchain

Blockchain

Most importantly, blockchains aren’t controlled by a central
administrator. By definition, the fifth blockchain elementof decentralization enables consensus-driven governance.
A centralized architecture would leave any solution open to
the same issues to which every central system is vulnerable.

9The Gartner
Blockchain
SpectrumThe Gartner Blockchain Spectrum

Blockchain is on an evolutionary path

Still, blockchain-inspired solutions are useful experimentson the path to solutions with all five elements. In time,
blockchain will evolve toward solutions that enable a wide
range of new digital transactions.

Blockchains require all five elements, though early experiments
coming to market incorporate only three of the five. Early
adopters are leaving out tokenization and decentralization,
as these are the least familiar and mature from an enterpriseperspective. Gartner refers to solutions incorporating only
some elements as blockchain-inspired solutions.

The Gartner Blockchain Spectrum illustrates the evolutionary
path that Gartner sees for blockchain — from the late 2000s,
when many of blockchain’s enabling technologies reachedmainstream awareness, to the current-day blockchain-inspired
solutions and blockchains of the future that will operate over
networks supported by AI and the IoT.

Blockchain-inspired solutions can still add value by digitalizing
manual processes, such as real estate purchases, or byenabling more efficient information exchange in multiparty
transactions, such as insurance claims. Without all fiveelements, however, their value is limited.

Internetof Information

Enabling
Technology
Get to Know Blockchain

2010

Internetof Content

Blockchain
Inspired

2020

Internetof Value

Blockchain
Complete

2030

Enhanced
Blockchain
11

The Gartner Blockchain Spectrum

Blockchain inspired
The Swedish Lantmäteriet’s real estate blockchain is one
example of a blockchain-inspired solution using only
three of the five elements — distribution, encryption
and immutability. Tokens are occasionally included inblockchain-inspired solution designs, but in a limited way
and under centralized control.
Blockchain-inspired solutions often aim to reengineer
existing manual processes specific to an individualorganization or industry.
Because blockchain-inspired solutions are developedfor use inside an enterprise or between known parties,
they are by definition centralized in design. Their owners
describe them as “closed,” “private,” “permissioned,”“enterprise” and “proprietary.”
Some blockchain-inspired solutions, like Sweden’s
Lantmäteriet, have the potential to evolve over time toincorporate tokens and decentralization as design elements.
Many enterprises, however, intend their blockchain-inspired
solutions to remain under central control. This includes someof the blockchain solutions developed by consortia or third
parties for use by multiple members of a value chain. Alibaba,
for example, developed a blockchain platform to allow
customers to trace the origins of imported foods, such as
New Zealand milk products, sourced from third-party suppliers.

Get to Know Blockchain

Libra coin — the Facebook-led digital currency that is
expected to go live in 2020 — is another high-profile
example of a blockchain-inspired initiative that plans to
evolve over time toward decentralized governance. Libra
is a rare example of a blockchain-inspired solution designedwith tokens. Facebook has formed a consortium of technology
leaders including PayPal, Square, Lyft and others to be partof the Libra nonprofit association that governs the blockchain.
The way the consortium describes its blockchain indicates
there will be equity among the members. Despite that, both
the general market and regulators are discussing Libra as
if it were a proprietary Facebook service.

12

The Gartner Blockchain Spectrum

Blockchain complete
Blockchain-complete solutions employ all five elements,
including tokens operating in a decentralized environment.
They will begin to have market impact in the mid-2020s.
To illustrate their potential, consider the solution evolving
at SWARM fund. The nonprofit startup wants to allow
individual investors to access investment opportunities thatare usually only available to institutions or ultra-high-net-worth
individuals. The SWARM fund model allows users to buy
SWM tokens, which the organization combines into a poolof capital large enough to purchase an institutional-sizedstake in the specified fund or asset class. Though the SWARM
nonprofit currently governs the network, the idea is thatthe network will ultimately operate with a higher degreeof decentralization.
As SWARM fund demonstrates, the presence of tokens
enables blockchains to create new native digital assets or
to represent existing assets in new digital forms so they
can be traded. Decentralization drives the use of consensus
to authenticate users, assets and transactions, and ensuresthat no single participant can control the underlying
mechanisms of trade or the value produced.

