Blockchains could store up to 10 percent of our global GDP in the future, upwards of $8 trillion. Some proclaim it the new “internet of value.” Yet others predict its demise, perhaps following in the path of the overhyped but prescient Apple Newton or even the once bright X.400 standard.
Is blockchain technology poised for a long and brilliant future, or not?
Here are some telltale signs that might reveal blockchain’s ultimate fate.
Blockchain Shines as Provenance Protocol
Many of us were first introduced to blockchain as the underlying distributed ledger technology enabling the digital currency Bitcoin. But blockchain has moved beyond its flashy cryptocurrency origins.
Klaus Schwab, founder and executive chairman of the World Economic Forum, describes blockchain as “a shared, programmable, cryptographically secure and therefore trusted ledger which no single user controls and which can be inspected by anyone.”1
Indeed, blockchain has emerged as a modern digital protocol for provenance, conveying authenticity and quality. Derived from the French, the word provenancehas most often been associated with works of art and antiques, but here it is, associated with blockchain technology. There is even a U.K. startup called Provenance using blockchain to enable supply chain transparency and product trust.
With blockchain, an asset has a record of origin and a history of ownership. And with blockchain, a current owner can authenticate a transaction that would cause an asset to be transferred to another owner.
These capabilities mean that blockchain can form the basis of trust for critical business transactions across multiple value chains and industry sectors.
Blockchains Search for Interoperability
A complex and multilayered vendor ecosystem is forming around blockchain as digital infrastructure. With all the differing platforms and tools, solution providers and enterprise adopters are demanding interoperability as they move from blockchain pilots to production. Yet efforts toward standards have just begun.
In a report titled “Who’s Winning the Battle of Enterprise Blockchain Platforms,” research firm HfS highlights the state of the market:
“Blockchain is emerging as a powerful architectural technology with the potential to impact enterprise and B2B as much as the cloud has …. [G]iven the nascence of the blockchain concept, the market standards have not yet emerged and interoperability issues persist …. [T]his will continue to evolve and we will start to see greater collaboration.”
Groups like the Blockchain Interoperability Alliance are being created to collaborate on researching interchain transactions and communications. And the importance of standards and interoperability is reflected in other initiatives like the Linux Foundation-backed Hyperledger and the Enterprise Ethereum Alliance (EEA). The EEA has grown to over 200 members, including JPMorgan and Santander, as well as newer members like MasterCard, Intel and Microsoft.
The increasing pressure for interoperability, as well as the rising interest in standards, indicates that blockchain is moving toward business impact.
Blockchain Chases Industry Value
Scientist and futurist Roy Amara coined what has come to be known as “Amara’s Law,” which states:
“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”
Blockchain is currently making its way through the Gartner hype cycle, which tracks the course of new technologies from the peak of inflated expectations to the plateau of productivity that some, but not all, achieve. In a post on Smarter With Gartner, Gartner analyst Christy Pettey predicted that blockchain is poised to create a transformative impact.
With current experimentation happening across every industry, here are just a few examples of how blockchain is chasing potential long-term value, from enabling the traditional world of finance, to expanding insurance into developing markets, to changing how creative industries operate, and helping the healthcare and life sciences sector deliver better patient value.
In financial services, Swiss bank UBS and U.K.-based Barclays are both experimenting with blockchain as a way to expedite back-office functions and settlement, which some in the banking industry say could cut up to $20 billion in middleman costs, according to CB Insights.
A Harvard Business Review article titled “Blockchain Could Make the Insurance Industry Much More Transparent” considers how a blockchain-based claims validation network could serve as a ledger for the physical status of an insured asset, which in turn could help improve insurance penetration and adoption rates in emerging and developing markets.
Creative industries could benefit from blockchain democratization. In an article titled “How Can Creative Industries Benefit From Blockchain?” McKinsey & Co. explores how blockchains could host “smart contracts” to help artists manage digital rights and through “micrometering,” record the precise components used of creative work.
Blockchain was one of the highlights of the Healthcare Information and Management Systems Society’s 2018 conference and exhibition in Las Vegas March 5 to 9. The vision is that blockchain will offer a construct for sharing electronic health records that transcends individual institutions and local practices. Mike Milliard, reporting in Healthcare IT News, cited the immediate real-world relevance for blockchain. He quoted Tim Mackey, director of the Global Health Policy Institute at UC San Diego, as saying, “This immutable distributed ledger can better ensure the resilience and provenance, traceability and management of healthcare data.”
The Wild West of Blockchain
McKinsey currently likens blockchain to the Wild West — “a place of recklessness and chaos and calamity.”
In fact, the biggest problems for blockchain adoption could well relate to risk control, policy and governance. There is still an element of uncertainty as we consider serious questions like how infusing blockchain with artificial intelligence will protect transactions, or what traditional off-chain mechanisms will be used to enforce owner rights.
So let’s continue to watch the signs to see if blockchain gets run out of town by a new sheriff like “Hashgraph,” or finds its value destiny as killer tech.