“Bitcoin, not Blockchain” is Shaping up to be the Theme for 2020
Many existing platforms and projects that have received funding to build enterprise blockchains have rolled out a product in 2019. But other than that, funding for these startups has dried out as investors look at opportunities within cryptocurrency and tokenization. As more people become aware of how having a native cryptocurrency enhances the decentralization of a blockchain, many industry insiders see a shift in outlook, reported by Bloomberg, November 12, 2019.
Crypto Assets and Tokenization Lead the Charge
The start of enterprise adoption of blockchains can be traced back to Hyperledger and the R3 consortium. Many companies, allured by the transparency offered by blockchains, became avid proponents searching for ways to implement this new layer of trust in their organizations.
Since then, a lot of these companies have seen muted flows and interest, forcing them to turn to other avenues within the broader cryptocurrency and distributed ledger space.
From retailers to mechanic firms, it seems as though all industries are adopting blockchains, and some of them very evidently wouldn’t benefit from running one in the first place. However, the birth of new technology instills an acute fear of missing the efficiencies brought about by innovation.
Venture funding to blockchain startups has fallen nearly 60 percent as per CB Insights estimates. From relying on venture capitalists to being forced to bootstrap, the challenges pure blockchain startups faced in 2017 and 2018 have only been amplified in 2019.
Meltem Demirors, CIO of CoinShares, declared that “blockchain is dead” at the Invest New York conference. Digital Assets Data Chief, Mike Alfred, also thinks enterprise blockchain usage is at least temporarily muted. But unlike Demirors, Alfred doesn’t believe this translates to the death of blockchain.
Economic Incentives Greatly Undermined
Running a blockchain and inducing an environment with improved transparency is undoubtedly a radical shift that could help a business gain public trust and erode internal corruption. But does it work as it is with no real incentive?
Some processes like supply chain management can genuinely see a huge benefit from the implementation of a blockchain. But the majority of enterprise blockchains between closed networks of companies think they can replicate Bitcoin’s trustlessness without recreating the same economic incentives.
In short, Bitcoin works because people have a financial interest in it working. If a blockchain exists just for data transmission and there is no on-chain economic incentive, it isn’t truly trustless as data alone can be tampered and is susceptible to a single point of failure.