By David Drake
Blockchain has proven to be disruptive technology with capabilities previously not imagined. It offers comparative advantages of transparency, speed and efficiency over other existing payment networks. These advantages have propelled blockchain to the top with developers, investors and corporates scrambling for a piece of the pie.
Over the last 18 months, numerous projects have been developed on blockchain. They include BlockVest designed to support management of digital asset portfolios, BQT for facilitating hedge fund trading, Gath3r for optimizing web mining and ONe Network for securing social interactions. Other interesting projects backed by blockchain include family smart contracts platform URAllowance, interactive marketing platform, Noiz Chain, crypto coupon marketplace, Qupon and portfolio optimization platform, LiveTradr.
By the end of 2017, at least 200 enterprises were piloting Ethereum’s blockchain in different ways. Players such as Ripple were having enterprise customers piloting on its blockchain in small-scale. However, 2018 has seen an explosion in the number of companies that have rolled out pilot blockchain projects, with more than $6.3 billion being raised in initial coin offerings (ICOs) in the first quarter of the year. In a span of less than two months, two reports have been released raising concerns on the possibilities of successful adoption and implementation of blockchain projects.
In the month of July, Forrester Research shared findings indicating that at least 90% of blockchain ventures will be abandoned or put on hold this year. Forrester’s research also indicated a drastic fall in the adoption of the technology in United States. Similarly, a report by Boston Consulting Group (BCG) has indicated that the potential of blockchain in commodity trading industry could be minimal.
The report suggests that the technology has been overhyped and that the volume of trade conducted on blockchain is insignificant. The findings of these two firms raise pertinent concerns on the state of blockchain as a leading technology. First, the reports highlight the issue of whether blockchain technology is applicable to all industries and secondly, whether there are possibilities that it could achieve mass adoption.
According to the BCG report, blockchain is not suited for the commodity industry and time sensitive trades where traders due to market inefficiencies that make it challenging for the technology to work for stock exchanges and price-reporting agencies. These findings, according to industry experts, are a reflection of overhyped perspective.
“It is necessary to wait for a new stage in the development of blockchain technology to increase its capability to withstand global pressures and the enhance the possibility of integrating it in any sector of the economy,” says German Tanov, co-founder and commercial chief of IOU.
Experts agree that in its current form, blockchain suffers several drawbacks and may not be a solution to everything. However, some of these challenges can be improved with time.
Varun Mayya of Avalon Labs says, “Blockchain has very specific use cases and while the community has been attempting to tokenize everything, we’ve seen that the successful projects often involve systems internal to a company that are susceptible to internal fraud. That, and smart contracts seem to be hot use cases of the Blockchain. Its limited scalability in its current incarnation is also a drawback.”
Both Forrester Research and BCG reports allude to lack of massive adoption and financial viability of blockchain projects. According to industry experts, these are key challenges facing blockchain, and they point out, for blockchain to realize its full benefits, all players need to participate towards standardizing and reconciling terminologies across board.
James Lopez, CEO of HFC Coin asserts, “The terminology used to describe blockchain falls in to the same category of optics. Standardizing terms that create separation from cryptocurrency will help transform the optics of how blockchain is perceived, in turn, helping larger businesses truly assess the financial viability of the technology. Artificial Intelligence has suffered from similar stigmas thanks to the Terminator movies and the dronings of Elon Musk and crew.”
Investors have, throughout history, overrated the uptake and value of new technology. Just like the case of electric vehicles, e-commerce, the internet, genome decoding and so on, it took time to refine and realize their massive adoption. And so will it be the case of blockchain.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.