Maturing blockchain industry paves the way for enterprise adoption
A session at this year’s Blockchain Expo Europe highlights that blockchain is reaching a stage of maturity that paves the way for enterprise adoption.
The session was presented by Pedro Lopez-Belmonte, Senior Manager of Web3 and Technology Innovation at Richemont, on day one of Europe’s leading blockchain conference.
One of the first charts presented during the session was Gartner’s hype cycle, which shows blockchain platforms now leaving the trough of disillusionment and entering the trough of enlightenment:
This area of the cycle is where emerging technologies leave behind their initial hype and subsequent disappointment, and have now reached a stage of maturity where expectations are realistic and more widespread adoption often follows.
Gartner are not the only analysts who believe that blockchain is maturing. According to Market Research Future, the blockchain industry will reach $6.7 billion next year.
“The technology has already had a decent level of maturity. We can see that it has proven its worth,” says Lopez-Belmonte. operations such as cloud.etc”.
There are three key areas that hinder mainstream adoption in Lopez-Belmonte’s view:
Limitations and misconceptions
Starting with Ethereum founder Vitalik Buterin’s infamous trilemma—which states that a blockchain must sacrifice either scalability, decentralization, or security—Lopez-Belmonte expects that a business will choose to sacrifice decentralization.
There are enterprise-focused blockchains like Hedera Hashgraph that still offer a degree of decentralization, but prioritize scalability and security. Proponents of decentralization argue that such blockchains are not sufficiently different from centralized alternatives, but many businesses will see it as the best compromise.
However, Lopez-Belmonte believes that a business still often has to give two elements away – and that’s a barrier to adoption.
There are also lingering misconceptions about the energy consumption of blockchains that need to be addressed. Limited energy supplies in recent months have only heightened existing concerns about climate change, and few companies want to be associated with anything that exacerbates these problems.
Ethereum, the largest smart contract platform, switched to Proof-of-Stake this month following an incredible feat of engineering called “The Merge”. Moving away from Proof-of-Work reduced Ethereum’s energy consumption by around 99.98 percent and should improve decentralization in the long term by eliminating the need for mining rigs.
As highlighted by Lopez-Belmonte, Bitcoin is the only major cryptocurrency that still uses the energy-intensive Proof-of-Work consensus. There are growing calls for Proof-of-Work mining to be banned in many countries due to its environmental impact, further affecting Bitcoin’s already questionable level of decentralization.
While Proof-of-Stake chains show that Bitcoin does not need to use as much energy, there is a misconception that it uses more than other technologies. For example, Lopez-Belmonte highlights this recent graphic showing that Bitcoin uses far less energy than YouTube, banking and gold mining:
Global compliance
The other major challenge in Lopez-Belmonte’s view is compliance.
Despite much talk, there is not yet much regulatory certainty around blockchain and Web3. This inhibits innovation and companies will not invest heavily until they have greater security.
“Although many governments are looking at it and pouring money into research, there is still a lack of a clear regulatory framework,” explains Lopez-Belmonte.
“It obviously creates a lack of confidence in companies to go ahead and do things. Maybe they have to change their implementation, they have to change what they’ve got in place – and this costs money and effort.”
Many governments, especially the UK, have publicly said they want to become hubs for crypto, Web3 and general blockchain innovation. However, much of what we have seen so far has been counterproductive to these efforts.
Lopez-Belmonte believes that upcoming European regulations will be a good thing for the industry, but largely believes that more clarity is needed globally.
“There are some places with more mature regulations such as Switzerland, Singapore – but in general we can say that we do not have clear rules.”
Implementation
The last challenge Lopez-Belmonte highlights is around implementation.
A big question is always: public or private? Lopez-Belmonte claims that most of the data is going to be stored off-chain anyway, and there will only be an on-chain certification for the data.
“The questions that we should ask is around decentralization: How many peers? Who validates my transactions? WHO can validate my transactions? Who do I wishes validate my transactions? How are the transactions validated? Do I want my colleagues to validate these transactions?” explains Lopez-Belmonte.
Lopez-Belmonte also says that there is a need for use cases that have actual value.
“If you were around in 2017/18, you will remember that there were a lot of futuristic statements and there was hype. There was a lot of money put into PoCs (Proof of Concepts) and pilots just to have a blockchain,” explains Lopez-Belmonte .
“Obviously, any project has to have a purpose.”
Long-term trends
NFTs (Non-Fungible Tokens) are currently associated with images that are popular but have little utility beyond bragging rights and value speculation. But in the longer term, they can be far more useful in areas such as the digitization of land use.
“In my opinion, enterprise NFTs will be very, very important. In an enterprise context, we mostly work with a lot of serialized, unique data,” says Lopez-Belmonte.
“Everything that is serialized, that is unique, has to be linked to an NFT – and with that we can improve the business process. It doesn’t matter if it’s B2B or B2C, we can bring a lot of efficiency and automation.”
“Enterprise NFTs are going to have a big impact on our interactions or business relationships in general.”
Then there is the metaverse, which is already closely linked to blockchain technologies. NFTs already grant the rights to digital objects in virtual worlds and so on. Many of the companies recently selected by Disney for their 2022 Accelerator were blockchain, metaverse and NFT startups.
“We have a lot of companies jumping into it,” explains Lopez-Belmonte. “They want to engage with new customers. Today’s players are tomorrow’s customers.”
More generally, many new technologies go hand in hand with blockchain such as IoT and AI. Blockchains open up doors that were previously closed.
“Blockchain is solving a lot of things right now, a lot of existing business processes or problems that we couldn’t [previously] solve,” comments Lopez-Belmonte. “Use cases with new technologies combined with blockchain are going to be the next big things.”
The coming year
Over the next year, Lopez-Belmonte says people should keep an eye on three important things.
The first is blockchain links:
Lopez-Belmonte is concerned with plugins that enable customers or other companies to log in with a wallet instead of traditional web 2.0 means.
The other big thing that Lopez-Belmonte thinks people should keep an eye on is decentralized identity.
“It is the new CRM because, especially in a B2C context, it enables companies to establish a new type of relationship with customers in an anonymous way,” explains Lopez-Belmonte.
“We all think about situations like Cambridge Analytica with Facebook, we still don’t know what they do with customer data.”
Blockchain naming systems have also exploded in the past year, enabling aliases like TechForge.eth instead of a long and forgettable alphanumeric code.
The last point Lopez-Belmonte makes about what to look for in the next year is about China.
China has provided its own, arguably far more restrictive, vision for blockchain. For example, digital collectibles are not transferable, so people cannot speculate on their value.
Lopez-Belmonte points to Beijing’s support for the BSN (Blockchain-based Service Network) which has its own public blockchain network, but without crypto. They are also setting up the “Spartan network” which is only available outside of China and aims to get Western companies involved in using their technologies.
The session was just one of many interesting talks during day one of Blockchain Expo Europe. You can find out more about upcoming events in the global series below.
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