The Narratives Projecting Success for The Blockchain Industry In 2020

After the hype that followed the emergence of blockchain in the mainstream investment landscape in 2017 through 2018, the industry went back to basics in 2019 when reality dawned that the technology was far from being able to deliver on a majority of promises heralded as potential applications. However, during this somewhat bleak period, there emerged new narratives that have rekindled blockchain’s prominence in the global market and have set it up for success in 2020.

In this article, I will explore blockchain’s main struggles and highlight some factors that might spur the technology to reclaim its status as a serial disruptor.

Blockchain: The Limitations of A Limitless Technology

The narrative that brought blockchain to the fore examined its major functionalities and theoretically imagined how they would improve existing systems in traditional industries. Blockchain was the ultimate innovation on paper – a technology that had all the answers to age-long problems plaguing different sectors. You must have encountered one or two publications listing the industries that blockchain was poised to disrupt while citing the technology’s foray into the financial sector as an indicator of its inherent capacity to eliminate expensive and unnecessary processes.

As expected, this narrative evoked hysteria not seen since the internet craze that swept across the globe in the 20th century. Everyone wanted a piece of the action. And this was evident in the explosion of blockchain investment, which saw heavy experimentations of blockchain technology in diverse applications. While blockchain’s disruptive nature was the prevailing sentiment, some believed that the technology was only trying to look for problems where there were none.

The blockchain movement encountered snags during experimentation, as it became apparent that the technology ought to resolve some issues before it could enable scalable and efficient products. Below are some of the factors that have limited the growth of the blockchain industry.

Blockchain Is Still Immature

There is no doubt that the blockchain industry has been mostly disappointing, especially if we look at it from the lenses of the huge expectations brought about by the above-mentioned narrative. The technology is yet to fire on all cylinders, as issues like interoperability, scalability, privacy, and so on continue to plague its efficacy. To properly appreciate the scope of blockchains immaturity, I have decided to discuss these deficiencies at length.

Usability

There is a reason why blockchain is still viewed as a technology only suitable to a technically sound demographic. Unlike blockchain, AI technology has begun to incorporate simple implementations, as utilizing the technology does not require users to understand coding or an unconventional process where they ought to adopt special tools or software to enjoy the benefits of Artificial Intelligence. A lot of people are unaware that they use AI daily. It might surprise you to know that some Facebook users are not aware that face recognition is an implementation of AI technology.

Unfortunately, blockchain is yet to attain the level of maturity found in other disruptive technologies. However, in all fairness, AI has had ample time to reach where it is today. Experts have to establish user-friendly processes for adopting, utilizing, and integrating blockchain.

Scalability

This issue is perhaps the most publicized challenge of the current models of blockchain networks. Although one might argue that this assertion is invalid, seeing that several blockchain solutions can rival the speed of conventional systems, it is, however, a known fact that the most dominant blockchain networks are still lagging. Take Ethereum for instance. The blockchain network is the most popular ecosystem for blockchain-based apps, and yet, it is still boasting a languid transaction speed.

Interoperability

The prevailing framework for blockchain networks does not support interoperability, which is also a worrying development. For the technology to achieve mainstream success, it is clear that experts must look for ways to eliminate the siloed structure of the blockchain ecosystem and implement protocols that would allow two or more blockchains to share resources effortlessly.

Security

Blockchain is marketed as one of the most secure ways of storing money and sensitive information. Ironically, security remains a recurring issue in the blockchain industry. Recent reports detail how an individual capitalized on the perceived weaknesses of bZX fulcrum exchange, a Defi product utilizing blockchain for the trading of crypto assets, and stole Ethereum worth $350,000. In response to this news, Tim Oglive, CEO of stake, surmised the incident and explained that it was a glaring indication that Defi was still at the early stage.

Tim explained:

“DeFi is an experiment… I think this is the maturation process for DeFi. You have to get battle-hardened, and if somebody puts out a product that has vulnerabilities, someone else is going to exploit it and that’s part of the system getting stronger.”

Privacy

Permissionless and public blockchains incorporate an immutable and open ledger, whose functionalities contradict privacy laws being enacted in some regions. It still not clear how privacy and blockchain will coexist, considering that there are no standards as regards the accepted level of protection that users ought to access when utilizing blockchain solutions.

The Concept of Blockchain and Its Existing Products Challenge the Existing Structure of Governance and Regulations

Blockchain regulation is one of the buzzing topics in the industry. Although the concept of blockchain facilitates a means to evade restrictions and bypass jurisdictions, it is, however, uncertain that the industry will achieve projected successes without regulations. The values of blockchain are different from the fundamentals, which define our society. Blockchain wants to strip the privileged of concentrated power and distribute it to you and me, while regulators and governing entities want to retain their control over wealth distribution.

Commodity Futures Trading Commission’s former chair, Chris Giancarlo, in an interview with Don Tapscott, CEO of The Tapscott Group, reiterated this sentiment when he stated:

“The late 20th Century digitization of information through the Internet took place in a regulatory “light” zone due to the US Constitution’s protection of speech from Federal government interference. Conversely, the early 21st-century digitization of value is taking place in a regulatory “heavy” zone because of the long-established authority of US state and federal governments to protect property rights, including those of consumers of financial services (banks, trust companies, and other financial service providers have been subject to both state and federal regulation for decades). As a result, the practices that guided the digitization of information (i.e. “Don’t ask permission, ask forgiveness”) when used for the digitization of property rights are particularly provocative to the established legal and regulatory order, as we have seen with initial coin offerings.”

