Last year around this time there were a lot of proclamations that 2018 would be the year of the blockchain. And in July of this year Gartner reported that ‘blockchain’ had been the top search term on Gartner.com since January 2017.
But what’s really happening in this space? Are we moving past the hype into practical applications, or is it still largely theoretical? And what’s ahead for 2019?
In PWC’s 2018 global blockchain survey, 84 per cent of executives say their organization has “at least some involvement with blockchain technology.” Of these, only 15 per cent have “live” blockchain projects, seven per cent have paused their efforts and the rest are in the research, development or pilot stages.
And while firms may be exploring uses for blockchain technology, CIOs don’t see it as a major priority. Gartner’s 2019 CIO agenda finds that “only 5% of CIOs rated blockchain as a game changer for their organizations, far below artificial intelligence, cloud, and data and analytics,” according to a Gartner blog. And, only 11 per cent have deployed or will deploy blockchain in the next 12 months.
Outside of cryptocurrency, use cases tend to focus on some form of permissioned ledger. “We have yet to find anyone who can produce a cost benefit [analysis] that shows positive return for private deployment,” according to Gartner analyst David Furlonger, when discussing key elements of the evolution of blockchain at Gartner Symposium/ITxpo in October.
The transformative power of the blockchain, as envisioned by Furlonger, lies in public blockchains.
The expected evolution is outlined by Gartner as a “blockchain spectrum” divided into four stages:
- Blockchain-enabling technologies (2009-2020): The early phase of blockchain-enabled experiments built on top of existing systems
- Blockchain-inspired solutions (2016-2023): The current phase of “blockchain-inspired” solutions designed to address a specific operational issue
- Blockchain complete solutions (2020s): Complete offerings using smart contracts to “deliver the full value proposition of blockchain” including decentralization and tokenization
- Blockchain-enhanced solutions (post-2025): Smart contracts with true autonomy “will enable exchanges and transactions that aren’t currently possible”
Gartner sees us moving over time to a “programmable economy” with new markets and systems of valuation. The shift to this economy “will require today’s data and financial assets to become digital tokens and smart money over the next decade,” according to Gartner.
We’re seeing blockchain proofs of concept and pilot programs in almost every industry — a few are going live, largely based on some form of permissioned ledger.
In November, a consortium of firms including BP and Shell went live with a blockchain platform for trading crude. Goldman Sachs and Morgan Stanley are among the players in a blockchain-based bilateral netting system for foreign exchange trading that also went live in late November. Walmart, aiming for better food safety, is requiring that all suppliers of leafy green vegetables for Sam’s and Walmart upload their data to the blockchain by September 2019.
It’s not hard to envision these examples eventually moving to more decentralized and tokenized “complete solutions” over time. Evolution is also being seen in cryptocurrency, which may help facilitate broader tokenization.
The Ohio state government, for instance, has announced that it will begin accepting cryptocurrency for tax payments by business. And the United Nation’s World Food Programme, the world’s largest humanitarian agency, is using the blockchain to store identity information and distribute food to Syrian refugees; recipients can pay for food using biometric data to access their wallet.
While blockchain may eventually change the world, the world will need to change to get the full value of blockchain — but the pieces are slowly falling into place.