“Blockchain is one of the major tech stories of the past decade,” said a December, 2022 McKinsey article, “What is Blockchain.” “Everyone seems to be talking about it — but beneath the surface chatter there’s not always a clear understanding of what blockchain is or how it works. Despite its reputation for impenetrability, the basic idea behind blockchain is pretty simple,” namely: “Blockchain is a technology that enables the secure sharing of information.”
That same month, a WSJ article, “Blockchain Fails to Gain Traction in the Enterprise,” noted that for years, blockchain “has been viewed by some companies as a way to drive industry-transforming projects, among them the tracking of assets through complex supply chains.” But, “So far, that hasn’t happened,” the article added.
I’ve been closely following the evolution of blockchain technologies for a number of years. Between 2016 and 2023, I’ve posted over 50 entries on blockchain and related technologies in my blog. For example, in 2017 I asked Is Blockchain the Major Next Step in the Evolution of the Internet?, based on the fact that the previous year, the World Economic Forum (WEF) had named The Blockchain as one of its Top 10 Emerging Technologies for 2016. In the blog I wrote that “Like the Internet, the blockchain is an open, global infrastructure upon which other technologies and applications can be built. And like the Internet, it allows people to bypass traditional intermediaries in their dealings with each other, thereby lowering or even eliminating transaction costs.”
But as reality set in, expectations started to wane. 2022 was a very tough year for enterprise blockchain, as a number of once-promising enterprise blockchain ventures went belly up, prompting me to ask Why Are Enterprises Struggling with Blockchain? we.trade, a blockchain-based trade finance network, shut its operations in June after running out of cash. A few months later, the Australian Securities Exchange canceled its much-delayed blockchain-based clearing system. Most prominently, in late November TradeLens announced that it was discontinuing its blockchain-based global trade platform. Other enterprise blockchain projects, like Walmart’s Food Traceability Initiative, still carry on but their uptake and progress have been slower than anticipated.
Why did TradeLens and other enterprise blockchain projects fail or, like Walmart’s Food Traceability Initiative, are progressing significantly slower than anticipated? The aforementioned WSJ article cited three potential reasons: the difficulty of enlisting companies that compete with, and don’t trust each other to collaborate on a common objective; the intrinsic complexity of blockchain-based systems; and the considerable time required to deploy a new transformative technology like enterprise blockchains.
What’s the future for enterprise blockchain technologies? This question was addressed in “Hyperledger Foundation 2023 Brand Study,” a report published in October of 2023 by the Linux Foundation (LF), written by Anna Hermansen, Ecosystem Manager at Linux Foundation Research. The report examined the current state of enterprise blockchain, and more specifically, the state of Hyperledger Foundation, the LF’s umbrella project for open source enterprise-grade blockchain technologies and tools. The report is based on a survey of roughly 40 questions which received responses from 298 participants , — 32% from the Americas, 31% from Europe, and 34% from Asia Pacific, — and on six in-depth interviews with subject matter experts.
“Blockchain has experienced significant cultural, technological, and economic shifts in the past few years: crashing crypto prices, the non-fungible token (NFT) phenomenon, regulatory gains and hurdles, ebbs and flows of different enterprise use cases, Ethereum’s merge to a proof-of-stake consensus mechanism, the spectacular rise and fall of crypto organizations such as FTX, the burst in financial services tokenization, and a government-mandated push for digital identity, to name a few,” wrote Hermansen in the report’s Introduction. “These different moments have left marks on enterprise blockchain as it continues in its adoption and development.”
The report includes questions about the state of enterprise blockchain as well as questions specific to Hyperledger technologies, but I’ll focus my discussion below on the more general blockchain questions. Let me summarize the study’s key findings.
Current state of enterprise blockchain adoption
“A portion of our survey and interview questions investigated the adoption of blockchain and the development of applications to understand the current trends in this technology sector,” said Hermansen. “Our findings suggested sustained activity in blockchain adoption and development.”
What’s the current state of blockchain adoption in your organization?: 37% of respondents reported that they’ve already implemented or are currently implementing blockchain applications; 26% are in the evaluation or testing stage; 13% are considering it; and 15% replied that they’re not currently interested.
What are the top benefits (up to five) of blockchain technologies: quality assurance and traceability of transactions was selected by 47% of respondents; overall efficiency by (45%); reduction of operation costs (43%); shared ecosystem and software standards (39%); ability to share data with greater security (35%); increased accountability (34%); single source of truth among many participants (32%); audibility (32%); and new revenue sources (29%).
Define your organization’s blockchain application by industry category: supply chain was the top (42%); followed by financial services (37%); energy and resources (22%); identity management (21%); sustainability (18%); mobility & transportation (16%); healthcare (14%); education & research (14%); government & legal (10%); and media & entertainment (8%).
How interested is your organization in participating in open source enterprise blockchain projects like those based on Hyperledger technologies: extremely interested (34%); very interested (19%); interested (16%); already participating (13%); somewhat interested (8%); and not at all interested (5%).
What are the top benefits of participating in open source blockchain projects: building my professional network; building skills; and keeping up to date with leading technology and trends were the top three benefits, each selected by 49% of survey participants; followed by building my company’s partnership network (45%); improving my job prospects (34%); and safeguarding my company’s blockchain investment (32%)
What are the most significant challenges to the adoption of enterprise blockchains: costly migration was the top challenge (34%); followed by security & hacking risks (33%); regulatory risks (30%); absence of regulations (29%); difficulty of integrating with legacy systems (27%); difficulty of explaining benefits to senior management (23%); limited governance (21%); lack of technology maturity (20%); competitive concerns (19%); lack of control (19%); and concentration of power (14%).
Looking to the future
“The sustained adoption and development rates echo the sentiment described by our interviewees that blockchain is moving away from being a trend and toward a more established core technology,” wrote Hermansen. “Amid all the findings described above, our research participants provided insight that can help us understand what the near- and longer-term future might look like for enterprise blockchain.”
How do you see enterprise blockchain trending over the next two years: rapid growth (22%); moderate growth (29%); slow growth (12%); contracting rapidly (12%); contracting moderately (12%); contracting slowly (4%); and no change (4%).
What’s the likelihood that your organization will adopt blockchain over the next two years: extremely likely (45%); very likely (22%); somewhat likely (17%); not very likely (8%); and not at all likely (3%).
In addition, over three quarters (77%) of respondents agreed that blockchain will become a key technology for the future, while only 5% disagreed; and 81% agreed that blockchain will enable new business models to emerge, while only 4% disagreed.
“As this research has revealed, there are many aspects of enterprise blockchain that make it challenging to implement, such as cultural concerns, technical complications, news cycles, and negative associations that distract from what this technology can accomplish,” wrote Hermansen in conclusion. “Technology officers, developers, and other enterprise leaders still have an uphill battle to overcome these cultural and technological complexities, the regulation that inhibits development, and the concerns over security. As our interviewees stated, this process is not linear, and it is not moving particularly quickly.”
“Despite these challenges, this research shows progress through the hype cycle of this technology. The findings have articulated momentum away from an understanding correlated with hype to a more grounded understanding of the technology, giving space for applications to develop that represent the best use cases for the technology as well as how it might best interact with other existing and emerging technologies.”
Blockchain being a new technology its faced with lack of clear understanding of the technology and security concerns
Posted by: Waigi | January 29, 2024 at 02:24 PM