Blockchain Has A Bad Reputation

Blockchain has had to weather different attacks on its reputation as a viable technology. Some of these barrages cite the proliferation of scams adopting the image of new and attractive technology to defraud unsuspecting investors of their funds. Also, it wasn’t until recently, particularly around the period that the effect of the bear market was at its peaks, that blockchain-based firms began to ditch siloed frameworks for business models that encouraged collaborations.

What Are the Indicators That Blockchain Is Positioned to Circumvent These Challenges?

Having listed the limitations of blockchain technology, this section will discuss the developments that indicate that blockchain is experiencing maturation.

Participants Are Focusing on More Realistic Applications

Before the blockchain movement stalled, it seemed like everyone was trying to introduce one or two elements of blockchain technology into existing systems, regardless of how improbable they looked. Currently, investors and developers have moved on from the stage of hysteria, as the industry has finally taken the time to understand the technology and focus on implementing realistic blockchain applications.

David L. Shrier, a blockchain expert, noted this commendable development and projected that it will help the blockchain industry prioritize meaningful and achievable use cases. David wrote:

“A challenge I have found over the past several years of educating blockchain entrepreneurs in over 130 countries in my work at MIT and University of Oxford is the need for more compelling use cases. Not just any use case, not just any scenario where distributed ledgers might be applicable, but natural uses cases where blockchain is clearly a superior platform versus other database technologies. I am hopeful 2020 will bring a more acute perspective from the industry on where blockchain is best used and scaled.”

The Institutionalization of Blockchain

Even though the Libra project has lost its appeal in the aftermath of the regulatory backlash it generated, the proposed solution gave us a glimpse of the possibilities embedded in blockchain technology. Blockchain in its purest form negates centralization. However, there are different ways organizations can capitalize on the technology’s borderless feature to create global products. In the case of Libra, Facebook wants to leverage its global reach to build an alternative to the current global financial system. As for Nike, it wants to put an end to counterfeits and solidify its position as the world-leading shoe brand. To UEFA, blockchain presents a way to have more control over the pricing and distribution of tickets. When describing the reason for introducing this initiative, UEFA stated:

“Supporters who purchase ‘Follow my team’ tickets will receive their mobile tickets only once their team has qualified for a specific match. The ability to deliver mobile tickets to fans close to matchday will considerably enhance the fan journey, as fans will no longer be required to visit ticket collection points to exchange ticket vouchers.”

The Emergence of State-Backed Cryptos

It is no more news that the introduction of Libra has propelled China to fast track its plan for a central bank digital currency CBDC. Certainly, China’s move to completely phase out the influence of the US dollars on its economy will spur the United States to initiate a similar plan to digitize its local currency via blockchain. Though the effect of this ongoing scramble for state-backed cryptocurrencies is unknown, it is, however, safe to say that it will put blockchain under the spotlight in 2020.

Simon Chantry, the co-founder of Bitt.com, argued that countries will have no other choice but to embrace the coming of CBDCs. Chantry explained:

“In 2019 we saw many Central Banks investigating and, in some cases, testing various blockchains and distributed networks for use in the financial system. While initially hesitant to move efforts forward past the test phase, the emergence of competition in the form of private-sector digital currencies and ‘stablecoins’ has prompted Central Banks worldwide to evolve their own technology strategies. I suspect we will see more tangible progress on Central Bank-issued digital currencies in 2020, as Central Banks seek to leverage many of the technological advancements that have taken place over the past decade to provide their countries and economies with advanced, secure, and efficient payment systems.”

The Influx of Blockchain Regulation

The growing importance of blockchain will usher in the unprecedented regulatory spotlight on the technology. Regulators will want more oversight on the activities of blockchain products, particularly in cases where decentralization is in full effect. This assertion holds for the emerging Defi market, which promises improved financial systems without all the regulatory debacles prevalent in the conventional financial sector. Although 2019 might have gone down as the year where Defi caught the attention of mainstream users, 2020, on the other hand, is looking ever more likely to go down as the year we will witness the push for Defi regulations.

Likewise, I expect the crypto regulation conversation to yield more results, as regulators finally coming to terms with the inevitability of the crypto economy. Some believe that the regulation of blockchain and its associated technologies does not conform to the values of the technology. In reality, the technology can’t attain mainstream success without the inputs of regulators.

Stephen Stonberg explains this best when he wrote:

“Blockchain and cryptocurrency will only reach that market – the only viable route to global scale – if the industry does what it has started to do more recently: harness the power of state and private institutions to create the accessible products, regulatory framework and capital flows that are the foundations of a trusted, functioning market. For blockchain to fulfill its potential as a transformative technology, leading the shift towards a world where digital assets are the new normal, it requires the certainty and infrastructure that only established institutions can provide. Mainstream financial markets must obey the law, they must follow regulation and they must provide a secure home for capital.”