The Future of Blockchain Adoption
In the past year, much experimentation has been carried out with Blockchains within large organizations. The underlying technology appears to be attractive for organizations and there is a wide variety of ways to use blockchains in many sectors. Forrester Research writes that Decentralized Ledger Technology will escape the Proof of Concept phase and that blockchains will be more able to communicate with other blockchains and their traditional data structures during 2020. However, according to renowned research agency Gartner, many organizations did not set up their blockchain experiments properly during their experiments. Gartner predicts that this will require a replacement of blockchains in the coming years within most companies. According to Gartner 90% of the enterprise blockchain implementations will fail by 2021 or should be replaced within 18 months. This is partly due to overly rosy estimates of CIOs, scaling problems and integration problems with existing applications. What exactly can we expect from blockchain adoption in the coming years and what does 2020 mean in this?
Successful use cases
Blockchain experiments are applied in all kinds of use cases where safety, transparency and reliability are important. Examples are demonstrating the authenticity and origin of products and improving the vulnerability of central databases. For example, many healthcare institutions and governments have fallen victim to cybercrime, while the data that these parties manage is highly sensitive. One of the companies that helps healthcare institutions with this is Factom. Factom helps healthcare institutions to save data securely through blockchain. This gives patients, for example, more ownership of their sensitive information. The application launched by Dutch supermarket Albert Heijn would help customers, for example, to find out the authenticity and origin of orange juice. Albert Heijn reports that the app is used daily by customers. Experimenting with blockchain sounds positive and many organizations promote themselves with the fact that they will use this new technology. But is it all going so well when we zoom out and look at the blockchain landscape? According to research firm Gartner, both good and bad things can be reported about this.
The huge number of platforms and protocols that are available resulted in market fragmentation. The platforms largely have the same proposition: namely digital exchange and representation of value and the facilitation of smart contracts and decentralized applications. This means that there is a lot of overlap and that it is hard to distinguish the platforms from each other. As a result, organizations are not sure what blockchain platform they should choose. It is not clear which platform will dominate in the coming years and that creates uncertainty. Do they opt for private ledgers such as Hyperledger or public ones such as Ethereum? And for which use cases do they do that exactly?
Traditional applications must be able to communicate with blockchain applications. After all, it is very unlikely that organizations will transfer everything to blockchains at once. It is rather a slow transition. However, traditional applications and blockchains are not always seamlessly connected. Large software providers hardly ever offer blockchain add-ons or integrations on, for example, Custom Relations Management software (CRMs) or Enterprise Resource Planning software (ERPs). This means that major investments must be made for any integration to take place. You would expect that blockchains should be able to communicate easily with other block chains. However, this is not the case either. Due to the fragmentation in the blockchain landscape, blockchains usually communicate with other types of data and other types of applications.
A complex landscape with potential
The confusion about the huge number of platforms and propositions make it difficult to come up with suitable use cases for specific problems within organizations. In addition to the lack of consensus on leading platforms, the standards are also not uniform. Without industry standards, it is difficult to deploy blockchain networks between organizations. Add to this that traditional software has difficulty communicating with blockchains and that blockchains often also speak a different language. It is therefore no surprise that the marketing message from blockchain providers does not fit well with the wishes and possibilities of organizations. This creates skewed expectations of CIOs and a mismatch with reality paired with a one-sided view of blockchains as administration systems. This undermines the possibilities to deploy smart contracts and decentralized applications. In addition, CIOs estimate the development of blockchains to be more advanced than they really are and assume that blockchains can effortlessly communicate with each other while this is not the case.
However, it is expected that in the coming years solutions will be found for these problems, at least according to Gartner. Blockchain applications would become more stable after a huge number of experiments. Standards will become uniform because it becomes clear which platform is used for what purpose. Consensus on dominating parties and technologies will become more clear. In addition, Gartner expects that most software providers, such as CRMs and ERPs, will have more blockchain integrations and add-ons within the next three years. The question remains as to what we can expect from this new year, 2020.
Developments in 2020
It is clear that there are challenges in the adoption of blockchains by organizations. The overview of these challenges makes it easier to see what 2020 can mean in the adoption process. 2020 seems to be the year in which implementation and fragmentation problems will be further solved. And in particular improving the integration of traditional software with blockchains and between blockchains. With that also more clarity for organizations about the functions and choices between a private and a public blockchains and more flexible propositions and packages for organizations.
Research firm Forrester predicts that the number of blockchain networks that jointly fill in a use case will increase in 2020. This is already happening successfully in, for example, food tracking (see the Albert Heijn example above). The industry will slowly outgrow the experimentation phase. This also applies to issues with the communication between traditional applications and blockchains. According to Forrester, software providers will search more specifically for integrations and add-ons with ledger capabilities for their customers. In addition, there will be more hybrid and cloud-transcending solutions for customers. Another important development is that it is no longer a taboo to discuss public versus private blockchains now that multiple communication problems have arisen within organizations between blockchains. It is clear that public blockchains are less suitable for complex use cases on a larger scale. These discussions are interesting because they do not only involve the technological aspect, but because there will now be more attention for organizational and process aspects. It therefore appears that a more holistic approach to blockchain implementation is being discussed.
The challenges that blockchains could solve for organizations are clear. There is a lot of experimentation and we are already seeing successful examples such as food tracking at Albert Heijn. However, challenges play in the background due to fragmented platforms and applications. Organizations are not sure which types of blockchain they should go for and the lack of uniform standards makes large-scale deployment challenging. Traditional applications and blockchains are difficult to integrate and even blockchains have difficulties communicating with each other. Because of the complex blockchain landscape, CIOs are a bit lost. They do not know what to expect and estimate the development of blockchains to be advanced. Yet there is hope: reputable research firms think that this is only an experimental phase and that the industry will mature in 2020 and on. This will start with breaking taboos about the types of ledgers that can be used within organizations, improving communication between applications and a more flexible range of integrations and add-ons for organizations that want to get started with blockchain. It promises to be a good year with an evolving maturity and clarity within the industry.
Contributed by @LordCatoshi