Investment into blockchain startup has already declined this year by 60 percent down to $1.6 billion, according to a CB Insights report. At the same time, money coming from corporations spent on blockchain technologies is on an even sharper decline.
Just as everyone was getting really excited about its potential, it appears blockchain is dead. Or is it? Interestingly, the world’s biggest tech leaders – Samsung, Microsoft, IBM – who were also blockchain’s biggest adversaries in the beginning, seem to have taken to the newfangled technology of late. Understanding blockchain and its potential application took a while for them, admittedly, but it appears the big guys are now on board. They have either created their own blockchain, or joined partnerships to use the technology, and HSBC and JPMorgan have similarly developed their own blockchain technology. What is the story? Why are the original perpetrators no longer convinced, but latecomers to the game are?
Crypto enthusiasts have lost faith in blockchain, the record-keeping technology behind bitcoin, believing it to be a thing of the past. At the recent Consensus Invest conference in New York, where crypto lovers gathered to discuss the latest in digital assets market trends, it was acknowledged as such. So much so that Meltem Demirors, chief investment officer of CoinShares Group, uttered the actual words Blockchain is dead . Most of the companies responsible for raising huge amounts of capital in recent years to build blockchain no longer exist or have morphed into cryptocurrency and tokenisation. Slowly, people have begun to realise is that blockchain is not an efficient system – they are just public ledgers and have limitations, like everything.
Not everyone thinks that way, though. Some believe we are merely on the cusp of blockchain’s biggest year yet – a year where we will see the technology truly take wings and see innovation like we have never seen before. It is anticipated that rather than getting excited by blockchain alone, we will begin to see how blockchain can produce solutions. Isn’t that the purpose of technology, after all? We didn’t invent the computer to simply sit down and admire it, but to use it for processes to make our lives more efficient. As yet, we have failed to see how blockchain can really do this, beyond provide us with the means of storing digital currency. What these solutions will actually look like, however, is yet to be seen ¦
That China’s Xi Jinping recently declared that his country needed to seize the opportunity of blockchain technology is a promising sign that the technology is only at its beginning. With continued regulatory clouds hanging over blockchain and cryptocurrency markets in the U.S., there is a strong chance that China will take the lead in the global market, and if there is one country capable of truly propelling a new technology or concept to commercial success, it is China. That being said, China hasn’t done itself any favours by denouncing cryptocurrency trading earlier this year in a bid to clamp down on foreign crypto exchange.
That’s right, in July this year China’s central regulatory authority – the People’s Bank of China, which regulates financial institutions in the country – issued a statement that it would block access to all domestic and foreign cryptocurrency exchanges and ICO websites. Chinese authorities also declared initial coin offerings (ICO), a cryptocurrency-based fundraising process, illegal in China in 2017. How are they going to seize the opportunity while simultaneously doing all they can to shut down the main activity blockchain was developed for? Beats me.
Many crypto proponents have started touting the benefits of security token offerings (STOs), sort of a mix between the ICO model and traditional finance, ie securities. However, the STO model has failed to produce any tangible results, and seems like another wolf in sheep’s clothing. It also begs the question of what will happen to crypto, and as a result blockchain, if the rest of the world follows in the footsteps of China and attempts to reign in the technology because of mistrust?
Blockchain technology is already not as widely used as it could be because blockchain users don’t trust each other, research shows. The irony of this is astounding, wasn’t blockchain initially created to allow financial transactions that didn’t rely on trust or the interference of government authorities? It seems absurd that now the very downfall of blockchain and crypto might be the increase in regulatory measures by governments.
Or will the U-turn we are seeing with governments such as that of China lead to blockchain’s demise because it no longer provides users with the safe haven they seek, far removed from the influence of governments? Think about it: people like blockchain and crypto because it is seemingly removed from regulation, from the normalcy of the banking world. If national governments turn around and are suddenly interested in blockchain, and as a result become invested in and potentially involved in its management, then it becomes the same as banks. No longer safe from government influence.
Here are some blockchain applications across sectors:
- In the financial-services sector, blockchain technology has disrupted the industry with many applications, like automated risk assessment and technology-guided portfolio management. JPMorgan has introduced the JPM Coin, a digital token based on blockchain technology, for transfer of payments between institutional accounts.
- In identity management, identity theft is gradually becoming history due to blockchain technology and biometric checks.
- In healthcare, blockchain has facilitated improved medical data access and efficient patient care.
- Startups across sectors are leveraging blockchain to transform traditional business models.
- In marketing, companies are using blockchain to reshape marketing functions. IBM launched blockchain-as-a-service (BaaS) to help brands like Walmart track food production.
But blockchain does have a downside; it can hinder or limit Data Governance practices. By disintermediating data management, blockchain actually ensures only trusted, complaint, and secure data is available for all. Further, you might be under the impression that blockchain is some sort of distributed computer, performing distributed computations. You might have supposed that nodes across the world gather something bigger bit by bit. That is totally incorrect. In fact, all of the nodes that maintain a blockchain do exactly the same thing.
Many blockchain (especially Bitcoin) proponents argue that miners maintain the stability and security of a blockchain. If there are enough miners this is true.
The problem is that miners can combine. If they do they assemble a coven (in Bitcoin’s case, >50% of mining power) they can rewrite or alter the blockchain record. If this is possible, the security of data disappears.
The truth is, we won’t know if blockchain is dying until it is dead. Perhaps we are just tired of hearing about its profound potential, and sick of waiting around to see when we will begin to reap the benefits of this wondrous new technology. It feels a little like trading fatigue, and is taking longer than expected. But perhaps that is because it’s greatest moment is yet to come and the lull in the meantime is unbearable.
