For years now, blockchain technology has been peddled as revolutionary for businesses. Alongside emerging technology like artificial intelligence (AI), the Internet of Things (IoT), and hybrid or multi-cloud, blockchain features as an enterprise tech ‘must-have’ in countless reports and surveys.
From voting, ridesharing, digital IDs, to gaming, all industries are poised to be transformed by the technology, with first-movers set to steal a competitive advantage. At least, that’s what we tend to hear.
Progress has been made. In banking, especially, distributed ledger technology’s (DLT) potential to save firms billions a year in middleman transaction costs has spurred sizeable trials by the like of HSBC, UBS, and Barclays. Meanwhile, blockchain’s ability to provide transparency into complex supply chains has seen entry by shipping giant Maersk and the world’s biggest food company, Nestlé.
There are plenty of applications for blockchain but, so far, commitments to the technology have been limited to startups with niche use cases or giant multinationals with the coffers to negotiate ongoing challenges in talent acquisitions, organizational restructuring, security, and expensive running costs.
As 2017 — the year of peak blockchain hype — moves further behind us, mainstream adoption is still lacking. Even for businesses with clearly-defined goals and rigorously-researched, viable use cases, blockchain remains a mammoth and risky undertaking. “Early obsolescence” could render initiatives redundant; according to a 2019 report from Gartner, 90% of enterprise blockchain platform implementations were expected to require replacement within 18 months to remain competitive, secure, and to avoid becoming obsolete.
Certainly not discounting it, business leaders have instead chosen to be non-committal, leaving blockchain on their radar as they take a ‘wait and see’ approach. But any possibility of the technology’s further mainstream adoption has been stymied further now, with investments into a risky, resource-heavy, experimental technology sidelined as businesses face a ‘cash crunch’.
According to research by HFS and KPMG in The Enterprise Reboot report — built on the perspectives of 900 business leaders — the pandemic has spurred urgency for digital transformation for the majority, but investments in blockchain are taking a bench once again while businesses focus on ‘have-to-have’ tech with more immediate returns – things like cloud technology and automation.
In March and April, the average budget for blockchain technology amounted to the not-so-meager sum of US$18 million. But as the pandemic took hold and businesses reevaluated their priorities for investment, the figure dropped to US$6.5 million in May and June. Interest in blockchain fell the highest among seven technologies.
As noted by Ledger Insights, the likelihood is that blockchain spend will be reigned in where businesses are in the exploration phase – where the tech isn’t crucial for survival – while projects that are close to production or already live may progress if they can show quick returns.
For now, any mainstream adoption of blockchain looks to be off the cards for another year as organizations focus their spend on technologies that help carry them through the immediate effects of a market downturn. But as we begin to emerge from a recession, sights will be set on technologies that can drive longer-term advantages, and blockchain could find itself quickly creeping back up that ladder of priorities.
According to The Business Research Company, despite a dip this year, the global blockchain market is expected to hit US$15.88 billion in 2023 despite retreating 7.27% to US$2.27 billion in 2020 — representing potential annual growth of over 91%.
In the circumstances, there is also an opportunity for more agile blockchain platforms to generate fresh interest throughout the remainder of 2020 by catering to the unique needs of the post-pandemic business. As companies have been forced to transact business online, prompting more aggressive approaches from cyber attackers, some businesses are considering how the technology could enable better data security, for example.
“Internet piracy has posed a major challenge for companies as they look to digitize operations,” Maruyama told the Nikkei Asian Review, given the ease of counterfeiting digital documents compared with paper versions. “Blockchain emerged as a solution for fighting digital counterfeits, pushing businesses to adopt the technology.”