Get to Know Blockchain

One benefit of blockchain-complete solutions derives fromthe way they expand commercial participation and access.
Anyone or anything can interact or transact in a blockchaincomplete network as long as they adhere to the shared rulesof the network. In a sense, blockchain-complete solutions
are realizing the promise of equal access that was part of theWorld Wide Web at its inception.

13

The Gartner Blockchain Spectrum

Enhanced blockchain
As blockchain evolves along the spectrum, a number ofparallel technology trends are likewise making commercial
inroads. Most important among them are the IoT and AI.
Within a few short years, organizations will have embedded
billions of devices and sensors in their products andinfrastructure. Concurrently, engineers and data scientists
are translating decisions into algorithms to executeautonomously. IoT and AI don’t need blockchain todevelop, of course. Yet blockchain, IoT, and AI complement
each other and could provide shared benefits in the formof more reliable data, more secure transactions and auditable
AI capabilities.
The result will be an enhanced blockchain in whichsmart, autonomous things join people as participants
capable of identifying, creating, transacting andnegotiating for digital assets.
Consider how an enhanced blockchain could functionin the context of autonomous vehicles. Within a decade,the intelligent sensors in a car will be able to communicate
with sensors located along a driving route to exchange
information. Driving conditions, distance traveled andGet to Know Blockchain

available parking are examples of the kind of information thatcan be passed between sensors. An enhanced blockchain
network could facilitate commercial interactions using that
information. A blockchain could reserve and pay for parking,or draw electricity to charge the car’s battery. Further into the
future, an enhanced automotive blockchain could coordinate
movement of autonomous self-driving vehicles between
multiple owners or within a ridesharing network.

14

The Blockchain
Society15

The Blockchain Society

Blockchain benefits go beyond business

Blockchain solves societal challenges

The benefits of blockchain are not exclusive to business. Just
as the internet, mobile technology, social media, AI and big
data have individually and collectively driven changes in theway humans, things, businesses and society interact, so too
will blockchain. We call the culmination of these technologydriven changes, when governed and enabled by blockchain,
the blockchain society.

In an early example of a blockchain ID solution with societal
benefit, the United Nations World Food Programme ran
a pilot in Jordan to allow Syrian refugees to use food credits
at local grocers. Inspired by the program, the city of Austin,
Texas, later proposed a blockchain ID solution for homelesspeople to access social services. The same idea of creating
a multipurpose digital proof of identity is in testing in various
municipalities to enable blockchain-based voting.

Consider the issue of identity as an enabler of societal
engagement. Identity provides the foundation forparticipation, as citizens and as economic contributors.
Current systems rely on methods such as driver’s licenses or
passports, which are easy to lose or steal, and can be easily
copied by identity thieves.
Long before blockchain, digital identity proponents argued
for a digital ID that is portable and secure, and which willallow citizens to access public services, perform civic duties
or provide credentials to possible employers. Blockchain
solutions provide the added benefit of allowing participants
to maintain sovereign control over their personal ID so they
can prove who they are without exposing personal data to
third parties to use for commercial gain.

Get to Know Blockchain

Blockchain’s impact on the way humans,
things, businesses and society interact
will rival that of the internet, mobile
technology, social media and big data.
Community finance is another area of avid society-driven
experimentation. The blockchain startup PotholeCoin, forexample, allows motorists to register a needed road repair
and put up a token-funded “bounty” to pay for the fix. Whenenough tokens have been saved, the blockchain deploysa designated repair organization to fix it, and pays when
the repair is done. This approach enables local community
members to fund repairs that otherwise may not be a priority
for their local governments.

16

The Blockchain Society

Blockchain and the organization
As with societal communities, blockchain’s consensusdriven operations will also lead to a reimagining of the
traditional organization — and the way in which its members
participate. Top-down hierarchy will no longer be the dominantorganizational model. Instead, organizations will adopt
structures that better reflect the collaborative and collective
ethos of blockchain.

Blockchain society offers a wide arrayof people, businesses and things fair
access to resources and fair opportunities
to engage.

