Why it’s time blockchain stopped being used as lipstick on the pig
Blockchain. Distributed Ledger Technology. Cryptocurrency. These words can add more value to any company than any genuine technology, strategy or growth. Shares in Stapleton Capital doubled on one day when it changed its name to Blockchain Worldwide. Bitcoin Services, formally known as Tulip BioMed, grew 42,500% last year. This is nostalgic: in December 2001, academics at Purdue University confirmed the 95 companies that added “.net”, “.com” or “internet” to their names saw a 74 percent increase in value within ten days. You would be forgiven for thinking that blockchain is another buzzword-fuelled bubble soon to burst. As a technology strategy firm operating heavily in blockchain, one thing is very clear – for many, this is lipstick on a pig. Until focus shifts to benefits and proven use cases, it will remain a buzzword void of traction.
This bandwagon-mentality is damaging the blockchain’s potential. This was emphasized when attending a recent blockchain conference, fuelled by people who had made a quick buck on the crypto boom, started up a “crypto hedge fund” and were now swanning around promoting the latest ICO. To a cynic, these ICOs seemed little more than a pyramid scheme. These individuals overshadow the value blockchain could bring. The intentions of blockchain are ultimately positive, and the focus has been on Financial Services as a result. Perhaps it is time our focus went to other sectors?
Blockchain has been founded on something transformative; something which has ultimately been lost through hype and hysteria. Some believed that blockchain would define a new era, characterised by peer-to-peer technology, instantaneous transactions and the dismantling of our banking system. This may be a relatively extreme view but ultimately one that has driven much of the near $1.3bn in Venture Capital funding in the space in the last 12 months. However, a massive 59% of ICOs that launched last year, failed, wasting a whopping $239m of investor funding. As of yet, there is a huge gap between all of this funding and the predicted impact to Financial Services. The cynics are widespread, even amongst those with exceptional technical knowledge – Cynthia Lee, a Computer Science lecturer at Stanford University, created a Google Chrome plugin which replaces the word ‘blockchain’ in google searches with ‘multiple copies of a giant excel spreadsheet’ – suggesting the advantages of blockchain extend little further than providing an unnecessarily convoluted database.
We appear to be at a welcome crossroad within blockchain applications to Financial Services. On the one hand, genuine use cases are emerging, cross-border payments being a prime example. Santander’s One Pay cuts the wait time from days to a matter of hours. Other banks are exploring similar applications – Crédit Agricole CIB are piloting a system for its Swiss employees to deposit their salary in Francs to their French bank accounts in real time. On the other hand, some companies have thought better of it and are moving away from blockchain. Tallysticks, who had set out with the intention of leveraging Ethereum’s blockchain for invoice payments, have reverted back to a conventional technology stack.
The intrinsic potential of blockchain in the context of trust should not be ignored. In essence, blockchain is a ‘digital ledger’ – a permanent record of transactions. Each entry, or ‘block’ is linked to the other to form a chain. Each of the blocks are secured with cryptography, thus creating a system which can be fundamentally trusted due to its resistance to modification. We are yet to see quite the Financial Services revolution that some expected, but the trust element could prove invaluable. Tradle, whom have created a blockchain platform for KYC, are a prime example of this. Imagine going through the long and unwieldy KYC process once and then enabling banks to access that approval status. Their traction is as clear as the benefits of the use-case. Beyond Financial Services, blockchain could revolutionise supply chain management in other sectors, where accountability is key.
In welcome news, companies are beginning to explore this. Walmart has created a system leveraging IBM’s Hyperledger Fabric Blockchain platform to track food staples from the supplier to shelf. This could in turn prove useful for the likes of the pharmaceutical industry, who need to ensure the safety and security of their products at every moment. Companies are beginning to leverage blockchain technology in a whole range of industries where trust across the supply chain is integral – Everledger in the diamond industry, Bext360 in the coffee industry and WWF in the Tuna industry – to name but a few.
Until recently, the blockchain industry has been all talk and no action – according to a Gartner survey, only 1% of 3,138 CIOs said they had “any kind of blockchain adoption”. Now companies are focusing more on opportunities in supply chain management rather than exclusively Financial Services, we will see far more use cases emerging.
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