It wouldn’t be much of an exaggeration to say that 2018 was the year of the blockchain. It sufficed to use the word “blockchain” in your job title or scope of services to quickly become the “it” person or a company.
While the disappointing finale to 2018 might have encouraged some to jump off the blockchain bandwagon, the field is steadily moving forward.
According to the report published in late November by PRWeb, the market value of blockchain in global retail is forecast to see an increase in value, from $80 million today to over $2.3 billion over the next five years. This means a soaring 29-fold overall increase and a 96.4% annual growth rate.
Interestingly though, the industry is still waiting for the breakthrough success adoption story of enterprise blockchain at scale.
Informed by the latest discussions, conferences, industry media and (often heated) conversations within my own network, I’d like to share some of my reflections on the status quo of enterprise blockchain in mid 2019, and the factors that stand in the way of accelerated adoption.
Blockchain is Here to Stay
Despite last year’s crypto cold shower, today it is hard not to interest companies in the blockchain technology. Perhaps the disappointingly high number of companies that underdelivered, and the bursting of the ICO bubble have been a blessing in disguise… Today the sentiments are maybe less enthusiastic, but investors and other stakeholders have started to take on a more rational approach to token economies.
As an answer to the under-regulated ICO model, alternative forms of coin offerings are surfacing out, including STO’s (Security Token Offering).
Similarly to other coin offerings, STO investors are issued with a crypto token that represents their share in a project. But unlike ICO, a security token represents real value, i.e. stocks, bonds, real estate, or other assets, and is thus a less risky form of investment.
While crypto startups might be going through a rough patch, the technology itself is gaining momentum among enterprises. Over the past months the blockchain media channels such as Coindesk or Cointelegraph have been regularly reporting on new cases of blockchain trials, PoC’s and adoption plans among some of the largest market players across a variety of sectors.
Among them there is IOTA’s collaboration with Jaguar and Land Rover, Nike prototyping a utility token called “Cryptokicks”, Louis Vuitton testing blockchain-fuelled provenance tracking solutions, PepsiCo joining in the advertising supply chain area, or IKEA prototyping in the IoT space.
Even more disruptive initiatives have been announced in fintech, including Societe Generale’s launch of smart-contract-powered bonds, JP Morgan stunning the market with the launch of the JPM Coin, and kick-starting Quorum — an enterprise-focused version of Ethereum, followed only by Samsung equipping the Galaxy S10 phone with a built-in crypto wallet.
Collaboration is the Driving Force Towards Maturity
As the technology is still struggling to push through to the next level of maturity, consortia have proved to be the most feasible approach for launching scalable enterprise-level blockchain solutions.
Towards the end of 2018 it was announced that two of the largest tech-focused blockchain consortia Hyperledger and EEA (Enterprise Ethereum Alliance) would merge, providing a show case example of how to build bridges in order to equip the field with common operating standards, while at the same time reinforcing the open source community.
Business-focused consortia are also doing well, with IBM Food Trust arguably in the lead. The consortium consolidates supply chain efforts of some of the food industry giants including Walmart, Nestle, Dole Food, Unilever, and by incorporating Carrefour it has most recently also expanded its reach to Europe. Today over 80 brands operate under the consortium’s umbrella.
Such increase in quantity of enterprise blockchain try-outs and PoC’s has become possible thanks to the existing off-the-shelf blockchain software. While permissionless, public, fast, secure and scalable enterprise blockchain remains the holy grail, other models provide equally fertile ground for decentralisation.
Of course, such alternatives might seem like a violation of Satoshi’s vision to blockchain evangelists, but on a more pragmatic level, permissioned, private or hybrid blockchains are a less risky and more flexible adoption model that still draws from blockchain’s core value proposition — data distribution, transparency, and security.
What is more, advancement and sophistication of the blockchain infrastructure is actively fuelled by open-source efforts, with Hyperledger at the forefront. Hyperledger continues to deploy new frameworks and tools that have become the backbone of many leading use cases of the technology beyond crypto.
Building on Hyperledger’s frameworks, the likes of IBM, Azure, Oracle or AWS offer cloud-based blockchain as a service (BaaS) solutions. They also provide full support in putting the tech infrastructure in place, including network consensus, transaction distribution and verification, smart contract templates, or asset tokenisation.
