Cryptocurrency has had a rough time in 2018; following record highs that were well en route about this time last year, Bitcoin has since lost 73 percent of its value. While the concept of digital currency has always attracted a skeptical eye, the technology underpinning it has always tended to be held in higher regard.
To offer a simple definition, blockchain technology allows multiple parties to record transactions on a decentralized, immutable, unchangeable and transparent ledger. This offers enhanced security and efficiency to any kind of transaction— it can add traceability in the food supply chain, bring transparency to the trading of commodities such as diamonds and oil, and increase the speed of international currency transfers, to name but a few use cases.
The opportunities are such that hundreds— if not thousands— of startups have raced to be the next blockchain-disruptors in their respective sector, many asking for vast amounts of capital to realize their lofty promises to engage the technology’s revolutionary power and return big bucks as a result. According to a new report by Monitoring, Evaluation, Research and Learning (MERL) Technology and USAID first reported by MarketWatch, however, those promises are falling well short of the mark, and a host of blockchain-based projects remain underdelivered.
Investigating 43 blockchain startups— that list a result of a simple internet search— found claims such as a “reduction of operational costs up to 90 percent” or “accurate and secure data capture” were not backed up by any credible evidence or documentation. Furthermore, the blockchain companies in question were far from willing to share data on program results, processes or adaptive management for their future growth.
Several blockchain firms were reportedly contacted via email, phone and in person, but to no avail.
“We found a proliferation of press releases, white papers and persuasively written articles. However, we found no documentation or evidence of the results blockchain was purported to have achieved in these claims,” read the report, suggesting that blockchain initiatives, in some cases, may amount to nothing of more substance than empty marketing exercises.
That’s not to say the technology is an underground or failed concept, though. Global financial institutions, such as JPMorgan and Goldman Sachs, have praised blockchain’s potential (making clear distinction between it and cryptocurrency, of course), while computing giant IBM, among others, has launched blockchain systems commercially, claiming to have experimented with some 500 projects to date, according to Vice President of Blockchain solutions at IBM, Ramesh Gopinath.
Speaking to MarketWatch, Gopinath is of the opinion that smaller blockchain-based projects perhaps don’t understand the time required to get a project started. Work on IBM’s Food Trust, which launched just months ago, for example, took two years in the making. Maersk’s TradeLens consortium, which has the potential to overhaul the global shipping network and now processes 154 million events a day, took longer.
“If you don’t work through all the major steps such as governance, scalability, interoperability and confidentiality, you’ll end up failing,” said Gopinath. “This is a sentiment shared by the research group as well, as these firms are not sharing data and lessons about what is working, what isn’t working and why.”
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When it comes to the high failure rates of blockchain-based projects, some believe that it could be a temporary setback— the teething problems of a fledgling industry. The research team at MERL believe that the “real value of blockchain is not the application of technology itself, but more about questioning what we do, why we do it and how it can be better”. Indeed, companies must “practice what they preach” in transparency, if they want serious attention and serious investment.
One could say that, perhaps, the future of blockchain rests with those who see value in the long term, are prepared to be in it for the long haul, and are willing to learn lessons from the larger, more successful and well-funded companies deploying the technology already.