The fintech market is fast and that goes equally for being a trend and stopping to be one. Recently, it seems like blockchain may be stopping to be the love of the corporate America for the moment, as the investments in the blockchain technology seem to be starting to cool down.
According to a recent Forrester Research study, a big number of blockchain projects will be wound down during 2018. Some companies which are pushing ahead pilot tests are already scaling back on their ambitions.
The company has affirmed that, in 90% of the cases, the companies are not going to actually use the blockchain technology. Even some companies that championed for the use of blockchain technology are not moving as quickly as they hoped.
Nasdaq Inc is an example. The exchange operator talked in 2016 about using the blockchain technology to aid in shareholder voting during meetings and stock issuance but it is not using the technology yet.
The main disappointment is that many companies expected to discover use cases quickly for this technology but blockchain is very complicated and they discovered that it would take a lot of more time and resources than they believed it would.
IBM And Microsoft Lead Blockchain Development
At the moment, IBM and Microsoft are leading blockchain spending, with 32% and 19% of the spending each. Accenture leads the way with 17% and all the other companies on the survey cover 33%.
While the idea of blockchain is both simple and groundbreaking, the digital ledger technology provides a tamper-proof record of transactions, real life adopting is seldom harder than companies imagine. Many of them hit performance issues when using the technologies or fail to actually believe that it can be so useful.
Hype And Reality
According to Rajesh Kandaswamy, an analyst at Gartner Inc, there is a giant disconnect in terms of actual production between the hype and the reality of the blockchain technology. If more companies agree with Kandaswamy, there is the danger that companies like IBM and Microsoft might lose heavy money as they are developing blockchain solutions that would be sold to others.
They are intending to make billions using blockchain cloud services to run supply chains, receive payments, etc, so if the industry turn its back on the blockchain technology, it can lead to heavy financial losses for these two giants of the technology. According to Roge Key, president of Endpoint Technologies, the companies have important future revenues connected to blockchain, so analysts will have to make downward revisions if the plans materialize slower.
IBM currently has more than 1,500 employees around the world working on the blockchain technology and it is still believed that there is a strong demand for it in the future. However, it is already starting to see risks. Jerry Cuomo, vice president of technologies at IBM, believes that competition can affect how much the company will be able to charge for its products.
Microsoft is also upbeat the blockchain and the company sees a tremendous momentum on the market and it is working with experts from the industry to ensure that their plans are realized. The survey has also estimated that IBM and Microsoft already have grabbed 51% of the blockchain market.
Only 1% of the Chief Information Officers of companies say that they have adopted blockchain in their organizations and only 8% experimented, even for a short time, with it. Nearly 80% of CEOs stated that they did not have any interest in the technology.
A lot of companies that have announced blockchain projects have changed their plans. One example is ASX Ltd, which operates on the Australian stock exchange and has delayed its plans to launch blockchain projects at the end of 2020 or beginning of 2021. According to the company, they were aiming for a platform within 18 months but that did not realize.
An exchange spokesman, however, affirmed that there was no delay as the company never officially announced an exact date for the launch. Another Australian company, BHP Billiton, has stated in 2016 that it would use the blockchain and has given up on this enterprise more recently as the tests proved that it was not a good idea.
However, specialized companies such as the Enterprise Ethereum Alliance, believe that most companies are still testing the waters and that more companies will develop solutions as soon as the technology becomes more mainstream.
Standards For The Technology And The Market
According the Enterprise Ethereum Alliance, many companies are delaying blockchain plans because they are not sure that the vendors are offering compatible software and they are worried to be stuck with only a single vendor.
The organization has decided to launch a certification program for blockchain software in 2019 to help companies. Other company, Hyperledger, which represents companies like IBM and American Express, is also preparing Kubernetes, another blockchain platform.
However, most blockchains cannot handle a large volume of transactions, which is important for major corporations, and sharing the same blockchain can be a part of the problem because of this. Because of this, most companies are worried that they will deploy their projects and run into problems.
The main issue with the blockchain technology does not seem that it is bad, as it’s really not, but that the companies want to see the other ones failing first, nobody wants to be a guinea pig, or at least that is, that the Hyperledger Executive Director Brian Behlendorf believes.