Is a Blockchain Backlash Brewing?

While blockchain-based solutions are mushrooming in many different fields including logistics, financial services, government and utilities, a new report joins a growing chorus suggesting a shakeout of current efforts may be looming.

The report, released Wednesday by GlobalData, suggests that over the next two years, many current efforts in the space will either be “quietly shelved in favor of more traditional approaches” or reduce their dependence on blockchain technologies.

“Over the next 24 months, the more outlandish claims made by proponents of blockchain will be debunked,” Gary Barnett, the data and analytics firm’s chief analyst, said in a release. At the same time, however, few observers doubt its long-term viability for some use cases and as part of broader technology plans.

Hype vs. Reality

Separating hype from reality is nothing new in the sector, and this week’s GlobalData report is just the latest in a series of research suggesting the majority of enterprise blockchain projects may be badly misaligned with corporate goals.

Technology providers and users are looking with clearer eyes at the narrow but significant set of use cases where blockchain and distributed ledger technology can add real value.

According to Gartner, 90 percent of enterprise blockchain projects don’t need the technology. “You can get your project done more quickly at a lower cost with a better quality result with more efficiencies, better performance, more compatibility… if you don’t use blockchain technology and instead use proven mainstream enterprise application platforms,” Ray Valdes, a Gartner vice president and fellow, said during an October webinar.

Several high-profile blockchain experiments have, in fact, been shelved in recent months, including projects by the Depository Trust & Clearing Corporation (DTCC) and BNP Paribas SA, according to Reuters. And reality checks about the technology’s practicality could be found even at Consensus, the blockchain sector’s largest gathering, in May. In a bet enshrined on Twitter, Blockchain Capital’s Jimmy Song predicted that most projects will fail in the next five years.

“Blockchain isn’t very useful for most of these businesses,” Song said. “You can’t sprinkle magic blockchain dust and make your problems go away.”