8,500 blockchain and cryptocurrency fans packed the New York Hilton Midtown to its gills this week in what organizers were calling the largest blockchain conference ever. Yet, while excitement around these technologies are indubitably at an all-time high, much of the activity at the show diverged from business reality.
The problem: most of the noise around both blockchain and crypto is little more than the community talking to itself – a massive ‘echo chamber’ that in its final analysis promises no lasting business value for its participants.
This echo chamber filled with schemers, scammers, speculators, and their various marks did not account for the entirety of the conversations at Consensus, however.
In contrast to the carnival huckster atmosphere dominating the event were firms focused on the other side of the blockchain equation: those seemingly rare but essential business models where blockchain may actually deliver real business value – in spite of all the nonsense at surrounding booths.
A bifurcation of sorts, therefore, was evident at Consensus: the sober, serious participants focused on business value vs. the insanity that is the frothy blockchain/crypto world today.
Blockchain’s Killer App
Where blockchain has been getting serious early traction in enterprises is for multi-party supply chain and logistics use cases – what we might collectively call enterprise blockchain’s ‘killer app.’ Consensus put this story front and center, with a keynote panel featuring the CEO and CIO of
As an international logistics leader, FedEx sees real value in blockchain. “Blockchain has the potential to completely revolutionize trade across borders,” said Frederick W. Smith, Founder and CEO of FedEx. “We think this is potentially a profound technological change.”
Robert Carter, EVP of FedEx Information Services and CIO, echoed Smith’s words. “This is such a game-changer for us because it extends the boundaries beyond our four walls,” Carter said. “We’re working with everyone to figure out how best to deploy custody chains.”
In addition to the FedEx panel, a handful of enterprise-focused firms including
The Blockchain Echo Chamber
Outside of this erstwhile killer app for blockchain, business value was a scarce commodity. Most of the blockchain/crypto community of vendors simply offer products and services to other members of the same community – money-making in the short term, but of questionable long-term value.
On display: plenty of crypto wallets, crypto trading platforms, blockchain consulting firms, tools for crypto investors, crypto law and accounting firms and the like.
What these companies are not taking into account is the fact that the only reason there’s any money available to such businesses at all is because of speculative interest in cryptocurrency as well as in initial coin offerings (ICOs), the novel way for such companies to obtain funding from speculators while attempting to sidestep security laws.
In other words, the entire blockchain/crypto community – not just Bitcoin – is in the midst of a massive, complicated speculative bubble.
True to form, throngs of VCs and other speculators (it wouldn’t be accurate to call them investors) were in attendance, looking to place their bets largely because of rampant FOMO – the proverbial ‘fear of missing out’ driving much of the frenzy.
Want a Platform? Here’s a Shovel
In addition to the killer app, other enterprise blockchain businesses were on display.
Enterprises want to build their own blockchain killer apps, so the reasoning goes, so let’s sell them the platform, tools, and even services to help them do just that. In other words, the proverbial selling shovels during the gold rush model.
I’ve written about companies like Stratis and Gospel before, but there were plenty more on display at Consensus, including Vechain, Boardwalktech, and BTL, among others. Each of these vendors has a different take on the shovels-for-prospectors angle.
Vechain offers a single, global enterprise-level public blockchain platform with built-in governance and IoT integration. It is targeting various industries, including pharma, automotive, and luxury goods, as well as the ever-popular logistics/supply chain market.
Boardwalktech leverages years of expertise with distributed immutable database technology predating the blockchain craze to offer enterprises shared digital ledger technology – the tech at the heart of enterprise blockchain.
Perhaps the most interesting vendor in this category at Consensus is BTL, which crafted an entirely new architecture for its Interbit blockchain development platform.
While other blockchain platforms consist of a single, distributed blockchain that leverages multiple nodes writing identical blocks to ever-growing, identical chains, BTL took a step back to rethink the nature of such a node.
The result: blockchain technology at the hypervisor level – the infrastructure technology at the heart of server virtualization. Each server thus has virtual machines (VMs) that are themselves individual blockchains or blockchain nodes.
