Data Governance is the hot topic in today’s security- and privacy-concerned digital ecosystem. Blockchain technology offers data-centered security to sensitive, transactional systems that require tamper-resistant, fully auditable tracking mechanisms. Thus, blockchain and Data Governance (DG) complement each other in many ways, while maintaining distinct operational philosophies and application turfs. Blockchain is today’s preferred technology for many systems governed by stringent regulatory compliance. Gartner confronts the Top 3 Blockchain and Data Management Myths for the wider audience.
A Little Bit of History behind Blockchain
According to Blockchain Demystified: The Next Database Management Evolution, in 2016, investments in blockchain startups touched $1.4 billion as the blockchain fever began to rise among the global industries—from insurance to healthcare. Even some governments attempted this novel technology for online voting purposes.
So, what are the biggest benefits of this technology? Time savings, operational efficiency, and fast authentication. The uniqueness about blockchain is that it gains momentum from widespread use; in other words, the wider the blockchain network, the better its performance.
Blockchain, the driver of bitcoin, thrives on a distributed network of databases linked through time stamps. The Swedish telecom giant Ericsson commercialized its blockchain platform through a partnership with GE. Many other companies including HP brought their own blockchain solutions to the market. Data Center Knowledge traces the history of commercial blockchain solutions.
Blockchain for Data Governance
The fundamental assumption in blockchain is that a centralized data monitoring or validation is not required among a network of distributed databases, because some pre-agreement about data validation has been conducted. The concept of “data integration” among widely disparate and uncontrolled data sources is in itself contradictory, and management and interoperability of disparate data have posed the biggest challenges to setting standards and protocols in blockchain networks.
Blockchain As Data Governance Accelerator
As the global financial services, insurance, and investments industries continue to adopt technologies like blockchain, they realize that tech innovations not only offer cost-competitive, operational models but also accelerate and enhance the risk-management functions of the businesses.
Blockchain Can Also Hinder Data Governance
As Data Governance is a core part of overall Data Management practices in an organization, any technology implementation that hinders Data Management will also hinder Data Governance. The following are some negative impacts of blockchain on Data Management or Data Governance practices:
- As blockchain promotes data validation between blocks of data, there is a high probability of more data silos emerging.
- If the data block does not match the stringent requirements of blockchain, the data block will be rejected.
- Master Data Management can be a challenge. This article points out that MDM and blockchain can reap benefits from mutual integration. MDM can utilize blockchain for data distribution and DG, while blockchain can clearly utilize the great master data.
Data Governance and Blockchain as Complementary Technologies
“Just as blockchain and distributed ledger technologies are disintermediating financial transactions and disrupting financial services, they also have the potential to disintermediate and disrupt Data Management, integration, and governance processes and technologies, thereby making data trusted, available, secure, and compliant for everyone.”
As global businesses of all shapes and sizes adopt digital technologies to reduce costs and increase operational efficiency, technology infrastructures will have to go through rigorous “standards and protocols” strength tests to ensure the technology implementations are devoid of faults. That includes Data Governance standards and protocols, which are critical for the survival of specific industry sectors like the insurance and financial services.
Blockchain is frequently used to deliver data-governed solutions in product offerings. In that sense, DG and blockchain are working in tandem to offer insurance customers more secure products. For example, Coinbase, a large Bitcoin wallet, provides insurance against employee theft and hacking.
Review the Payment Processing Industry
To see blockchain in action, review the payment-processing industry. About three billion people who do not have access to online financial services will be inducted into digital payment systems in the near future. That is transformative financial services. Blockchain will help to mitigate the risks, and reduce transactional frauds in such systems, such as in the insurance or investments businesses.
This publication describes how blockchain is handling risk management in real time. This technology is rapidly becoming a positive, competitive differentiator among high-risk businesses. The cloud-based insurance service providers are using Big Data-enriched insights to predict natural calamities or dubious investors before determining policies.
Insurers, Traditionally Slow in Tech Adoption, Welcome Blockchain
The global insurance industry is overwhelmed with data breach incidents, fraudulent claims, dubious investors engaged in money laundering, and the possibility of natural disasters and man-made accidents at any time. Blockchain has suddenly surfaced as a panacea for their problems—with a host of capabilities and benefits that enhance Data Governance and increase trust:
- A trusted ecosystem offering many business benefits
- Improved Data Governance, third-party controls, and enhanced risk management
- Decentralized ledger systems with full auditing features
- Timely alerts and notifications informing changes
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