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In the "hype cycle", an unscientific concept invented by the US technological research group Gartner, new technologies travel through phases towards the market. Before the final production phase, new ideas start with an initial "technological trigger". In a second phase, the idea moves through a period known as the "peak of inflated expectations". Then, when the defects and limitations of technology become evident and the experiments and market tests fail to deliver the promised miracles, the idea slips into a phase known as the "trough of disillusionment".
After a couple of years at the height of inflated expectations, the blockchain hype machine and its associated cryptocurrency are sinking deep into disenchantment. Will they ever recover?
The collapse of the cryptocurrency segment of the hype blockchain cycle is clear. Bitcoin Cash, to cite an example, was traded on Tuesday at $ 215, down from about $ 4,000 a year ago – a change that somehow undermines its creators' claim that Bitcoin Cash is "the best money in the world" because " bring healthy money to the world. "
The cryptocurrencies are based on the blockchain, which in recent years has flown into its state of overvaluation as the futuristic technology that would revolutionize business, government and global finance. A 2016 IBM presentation described blockchain as "an open enterprise-class standard and cross-industry for distributed registries that can transform the way business transactions are conducted globally."
But the blockchain in 2019 seems to be well beyond the hype phase and slip into the background phase. In a report this week, global consulting giant McKinsey and Co. said that while there is a "clear sense that blockchain is a potential turning point … there are also emerging doubts." A particular concern, given the amount of money and time spent, is that little of substance has been achieved. "
The bottom line, adds the authors of the report, is that "despite billions of dollars of investments, and almost as many titles, the evidence for a practical and scalable use for blockchain are scarce". Negative descriptions accumulate in the report on the blockchain "Stuttering development", "relatively unstable, expensive and complex features", "lack of progress" and "a growing sense of underestimation". (See more excerpts at the bottom of this column).
Some publicized blockchain applications have been identified, although they are far from promised disruptions in the status quo world. Walmart and other food retailers say they will use the blockchain to monitor the supply of lettuce, chickens and other fresh products, for example.
Otherwise, it remains bogged down in the type of problems described by U.K. skeptical blockchain David Gerard in his book "Attack of the 50 Foot Blockchain." In an e-mail, Gerard told me: "I am very envious of McKinsey that he names the problem so clearly, they really hit the nail in the head here, the Digital Transformation Agency in Australia said the same thing : "For every use of blockchain you would consider today, there is a better technology".
The supporters insist that "it will surely come in six months or next year." He continues to give us money! "Gerard scoffs. "Everyone says it will be great in the future, or it will not work in their industry, but it could work in someone else's – but there is no evidence that it works in any industry."
I asked Matt Higginson, one of the report's authors and a McKinsey partner in New York, to make some setbacks from the blockchain-booster cult. "On an individual level, there was hardly a negative feedback but a ton of positive feedback for honesty and candor of the tone – saying what others were afraid to say in public (after so many investments ) ", he wrote in an email (the brackets are his). I asked Higginson to what extent his assessment represents a permanent reduction in expectations – as opposed to a timing of deadlines in which the blockchain ultimately achieves all its expectations, only slower. He said that "in their current event, the existing blockchain protocols offer few advantages over existing technologies for MOST applications, and moreover, focusing on solution technology (missing) the biggest obstacle to solving some of the most persistent problems. in different industries ".
Take properties, for example. Higginson said the attempt to create a blockchain for property titles, insurance, etc. It might sound like a good idea, but "the technology solution alone does not address more fundamental barriers, including how to digitize all titles, how to agree (on) acceptable standard data for an entire industry, and ultimately the path to ## Adoption by the majority of participants in an industry ".
The biggest obstacle to the generalized adoption of blockchain, says Higginson, is what business theorists call "co-opetition," an extravagant word that refers to when companies and competitive industries agree to share information. Getting there is a problem. "Solving the paradox of co-opting and clarifying a path to majority adoption seems to be the most important obstacle," Higginson said. Because of the problem of cooperation, the implementation of blockchain pilots is "tormented by a single player who pushes his monopolistic solution" or "no single organization takes the role of investing sufficiently to move from the pilot to scale implementation. business ".
In the end, however, Higginson refers to the main problem in the McKinsey report and to the need to consider Occam's razor principle, which is that the simplest solution to a problem is probably the best (and probably the cheapest), & # 39; d add). "We need to respond adequately to the question of" why blockchain "as opposed to more established existing technological solutions. "Otherwise, the blockchain, once at high altitude, looks set to remain rooted in the hustle and bustle of the hype cycle.
Extracts from the "Blockchain & # 39; s Occam problem", a report published Monday by McKinsey & Co., written by Matt Higginson, Marie-Claude Nadeau and Kausik Rajgopal:
It is clear that blockchain is a potential turning point. However, there are also emerging doubts. A particular concern, given the amount of money and time spent, is that little has been achieved. Among the many cases of use, a large number is still in the idea phase, while others are under development but without output. The bottom line is that, despite billions of dollars of investment, and nearly as many titles, the evidence for a practical and scalable use for blockchain is thin on the ground …
One of the reasons for the lack of progress is the emergence of competing technologies. For example, in payments, it makes sense that a shared ledger can replace the current highly intermediate system. However, blockchains are not the only game in town …
Blockchain players in the payments segment, such as Ripple, are increasingly collaborating with non-bank payment providers, whose activities may be more suited to blockchain technology. These companies may also want to proceed more quickly with the integration …
Given the range of alternative payment solutions and incumbents' disincentives to investment, the question is not whether blockchain technology can provide an alternative, but what if necessary? Occam's razor is the principle of problem solving that the simplest solution tends to be the best. On this basis, the cases of use of blockchain could be the wrong answer …
McKinsey's work with financial services leaders over the past two years suggests that those of the "coalface" blockchain have begun to doubt. In fact, as other industries have equipped themselves, mood music at some levels in financial services has been increasingly cautious (even though senior executives have made claims to the contrary). The fact was that billions of dollars had been sunk, but almost no use case had a technological, commercial and strategic sense or could be delivered on a large scale …
McKinsey's work with financial services leaders over the past two years suggests that those of the "coalface" blockchain have begun to doubt. In fact, as other industries have equipped themselves, mood music at some levels in financial services has been increasingly cautious (even though senior executives have made claims to the contrary). The fact was that billions of dollars had been sunk, but almost no use case had a technological, commercial and strategic sense or could be delivered on a large scale …
In recent months, some financial institutions have begun to recalibrate their blockchain strategies. The POCs have been more intensively monitored and a more targeted approach to development funding has been adopted. Many have narrowed their focus on dozens of one or two use cases and have doubled the oversight of governance and compliance, data standards and network adoption. Some consortia have reduced their trial draft lists by tens in 2016 to just a handful today …
Of course, there is a growing sense that blockchain is a little-known (and somewhat clumsy) solution in search of a problem …
Conceptually, the blockchain has the potential to revolutionize business processes in the banking, insurance, maritime and healthcare sectors. However, technology has not yet seen significant large-scale application and faces structural challenges, including the resolution of the innovation dilemma. Some sectors are already downgrading their expectations (distributors have a role to play there) and we expect further "doses of realism" as experimentation continues.
