Whither Blockchain?

A decade of Blockchain in retrospective…

As we settle into the last year of the decade (for my horologist readership — let the raging debates begin!) and pass the tweener-ish 11th birthday of Blockchain, it seems appropriate to take a bit of a look-back on one of the most explosive and hype-laden technologies to debut in the 21st century. From its completely un-humble beginning as a new form of money to its insidious infiltration into virtually every industry, I would argue that no other technology, especially one so esoteric, has had such an impact on the business zeitgeist over such a short period of time.

This sort of cosmological rise can really end in only one of two ways — spectacular, world-changing and permanent impact on day-to-day business (think — World Wide Web), or a massive crash-and-burn (like, I don’t know… MySpace?). Only time will decide, but let’s take a look at some of the developments over the last few years to construct an educated guess.

Inception

It’s impossible to begin a discussion on Blockchain without considering its genesis — Bitcoin. There are many historical accounts of its conception and birth (here’s one), so I won’t belabor the topic — other than to note that what began as a single, experimental network of value exchange rapidly grew into a $250B US market. It is now comprised of dozens of cryptocurrencies, based on everything from green house gas emissions to literally nothing at all (fiat at its best).

The problem, of course, is that this market is almost entirely unregulated; so, much like the Frontier-bound stage coaches besieged by nefarious gunslingers, investors in crypto (affectionately called HODLers) are continually at the mercy of bad behaviors and bad luck. In fact, according to Warren Buffet, we’re better off stuffing money in our mattresses, at least for the foreseeable future (or, you can believe this… up to you). There’s some safety in more controlled cryptos, partially backed by hard assets, such as Ripple. For the most part, however, this initial instantiation of Blockchain, though seminal, will likely remain on the fringe for some time to come.

Proliferation

Interestingly, although Blockchain had its beginning in the world of Finance, banks and other financial institutions have shied away from leading the evolution of Blockchain. Instead, Blockchain developers and consultants have turned to the broader world of business to find problems to address and solutions to build. By the end of 2019, there wasn’t an industry left unassailed by at least one Blockchain solution/platform — in many cases, a multitude of overlapping and super-confusing solutions — targeting some nuance of the business.

Warring factions of product companies, consulting firms, and research organizations vied and battled for conceptual supremacy, determined to find the ‘perfect’ Blockchain solution (much like mining Bitcoins, it seemed to get more and more difficult as time went on). Confusion reigned, questions from desperate customers == “What the heck exactly is Blockchain?” — met with an overabundance of words and little substance. By the end of 2019, exhaustion and malaise had begun to set in.

Okay, so maybe I’m getting a little carried away… back to the topic at hand… Can we glean any insight from the past decade? Where are we headed as far as Blockchain is concerned? Let’s look at some of the initial evidence…

Successes and Challenges

Interestingly, the first successful in-the-wild deployment of Blockchain beyond crypto was in the food safety industry. In 2016, Wal-Mart and IBM formed a cooperative effort to build end-to-end traceability farm to store, using Blockchain. The results were impressive, providing almost instantaneous tracing of agriculture products with high confidence in information integrity. As of 2019, Wal-Mart continued to migrate suppliers onto the platform, significantly improving the ability to monitor food quality and to rapidly respond to any identified safety concerns.

Next, consider Ripple. Contrary to the previous point about cryptos and instability, Ripple is a cryptocurrency with a difference. The purpose of Ripple (the coin is labeled XRP) is to facilitate inter-bank exchange, cross-border currency exchange, and also serve as a medium of exchange on its own. The difference from Bitcoin is that Ripple is a closed (controlled) cryptocurrency and relies of pools of equity within the network to facilitate the transfer (yes, the XRP is still subject to speculation, but not the network itself). In fact, Ripple has been shown to be a viable and much faster alternative to the incumbent inter-bank transfer service, SWIFT, and most large financial institutions are looking at how best to adopt and leverage this platform.

This is the point where some Blockchain evangelists would want me to mention potential applications in healthcare (records management, drug traceability, privacy management), identity management (universal identification, personal credentialing), property management (corporate real-estate investment management, public records keeping), etc. The challenge is that, while many Blockchain-based ideas in these industries are promising, we just haven’t seen enough success to warrant accolades.

Adoption has been slow or non-existent in most industries. That, coupled with the extravagant and somewhat ludicrous level of investment in Blockchain companies and solutions, it’s no surprise that there is a LOT of negative press and general pessimism about Blockchain (two fairly scathing perspectives here and here) right now.

It’s not to say that all of those ideas are bad ones. In fact, there are many solutions in development that are based on very sound business cases, but, for various reasons, are not gaining traction.

Here’s one example of a good Blockchain idea that’s struggling to gain momentum…

Getting Real

Propy, a start-up in the residential real-estate space, has created a Blockchain solution for real-estate transactions (i.e., deed transfers). It’s a great idea with lots of potential. The concern is that it’s only been implemented in one community in one state, Vermont (VT has recently passed Blockchain-friendly legislation); and, as far as I know, as only been used to execute one transaction. Why?

On the surface, this application seems like a great use of Blockchain as a technology, but it’s becoming apparent that systemic changes like this are quite difficult to implement, given the level of lobbying required at the local level to drive adoption. So, while this is a good proof of concept, it also provides a cautionary tale for other Blockchain solutions.

Until Blockchain is more widely accepted and technologically ubiquitous, closed systems, Like Wal-Mart and IBM’s FoodTrust, are a much better bet, given control over roll-out and adoption.

And, So…

Of course, the story is not over. We are certainly still riding high on the Blockchain Hype Cycle, however, it is clear that there are definitive applications and use cases for the technology. As with most things, sticking to basics seems to be the most rational course, with closed infrastructure plays like supply chain & digital logistics, information chain of custody, and records management benefiting the most; as Blockchain matures as a concept we will almost certainly see it grow successfully into other areas — like identity management, healthcare and real estate. But, that may take a while…

Where Blockchain will ultimately fall on the spectrum of transformative technologies is definitely still up for debate. However, the promise if fully realized, could have a profound and far-reaching impact on how we gather, store, and share information, both as individuals and as organizations. At the very least, it is important to understand what impact this technology is likely to have on our respective industries and to plan accordingly, and for that, we will need to continue to watch things evolve.