The London-based startup Colony offers an aspirational
example of a blockchain that reimagines the nature of theorganization. Using the Colony blockchain, participants canestablish their own “colony” (i.e., organization) and define
work categories (e.g., finance, marketing) and the tasks
that need to be done for each. Participants opt in to becomea member of a colony and to complete certain tasks. The
more tasks a participant completes at a requisite level ofquality, the better their reputation and the more managerial
responsibility they can take on. Participants receive faircompensation and promotion based on the quantity andquality of their work.
Returning to the subject of identity, a blockchain-enabled
ID can allow participants who gain reputation with one
organization to capture a record of their work and shareit with others. Such a mechanism could revolutionize howhuman resources professionals validate employee credentials
or recruit talent to participate in high-priority projects.
Society-oriented solutions will help drive citizens towarda blockchain society running on decentralized systems thatoffers a wide array of people, businesses and things fair accessto resources and fair opportunities to engage.

Get to Know Blockchain

17

Conclusion
The impulse to wait and see how any newtechnology evolves is strong. But the rapid adoptionof AI algorithms and IoT should make clear that
there is no time to wait. These technologies bothproduce and depend upon massive volumes ofour personal and business data to operate. As time
passes, our data assets are increasingly under thecentralized control of a few powerful actors, whothen use it to generate value for themselves at theexpense of the larger economy and society.
Business leaders who want a future programmable society
in which they can form partnerships and do business with
fairness and privacy need to lay the groundwork for a new
economic and social model now.
The platform leaders that currently control the lion’s shareof digital value flows aren’t waiting. The financial institutions
that manage the flow of money aren’t waiting. The largest
insurance companies aren’t waiting. As a result, no businessor societal leader who hopes to influence the terms ofengagement for their company or society can afford to wait.

Get to Know Blockchain

Where to start
To begin to explore what blockchain means for yourorganization, leaders should:• Develop a vision of how blockchains designed with thefive elements could benefit your organization today. What
intractable challenges involving access to, exchange ofor sovereignty over data could they address? What simple
administrative decisions would you leave to an algorithm tomake today? How could those initial experiments progress
to more complex managerial and leadership decisions? How
might you create incentives and reward structures using
tokens to encourage participation?
• Define the organization’s blockchain development
strategy. What are the priority use cases? How will you
pursue them — independently, as part of a partnershipor as part of a consortium? If you’re already involved inblockchain pilots, proofs of concept or full implementations,
are the solutions inspired? If so, where does the network
data reside? Who has access to it? Who defines the rules?

18

Conclusion (continued)• Monitor launches of new blockchain solutions. Startups
are emerging with new blockchain-complete solutions
to disrupt incumbent players in various industries.
Incumbents are doubling down on centralized solutions
while experimenting with decentralized models. And
blockchain infrastructure vendors are driving maturityof the technology components. The market is moving
fast, and its points of convergence highlight veins ofopportunity to mine.

The stakes are high in defining a new economic and social
model for the blockchain future. Businesses need a systemthat can enable trade in the new forms of value made possible
by digital advancement, and they need a way to break up themonopoly on data and value currently controlled by a handfulof central actors. That is the real business of blockchain
available to leaders who are willing to grab it.

• Become an advocate for blockchain-enabled IoT and
AI transparency. As IoT and AI continue to gain traction,
there is increased backlash by customers and employees
concerned about privacy, security and transparency.
Commit your business to protecting privacy and pursuingtransparency, and leverage the immutability and auditability
features of blockchain to show stakeholders that youractions are appropriate.
• Explore how your organization will evolve its blockchain
culture. When decisions are made automatically andby consensus, it changes how leaders lead and how
team members participate. It invites different rewards
and incentive mechanisms with an eye to how wellthey encourage collaboration. Make sure you havemultidirectional feedback mechanisms in place to improveoutcomes and accountability.

Get to Know Blockchain

19

A Leader’s Guide to Understanding Blockchain and Enabling Digital Business
Discover insights, tools and templates to support your technology initiatives. Visit gtnr.it/blockchain to access resources for yourfunction.

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ThinkCast: Hear a Gartner strategy expert discuss winning businessmodels for the digital era

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Research: Understand blockchain’s principles and potential, and how tonavigate the hypeResearch: Understand when blockchain makes sense and the criticalfactors to consider to capture its value
Research: Access insights that help CIOs determine when to accelerate
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20

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The Real Businessof Blockchain
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