BaaS solutions are delivered not only by large industry players, but also smaller companies such as Dragonchain, Factom or Blockstream, among many others. By utilising BaaS solutions, enterprises can build custom products without the need for setting up, managing or executing blockchain-based infrastructure, thus bringing the ease of adoption to a new level.
While it is relatively easy to set up the tech infrastructure, recent implementation efforts show that it is the business objectives and collaboration efforts that will define whether the technology will scale.
The Shifting of Paradigm
Agreeing on a common path to adoption is not easy. Finally though it seems that the industry is shifting its focus away from the technology and towards the use case, where it should have always been. The technology’s value proposition still fascinates, but companies and investors are finally realising that the technology is only as good as the use case around it.
The case of d’apps (decentralised applications) is perhaps the strongest evidence that the promise of the technology completely overshadowed the usability factor. The d’apps stats are ruthless.
According to dappradar, there are now 2197 live d’apps across all platforms, 75% of them with 0 users… It seems that in the blockchain frenzy many projects “forgot” to follow the good practices of product development lifecycle that have long been in place in the tech industry.
Convinced that the technology alone will drive the sales, many projects built their products on assumptions alone, with poor UX and no user feedback. As a result, the market filled up with low quality products that nobody wanted — semi-functional, difficult to use and with no real problem to solve. Today, the tide is turning, and more startups are finally drawing from the good ol’ agile and lean project development practices — test early and small, build for users and iterate in line with their feedback.
Scaling is becoming a Business, not a Tech Problem
We are still waiting for the groundbreaking, at scale enterprise blockchain implementation success story, but it is becoming clear that the hindrance to scaling lies not so much in the technology but in the business infrastructure. Paradoxically, it is the issue of trust that is at the centre of the challenge.
Many companies that are consortia-hesitant fail to join the coopetition, and the balancing between the shared and individual objectives remains a huge issue. Some might say, the reservations are not unwarranted. Joining forces in an effort to innovate an industry and make it more transparent requires extensive high integrity data sharing, something that many companies are skittish about, despite data encryption.
The issue of trust and ownership has cast a dark cloud over the promising IBM-Maersk provenance tracking supply chain consortium in the shipping industry. Next to IBM Food Trust, the IBM-Maersk use case has been in the running to becoming the leading and groundbreaking example of collaboration and scalability that could show others “how it’s done”.
Naturally, the Maersk-owned blockchain platform requires nodes that would act as trust anchors on the network — a prerequisite for the product to be usable. Maersk has invited competitors and their subsidiaries to join the platform, but the competitors are hesitant. So far, the chiefs of two rival shipping carriers have publicly dismissed the Maersk-IBM blockchain solution as unusable, thus significantly slowing down the pace of scaling.
Focus on Interoperability
The tension between individual and shared goals also brings about the issue of interoperability that is still very much in the way of blockchain adoption and scaling. Poor interoperability means obscured asset transfer between blockchains, and smart contracts that cannot interact. On a business level, better system interoperability means increased collaboration opportunities within and between organisations, and across sectors.
Although some high-profile interoperability solutions, such as Wanchain and Polkadot, are already operational in the ecosystem, we should expect increased efforts towards greater connectivity across systems. In a blockchain-focused panel at the World Economic Forum in Davos, core blockchain company leaders pledged intensified interoperability efforts in 2019.
Brad Garlinghouse, the CEO of Ripple promised to bring back momentum to Interledger, Ripple’s interoperability solution. Since then though, there has been little breakthrough in the area.
Maturing is a Marathon, not a Sprint
Following the hype of 2017–2018, the blockchain industry has indeed become slightly older and wiser, although implementation and knowledge levels remain hugely heterogenous across sectors and demographics. In my native Poland over the past year substantial efforts have been undertaken to educate the general public on the value of the blockchain technology, the business opportunities it provides, as well as associated risks.
Incredibly, education activities are channeled both top-down, via high-end corporate activities, as well as through bottom-up low key community activities. And there is added value of “spreading the word”. As more successful projects emerge globally, and with ready to use blockchain software at hand, companies offering competitive centralised solutions are under increased pressure to innovate as well.
It seems that the final hurdle that the industry needs to cross in the process of blockchain adoption and scaling is the mindset one — sadly, perhaps the most difficult one to bridge… To get there, enterprises must get out of their comfort zones — move away from silos, increase collaboration and coopetition, gain and share knowledge. It seems that it is the same old trust issues that prevent businesses from implementing a technology that in principle should eliminate trust altogether.