Blockchain, the technology that underlies cryptocurrencies, has become popular among American companies due to its ability to enhance business efficiency. Earlier this year, Walmart made public its intention to apply the technology in managing its supply chain, particularly in tracking food products.
Around the same time, Amazon launched AWS blockchain templates that allow its users to access preset frameworks enabling them to build blockchain projects for use in their businesses. Blockchain is not just bound to change the way businesses run, it has also facilitated development of innovative solutions to problems experienced on a day-to-day basis.
Over the last 18 months, numerous startups have developed blockchain-based ideas to address gaps across sectors. In the social sector, such startups include the family-smart contracts platform, URAllowance, online customer satisfaction platform, IOU, and social interactions platform, ONe Network.
In the business space, blockchain-backed solutions include digital asset portfolio management platform, BlockVest, hedge fund trading marketplace, BQT, web mining optimization platform, Gath3r, mortgage lending and investing platform, HFC Coin, and the crypto coupon advertising marketplace, Qupon.
But is blockchain technology ideal for all businesses? Studies conducted by two firms show it’s not.
A report by Forrester Research shows that companies that have been working towards incorporating blockchain are now scaling down their ambitions, even pulling back. Only 10% of blockchain initiatives launched in the US will remain active by the end of the year, the rest will be abandoned.
Furthermore, the report predicts that the majority of blockchain initiatives will be put on hold while at least 90% of them will not form part of operations in the companies that initiated them. At the same time, a report released by PwC recently shows that blockchain adoption is stalling.
Though there are many companies that are researching and even tinkering with the technology, the report shows that only 15% of such companies have launched live blockchain projects and about 10% of them are piloting blockchain usage. With such statistics, it is critical for businesses to evaluate their need for blockchain technology before they decide to adopt it, according to Andy Ann, CEO of NDN.
He says, “In the case of blockchain projects that incorporate digital assets, like cryptocurrencies, companies need to keep in mind the growth rate of their network users. Blockchain is still a new technology and the world hasn’t fully adopted the idea of digital assets, however this varies by industries.”
Navjit Dhaliwal, CEO of Iagon, advises businesses to consider the motivation behind the decision to integrate blockchain.
He says, “Prior to the integration of Blockchain technology into corporate operations, there are several factors that need to be considered, first and foremost is the motivation for leaning towards the adoption of blockchain tech. It is imperative that all businesses, corporations, and startups alike, look towards fully researching and educating themselves on the numerous facets of the technology.”
Most players in the cryptocurrency space feel that businesses should take the time to determine how suitable blockchain technology is for their operations. Andrei Huseu, CEO of Wealthman, highlights the need to pinpoint the value the technology would bring to businesses as a first step.
He says, “First of all, businesses should clearly understand the value that particular technology brings to customers or business owners. Usually, blockchain valuable in solving trust issues, but 90% of companies try to implement blockchain in wrong way or into the processes where the trust is not an issue.”
According to Dhaliwal, companies should be able to ask themselves critical questions before shifting to blockchain.
He says, “While looking beyond your bottom line is the only way to truly realize the powerful capabilities of the blockchain, it is important that you first ask yourself, how will this assist my company in the development of new growth, revenue and consumers, rather than questioning the cost efficiency that it provides. Are you looking to truly innovate your business, or are you solely looking for a cheaper, more secure and quicker process improvement style of technology?”
While acknowledging that viability of blockchain technology for businesses varies from one industry to another, Ann highlights cases where blockchain tends to be more successful.
He says, “There are a number of factors a company would need to consider before deciding if their business is ready and able to handle blockchain technology, it all depends on the industry and the company. Companies most frequently see success when they use blockchain to address issues in industries that already have large amounts of digital users.”
He further advises businesses to understand the cost and time demands of implementing the technology in their businesses saying, “When implementing the technology in a business model, such as the supply chain process, companies need to understand the costs and time it would take to create a network. If incorporating clients or third parties, like shipping companies, it is necessary to complete a network, and ask, are those other business willing to become part of the network?”
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.