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Blockchain in 2020: 5 trends to watch
Blockchain “tourism” is giving way to serious projects, and standards groups are tackling key pain points. Here’s what IT and business leaders should watch for in 2020
If you’re looking for a one-word summary of corporate blockchain efforts in 2019, try “experimentation.” The hype is subsiding and more businesses are actively trying to figure out how they can actually use the technology to their benefit.
“2019 has continued what 2018 started – enterprises experimenting,” says George Spasov, blockchain architect and co-founder at LimeChain. “The finger-dipping exercises of the last year have encouraged further experimentation this year, while dragging along new experimenters.”
Trading in hype for tangible results is always good news from an IT leadership perspective. But Spasov has some “bad” news, too: These experiments have struggled to move from proof-of-concept to production. It’s not actually that grim a report, though, because the challenge isn’t a lack of viable use cases. Rather, it’s a largely technical issue, and that is easier to solve.
“While in 2018 the proof-of-concepts were failing due to lack of product-market-fit, this year struggles with adoption are due to [a] much more fixable reason: technological immaturity,” Spasov says. “In 2019, we’ve seen proof-of-concepts being defined to address key areas in various businesses. From financial use-cases and asset tokenization to transparency and traceability of the supply chain, the technology promises to add significant value.”
[ Can you explain blockchain to non-techies? Read our related story, How to explain blockchain in plain English. ]
Clearing the technology hurdles standing in the way of value will likely be one of the key blockchain stories in the year ahead. Let’s take a closer look at that and other important trends IT and business leaders should be aware of in 2020:
1. Blockchain “tourism” gives way to serious projects
As Spasov notes above, most companies have been merely testing the blockchain waters; that fits with some earlier data points, circa late 2018, that indicated most CIOs weren’t actively pursuing blockchain projects. A year later, more recent research suggests that’s changing.
“From an enterprise perspective, the ‘blockchain tourism’ phase has passed and companies are beyond [simply] feeling the need to understand the underlying the technology details,” says Chris Broderson, Deloitte Americas Blockchain Lab lead.
Broderson notes that according to the Deloitte 2019 Global Blockchain Survey, executives say they’re expecting common barriers to blockchain adoption – such as security threats, implementation headaches, or regulatory issues – to decrease significantly.
“What has emerged is a shared recognition that blockchain is real and that it can serve as a pragmatic solution to business challenges across industries and use cases,” Broderson says. Roughly half of the organizations included in the survey said they expected to spend, on average, $5 million or more on blockchain projects in 2019. That fits with another number: 53 percent of the survey’s respondents said blockchain was one of their top five strategic priorities this year, up from 43 percent in 2018.
2. Adoption grows as proof-of-concepts become MVPs
Expect that to generate momentum heading into next year, when even some skeptics begin to revisit the technology’s potential uses.
“Blockchain appears to be entering a new era of wider, more practical adoption,” Broderson says.
Spasov expects this to take the form of a more visible transition from experimentation to actual production use – not because some blockchain revolution is going to take place, but because the companies that have been running proof-of-concepts will begin to take a minimum viable product (MVP) approach to running an application in production.
“While on the surface, not much has changed in 2019, the internal improvements made by the major distributed ledger technology (DLT) technology groups have increased the potential to address real-world issues significantly,” Spasov explains. “It is a matter of time that the experimenters start utilizing the new advancements and finally hop the hurdle between POC and MVP. It is quite likely that this will happen in 2020.”
Broderson notes an overlapping trend: The research and experimentation companies have been doing might also lead to the growth of “blockchain-inspired” systems that, while they won’t meet a purist’s definition of a blockchain, will borrow key concepts to solve business problems. He points to transactional functions that can be heavily fragmented, such as trade finance, cross-border payments, digital certifications, and supply chain optimization.
“Blockchain has led many to rethink a number of business processes that could be transformed not by blockchain but also ‘blockchain-inspired’ solutions to solve many of today’s data-sharing challenges, such as reconciliation and data processing. In other words, the genie is out of the bottle and in 2020 there are likely to be a number of blockchain or blockchain-inspired solutions launched, creating new ecosystems at scale.”
3. Blockchain platforms continue to adapt and evolve
Technology maturity will be one of the biggest catalysts of growing adoption, and Spasov notes an outcome of the experimentation phase: Key ecosystems are adapting their platforms based on lessons learned to this point and on the needs of actual businesses.
“The two major enterprise DLT technology groups – Hyperledger Foundation and Enterprise Ethereum Alliance – have heard the screams of the failing experiments and have taken steps to address their pains,” Spasov says.
As an example, Spasov points to the addition of the “private data” concept in Hyperledger Fabric earlier this year. Here’s a case where a blockchain ideal – completely transparent transactions – doesn’t always mesh with the realities of running a for-profit business, which in turn hinders adoption. This evolution could help address that conflict.
“While in theory, the idea for a fully transparent system seems incredibly powerful, it is also a utopian one,” Spasov says. “In the real world, trade secrets generate profit. Very few companies will ever be able to operate in fully transparent mode without losing their edge.”
A lack of interoperability – between blockchain platforms themselves and between blockchain platforms and existing systems – is another example. (More on that in a moment.)
“Both [issues] have been recognized by the major blockchain platforms and the necessary steps to address them are already underway,” Spasov says. He expects this to continue apace in the year ahead: “Continuing the trend from 2019, they will continue learning what the business needs and will further adapt their platforms to address key adoption problems.”