Blockchain: Hype or hot?

by John Reiners

In an earlier post, I noted how I may have been over hasty in accepting an expert’s view that the Blockchain was at the peak of the Hype Cycle – with the implication, among those listening at least, that not much would happen for a while. Here I want to expand on that thought and consider whether the Blockchain is over hyped, or whether it is a hot opportunity, that should be closely followed.

Certainly you can see why people could consider Blockchain overhyped. Over the last year there have been more and more articles, blog posts spreading from the technical press even to the freesheet I read on my way to work in the morning. I have heard politicians referencing its potential (typically vaguely). Yet it’s hard to think of many examples where it is making a difference to anything in the real world. OK, people have heard of Bitcoin – but usually for its difficulties (large swings in value, used for shady transactions, hacked accounts). And it’s almost 8 years since it was invented – an age in tech adoption time.

Yet there are reasons to think Blockchain, or the underlying concept of the distributed ledger, could be the real thing. Blogposts on the subject are increasingly from commentators with expertise and whose views I trust. There are significant industry moves – the R3 CEV consortium of leading banks and financial services firms are investigating opportunities to use the technology. The Linux foundation has set up a collaborative effort to develop an open source distributed ledger framework, supported by R3 CEV and with big beasts like IBM, Accenture and Cisco contributing funding, code and expertise. According to Irving Wladawsky-Berger, these open and collaborative developments follow the adoption path of technologies like the Internet, World-Wide Web and Cloud. CNN reported in December that there is an increase in start-up activity, with $1 Billion raised for Blockchain related projects. The UK government last week issued a detailed report on the potential of Blockchain technologies, recommending that development should be supported. Consultancies are building up their Blockchain advisory services. I even saw an advert today for a Blockchain developer to work on a “truly prolific project which has the potential to disrupt the technology and financial services industry”. There are also a few use cases emerging, though admittedly they tend to be a bit obscure (e.g. land registry in Honduras, public services in Estonia). The list of potential uses is expanding – for example settlement systems, managing intellectual property rights, smart contracts, helping tax collection.

Of course all this activity does not prove that Blockchain will take off – there are many obstacles that need to be overcome, including security, scalability, effective business models and willing customers. But it certainly makes it worth paying close attention. Blockchain could be revolutionary, a truly disruptive innovation. The Internet connected the world’s data, IoT is connecting physical objects and Blockchain aims to be the Internet of Value. Last weekend, The Observer’s John Naughton asked if Blockchain is the most important IT invention of our age. It is too early to answer that now – though the scale of investment, activity and interest are seriously shortening the odds. Certainly one to watch in 2016.

John Reiners is Oxford Economics Managing Editor, EMEA. He manages research programs on a wide range of topics, including digital economy and international trade. He also follows emerging trends, like Blockchain. He can be contacted at jreiners@oxfordeconomics.com