While each blockchain is thus immutable and may maintain multiple nodes across multiple distributed servers, it is also inherently ephemeral, as are all VMs.
In BTL’s architecture, therefore, a single solution may consist of dozens or hundreds of individual blockchains, spawned perhaps to maintain a single multi-party transaction or even an individual user’s data, depending upon the situation.
BTL’s architecture is like no other I’ve seen, and it is the only one that succinctly deals with the GDPR ‘right to be forgotten’ requirement: to forget a user, simply delete their blockchains.
There Can Be Only One
Beyond the enterprise blockchain killer app, the shovels-for-prospectors, and the echo chamber offerings, other wares on display tended to repeat themselves.
There were more ‘know your customer’ identity platforms, anti-counterfeiting luxury product tracking solutions, and next-generation advertising platforms, product categories I’ve recently covered in previous articles (see Blockchain’s ‘Underpants Gnomes’ Problem and How To Make Money With Blockchain, Despite The Hype.)
Added to this list: various content monetization platforms, healthcare information exchanges, electricity trading hubs, and the like.
On first glance, each of these use cases seems to make sense for blockchain. The problem with all such offerings, however, is surpassing their respective tipping points: to be successful, any vendor must sign up enough customers to attract end-users, and enough end-users to attract customers.
Getting to this point is expensive and difficult, and few have the plan or the resources necessary to get there. But there’s an even greater roadblock for each of these startups: there are simply too many in each niche.
The more competitors there are, the less likely any one of them will hit that tipping point. For anyone to be successful, therefore, competitors should join forces to create a single blockchain-based platform that all competitors can build their own proprietary solutions on top of.
The money, however, is in the solutions, not the platform – placing each vendor in the precarious predicament of investing their resources in a platform that won’t make it any money in hopes it will become the single dominant player, thus catapulting the company past its tipping point – a strategy with long odds to be sure.
I call this challenge the ‘platform predicament.’
Plenty of Silliness
I’ve still only accounted for a fraction of the noise on the Consensus exhibit floor. The rest are ideas that range from poorly thought out to downright silly. There were numerous merchandise coupon platforms, hoping that coupon issuers would be happy to accept competitors’ coupons (it ain’t gonna happen).
And what about a vegan blockchain? Use its coupons (aka ‘tokens’) at vegan restaurants, and it only takes a 5% cut for its troubles. What vegan restaurants, you may ask? Good question.
Deloitte’s Long Play
Silliness aside, there were bona vide enterprise business stories to tell. I spoke to Linda Pawczuk, leader of the Deloitte US Financial Services Industry Blockchain group, and she provided insight into how Deloitte is helping its customers to overcome the platform predicament.
As many blockchain startups have found, it makes sense for the organization running a platform to be a non-profit. However, many of these chose the ‘dot org’ designation more from a lack of business model rather than a higher mission.
What Deloitte realized is that existing industry consortia already exist – non-profits funded by member companies to address cooperative issues among competitors. And such consortia would be ideal organizations to run multiparty enterprise blockchains.
Case in point: The Institutes, an industry consortium for the property and casualty insurance industry, whose business has historically focused on training and certification.
Pawczuk was central to the formation of The Institutes’ RiskBlock Alliance, a consortium focused on leveraging blockchain specifically for the risk management and insurance industry.
This alliance already has more than 30 members and is thus well on its way to overcoming the tipping point that plagues all blockchain business models.
An insurance company consortium may not have the sexiness and sizzle of many of the blockchain businesses at Consensus to be sure, but what it does have is real business value. When the dust settles and the speculators have moved on, business value will be the only thing that the survivors will share.
Intellyx publishes the Agile Digital Transformation Roadmap poster, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, IBM is an Intellyx customer. None of the other organizations mentioned in this article are Intellyx customers. The author does not own, nor does he intend to own, any cryptocurrency or other cryptotokens. Image credit: Jason Bloomberg.