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Connecting The Dots With Web3

Connecting The Dots With Web3

As the CTO, Shine leads Global Engineering at dltledgers. He had been working in digital transformation platforms for more than a decade.

We have evolved rapidly as a species on the technology front, especially in the last three to four decades. Just when we thought Web 1.0 was the biggest thing that happened, Web 2.0 came with its share of rich interactivity, e-commerce and web-native content sharing. Centralization was the dominant mode for operations and service delivery in Web 2.0, and this gradually opened up many significant concerns, including internet neutrality, data privacy, anonymity and service monopoly.

A seminal paper on decentralized finance in 2008 by a pseudonymous entity/person named Satoshi Nakamoto opened up an essential possibility of having trust in a decentralized transaction context. Blockchain, leveraged to enable Bitcoin, is becoming the most disruptive technology of this century, and it changes how we perceive the connected world of business operations involving multiple parties.

With the advancement in cloud computing, Industry 4.0 (with IoT and intelligent automation as its backbone) and artificial intelligence, it wasn’t long before a computer scientist like Gavin Wood figured out the missing technology piece in this labyrinth of real-world interactions. He could see how well blockchain could connect the dots in the new internet context, thus laying the foundation for Web3.

Current World State For Enterprises

If we look at the prevalent business interactions across organizations, there are elements of data fragmentation, operations rigidity, application centralization and lack of process visibility. Trust predominantly is based on authority and becomes more of a prerequisite than the desired effect. Systems integrations are spaghetti partly because of the siloed core operations systems in each domain or subdomain.

Despite these existential constraints crippling them from seeing the broader picture, people try to develop digital transformation roadmaps. What typically follows is a difficult journey of uncertainty accompanied by a high degree of failure. The scope of this article is to acknowledge and understand this elephant in the room and then look at a plausible implementation blueprint for business transformation leveraging Web3 and its underlying technology levers.

Elephant In The Room

Let’s remove the blindfold and have a look around. We can see that the metaverse of business interactions has multiple businesses or business contexts modeled as interconnected domains (and subdomains). In place of business boundaries naturally becoming system boundaries or bounded domain contexts, we now have systems at the enterprise level. You have spaghetti data integrations primarily driven by these systems and their interfaces. Still, the source of truth is fragmented across these multiple systems—whether it’s a core operation, collaboration or content management system. Thanks to the advent of cloud computing, we have some solace in transcending these boundaries through a multitenant software/platform service.

It’s like we have built this world in silos as concrete islands first and then started erecting bridges as we discover more ways of interaction in the context of exchanging value. In a graph, you can picture systems and their integrations like nodes and edges. The digital transformation blueprint essentially translates to a specification for building the bridge between systems (both internal and external). Though enterprise application integration (EAI) strategies seemingly bring in a connected infrastructure, the source of truth is still fragmented in these multiparty business transactions. These transactions also lack multiparty consensus and are not tamper-proof in the event of a security risk.

Accessibility to these systems of record is limited, and the eventual transaction consistency model is bringing the need for offline reconciliation, thereby reducing possibilities for real-time compliance—not to mention the enormous effort taken in assuring data compliance regarding residency, security and privacy. Reliability of effective governance is always a massive burden on enterprises, taking a severe toll on their share of effort and resources. This nonreliability increases the escape velocity for putting strategic initiatives in orbit.

Getting Started

It’s time organizations started taking a serious look at their risks regarding “global compliance” and strategizing a transformation path around Web3 (especially the blockchain lever). They need to assess the threat surface regarding people and processes and align the interactions in the context of a permission-driven distributed ledger. This assessment should help establish the identities and regulated permissions of all parties involved in the transaction. The key objective should be to embrace “transparency,” which should help establish compliance and trust. These incentives can help prepare an organization (including people and processes) and its partners for change management.

The transition could happen with minimal business disruption and in a staged manner. Organizations need to look at their processes, evaluate the risk elements and identify candidates for a pilot based on the risk score. Success criteria for the pilot should be defined upfront in the context of risk mitigation. They include audit reports with indications of process compliance. The “tamper-evident” distributed ledger and the smart contract leave an immutable trail of audit logs that serve this purpose. The capability to convert a legal agreement (with all of its business rules, business events and security policies) to a Turing equivalent smart contract makes your smart contract “smart.”

While Web3 presents its promise to be the next-generation ESB, it also offers its share of challenges in the form of readiness. Organizations must invest in upskilling (both awareness and technology) people and preparing them for this impending journey. They could effectively apply a “buy vs. build” strategy here depending on their business priorities and risk dispositions. Upon concluding the pilot, an organization should be in a better position to evaluate the possibility of an ecosystem (metaverse) of distributed applications (dApps) that helps connect their business partners and present a “single source of truth”—one that helps them make timely and informed decisions.

Conclusion

Connecting the dots in a transformation context is quite natural in the context of a Web3 network. Service delivery models would change from conventional centralized SaaS solutions to a decentralized network-driven services model where ecosystem service providers also become nodes in the network. Near-real-time compliances backed by “smart contracts”—driven by multiparty consensus, notaries and zero-knowledge proofs—would become a reality and replace existing batch processing reconciliation methodologies.


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