The death of the hype around blockchain might be the best thing that has ever happened to the technology.
Now that companies are no longer using the term to gain some short-lived media hype, we might be able to think rationally about what blockchain can actually be useful for, and what it can’t.
First, though, it’s worth remembering just how much hype surrounded blockchain last year. A recent survey of advertising executives by MediaPost found “blockchain” to be the most overrated word of 2018. For those of us involved with the technology, that’s hardly a surprise.
The survey, in fact, puts numbers behind the hype.
It suggests that advertisers knew that many companies abused the word “blockchain” just to get free media hype. In January, management-consulting firm McKinsey & Co. found that the vast majority of blockchain pilots and proofs of concept were still stuck in “pioneering mode” or were being shut down.
That’s far from being a negative outcome for blockchain, though. Perhaps we can now start to look at the technology more rationally. That’s what we’ll do now.
It can often seem like blockchain is a solution in search of a problem to solve. Though the technology has been mentioned in relation to almost every IT system and social problem out there, in order to discern the immediate future of the technology it’s worth remembering why it is valuable.
Blockchain’s primary value is creating trust. Through tokenization and encryption, systems that were previously regarded as vulnerable to hacking or abuse can be made trustworthy. It does this by making transactions open and transparent.
From that starting point, there are two primary ways in which blockchain might make an immediate impact:
1. The first is in financial services and fintech. It’s no coincidence that blockchain’s first (and to date only) major use case was in cryptocurrency. Expanding and developing cryptosystems to cover crypto microtransactions and real-world assets would seem like an easy win for blockchain tech, and it’s likely that the proof-of-concept trials undertaken by several major banks in recent years will soon come to fruition.
2. Secondly, blockchain could help with e-governance. Estonia is already using the technology to replace outdated identification systems (like the Social Security system) with more secure solutions. Not only will this make public records more secure, but it will also allow greater transparency.
All this said, there are still some major challenges facing blockchain as a technology.
These are likely the cause of the reduced hype in the past year: many companies started researching the technology in 2018, only to conclude that it is not yet useful for them.
Cointelegraph, for instance, has reported on a recent survey by Globant that found while 61 per cent of organizations has started researching blockchain, only 28 per cent chose a provider to help them deploy the technology.
There are several challenges facing blockchain, at least some of which will have to be overcome before the tech goes mainstream:
First, the way that existing institutions move from legacy systems to new, blockchain-based solutions is not yet clear.
A press release from a recent TD Bank survey noted that 90 per cent of treasury and finance professionals believe blockchain and distributed ledger technology will positively affect the payments industry, but that only 14 per cent said their organizations had training strategies for blockchain. Managing this change is going to be the biggest challenge for blockchain in the coming years.
Secondly, there remains a perception problem with blockchain.
The public still associates the technology with a shadowy underworld of (at best) crypto entrepreneurs, and (at worst) hackers. This perception is not helped by the continued reports of hacking in the crypto space, from the rise of crypto mining malware to the spike in cryptojacking. Given this bad press, it’s no wonder that large, established companies are unwilling to be associated with the tech.
Finally, there remains a huge problem with scalability.
This is the most-noted technical problem with blockchain, but we are still no closer to a solution. Blockchains can still take many seconds to process even the most basic transactions, and so scaling them up into national databases is not yet feasible.
The future is two-speed
Responding to these opportunities and challenges can be difficult for businesses, but the falling away of the hype around blockchain allows us all an opportunity to stop and think.
As others have noted, it is important to refrain from hyping it as-yet unproven new applications for the technology.
By showing where and how blockchain can actually help companies solve existing problems, the technology can be built into and around legacy systems.
Secondly, it will be important for companies to take a cautiously enthusiastic approach to blockchain.
One of the primary limitations on the technology at the moment is that staff lack the knowledge to work with it, understand it, or see its potential. But then, the same could be said of many new technologies.
What is therefore required is that companies put in place training schemes that will allow them to take advantage of blockchain, as and when it becomes useful for their business.
Alongside these training schemes, companies will need to invest in the basic building blocks that will allow them to deploy blockchain. This means increasing their cloud storage and security capability, and ensuring that the systems they are already working with are highly scalable.
As with any new technology, it’s difficult to predict the future of blockchain with any degree of certainty. What is clear, though, is that it has not lived up to the hype. Or, at least, not yet.
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