The company consulting firm McKinsey & Company has published an elegant analysis of the corporate blockchain called "Blockchain & # 39; s Occam", which states:
"A key to finding value is to apply technology only when it is the easiest solution available."
Blockchain has been publicized as a revolutionary technology capable of expelling corruption from data management through complete automation.
The idea is that the technology underlying Bitcoin can be applied in many sectors and used to make data incorruptible, both in terms of data and of a political / social sense.
Critics of the "blockchain panacea" claims like Jimmy Song have long argued that applying Bitcoin-style blockchain-style technology is like trying to insert a square peg into a round hole: it's both useless and useless.
McKinsey & Company reiterate some of the same arguments in their last article, although they indicate that there may be industrial use for blockchain-like software (Jimmy Song suggested a regular database with cryptography).
The company claims that financial corporations invest $ 1.7 billion annually in experiments, and in 2017 venture capitalists have sunk $ 1 billion into "blockchain" (sometimes used as a euphemism for cryptocurrency projects and initials coin offers):
"Between intense experimentation, industries from financial services to health care and the arts have identified over 100 cases of blockchain use ranging from new real estate registries, KYC applications and smart contracts that allow actions from the processing of the product to the sharing of the trading.The most impressive results have seen the blockchain used to store information, cut intermediaries and allow greater coordination between companies, for example in relation to data standards. "
IBM reported having invested $ 200 million in blockchain testing. And because it has been associated with many cryptocurrency projects that raised funds from the ICO, blockchain technology has also been greatly promoted by emerging companies that use investor money, often long before a product has been successfully implemented or initiated. a revenue stream.
M & C underlines that now "doubts" have emerged:
"The fact is that billions of dollars have been sunk, but almost no use case has made any technological, commercial and strategic sense or could be delivered on a large scale."
By the end of 2017, many people working in finance companies believed that blockchain technology was too immature, not ready for enterprise-wide application or unnecessary.
Despite being often criticized for their weight, many banks, such as M & P, have invested in "blockchain" in advance, from 2012 to 2015:
"Numerous companies have set up innovation labs, hired guru blockchain and invested in start-ups and joint ventures."
Since then, these companies have found the technology impractical and have abandoned their membership in blockchain consortia:
"At the end of 2017, many people working in finance companies believed that blockchain technology was too immature, not ready for enterprise-level application or not needed, and many POCs have brought few benefits, for example beyond cloud solutions and in some cases generated more questions than answers.There were also doubts about commercial profitability, with few signs of material cost savings or incremental revenue. "
Despite the many millions invested and the dedicated work of some of the brightest people, the blockchain, says M & P, remains "child technology … which is relatively unstable, expensive and complex, and is also unregulated and selectively distrustful."
M & P emphasizes that in the "classical life cycle theory", practicable innovations should progress through four phases:
- pioneering (made in advance on proven demand, "Sales tend to be low and return on investment is negative."
- growth: (application "accelerate (s) … product takes off")
Regarding the blockchain, M & P provides a "blockchain" life cycle table and writes:
"At the turning point of today, many prototypes have been built but the blockchain technology has not yet seen a large-scale application and the future remains uncertain".
For the most part, says the consulting firm, the technology has stopped:
"Through its many applications, blockchain is likely to be stuck in phase 1 of the life cycle (with some exceptions) .Most of concept demonstrations (POCs) are pioneering (or undergoing liquidation) and many projects are not managed to reach the C series funding rounds ".
Blockchain technology is blocked
For the record, the future is not uncertain for Jimmy Song and other Bitcoin programmers who recommend basic database cryptography – probably the easiest solution to data security issues that companies try to fix – the true razor of Occam.
Unfortunately, the suppliers of many "rival coin" projects managed to successfully label the criticism of Song and other Bitcoin "bitcoin maximalism" (and more recently "bitcoin extremism") and successfully put them in the background.
Meanwhile, M & P says, banks have moved widely and are working on other technologies, and companies like Ripple "are increasingly collaborating with non-bank service providers, whose activities may be more suited to blockchain technology."
Left more and more alone, the "blockchainers" now have to take a little relief, not only because their technology may be inadequate, but because private companies do not necessarily want to finance innovation that does not favor them. markets.
The blockchain for payments is also subject to the competition of legacy systems:
"Of nearly $ 12 billion invested in US Fintech last year, 60% focused on payments and loans."
SWIFT, a payment system compatible with the compliance with which banks are very familiar, has reported that it has tried to solve inefficiencies in global payments and to maintain its market share:
"SWIFT's global payments innovation initiative (GPI), meanwhile, is addressing the initial pain points through higher transaction speeds and greater transparency, leveraging banking collaboration."
M & P is more generous than Song and its genre, as it identifies some "niche" applications that are potentially legitimate and improved for blockchain (such as "asset management" and "balance sheet"); possible "value of modernization" to simplify the processing and collaboration in global shipping contracts and commercial finance ("However, in many cases blockchain technology is a small part of the solution and may not imply a real register distributed "); and 'reputation value', for companies that want to demonstrate to the markets the desire to innovate:
"… with little or no intention to create a commercial-scale application, but in many cases blockchain technology is a small part of the solution and may not involve a true distributed ledger. to be "blockchain enabled" sound empty. "
M & P does not bury the blockchain sector in its relationship, but advises considerable circumspection:
"Companies that are committed to pushing the blockchain must adapt their strategic gambling books, honestly review the benefits of more conventional solutions, and take a harder business approach – they should be quick to abandon applications where they do not it is no incremental value. "