What is the future of blockchain?
Video: Gartner survey: Only 1 percent of enterprises use blockchain tech
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According to Gartner, the business value-add of blockchain will grow to slightly more than $176 billion by 2025, and then it will exceed $3.1 trillion by 2030. Gartner does not expect large returns on blockchain until 2025.
Most current uses of blockchain are not disruptive, because, according to Gartner, "the majority of organizations that undertake blockchain projects find it hard to conceive of systems that are outside of their legacy, centralized models (both business models and technology platforms)." Yet a Gartner survey shows that 66 percent of business leaders believe blockchain is a business disruption and have set budgets accordingly; and 5 percent of those surveyed said they will spend over $10 million on blockchain. But a 2018 Gartner CIO survey of 3,000 CIOs from 98 countries found that "only 1 percent of CIOs indicated any kind of blockchain adoption within their organizations."
Must read: Executive's guide to implementing blockchain technology
According to IDC, worldwide spending on blockchain solutions is forecast to reach $2.1 billion in 2018, more than double the $945 million spent in 2017. IDC expects blockchain spending to grow at a robust pace over the 2016 to 2021 forecast period with a five-year compound annual growth rate (CAGR) of 81.2 percent and total spending of $9.7 billion in 2021. "The United States will see the largest blockchain investments and deliver more than 40 percent of worldwide spending throughout the forecast. Western Europe will be the next largest region for blockchain spending, followed by China and Asia/Pacific (excluding Japan and China)(APeJC). All nine regions covered in the spending guide will see phenomenal spending growth over the 2016 to 2021 forecast period with Latin America and Japan leading the way with CAGRs of 152.5 percent and 127.3 percent, respectively," per IDC.
Blockchain spending will be led by the financial sector ($754 million in 2018), driven largely by rapid adoption in the banking industry. The distribution and services sector ($510 million in 2018) will see strong investments from the retail and professional services industries while the manufacturing and resources sector ($448 million in 2018) will be driven by the discrete and process manufacturing industries. In the U.S., the distribution and services sector will see the largest blockchain investments. The financial services sector will be the leading driver in Western Europe, China, and APeJC. The industries that will see the fastest growth in blockchain spending will be professional services (85.8 percent CAGR), discrete manufacturing (84.3 percent CAGR), and the resource industries (83.9 percent CAGR). -- IDC
According to Venture Scanner, there are currently 1,008 blockchain startups that have raised $6.2 billion venture capital funding, across 333 funds and 75 countries.
In case you are new to blockchain, here is a quick reminder: What is blockchain?
To learn more about the industry's point of view on blockchain momentum by industry, adoption accelerators, enterprise benefits and challenges, I connected with one of Boston's top venture capital firms focusing on new emerging technologies, including blockchain.
Michael Skok is a founding partner at Underscore VC and a venture partner at Harvard Business School. Skok is a serial entrepreneur of more than two decades, turned investor for more than a decade, and now, he is also mentoring, continuously learning, and teaching entrepreneurship.
Skok is one of the founding partners of Underscore VC. Prior to that, he was a GP at North Bridge Venture Partners. He has created ventures with founders and invested in many great entrepreneurs who went on to build billions of dollars of value focusing on large market opportunities such as ecommerce and big data. Skok focuses on breakthrough technologies and disruptive business models such as SaaS, cloud, open source, and blockchain. He is the founder of the Future of Open Source and Future of Cloud Computing industry collaborations that gave rise to the broadest industry wide surveys of their kind.
Prior to becoming an investor, Skok was an entrepreneur and CEO in the software business for 21 years. Skok founded and recruited teams that attracted over $100 million in private equity for investments in multiple software companies ranging from enterprise big data and analytics (AlphaBlox -- acquired by IBM) to security and consumer products (Symantec UK -- NASDAQ:SYMC) while spanning the Workstation, PC, Client server, and Internet eras.
Read also: The enterprise shows little interest in blockchain technology: Gartner
Here are some of the insights received from thousands of data points and conversations with the business and thought leaders, founders, technologists, economists, academics, and educators who gave their opinions for UnderscoreVC's future of blockchain survey.
Blockchain is in its infancy: Respondents believe the current state of the Blockchain Era is comparable to June 1997 during the Dot Com Era. Given the historical similarities, blockchain is still missing most of the key infrastructure and tooling to build applications, let alone good user experiences. Here's a great post about understanding timing, historical perspectives, and the importance of re-imagining, innovating, and creating the new trusted infrastructure that blockchain provides.
The promise of blockchain is enticing: People believe that the promise of blockchain is to provide decentralized control, trust, transparency, enable new business models, and ensure data resiliency will accelerate its adoption.
Enterprise blockchain adoption: Enterprises are excited about the promise of blockchain, and many like IBM are actively taking leadership in the space.
- 69 percent of respondents believe that the enterprise has very low ability to implement blockchain technology in their organization.
- 75 percent of people believe that private blockchains will accelerate adoption.
"One of the most surprising results was that 78 percent of people believe that enterprise adoption was going to help accelerate overall blockchain adoption. It's actually a finding in the survey that we disagree with. And in at least one sign of why -- 69 percent believe the enterprise has very low ability to implement Blockchain.
Building on our 16 years of investing experience, surveys, and understanding the way Open Source and Cloud Computing have been adopted, the enterprise has generally been a laggard. We expect the same will be true of blockchain. We believe that the public blockchain will be the area of innovation, and the way that will come about is with startups." -- Michael Skok
Blockchain will disrupt countless industries: Top 10 sectors most susceptible to disruption by blockchain within the next five years:
- Financial Transactions
- Micro-payments
- Banking
- Supply Chain
- Crowdfunding
- Securities Trading
- Voting
- Healthcare
- Cloud Storage
- Virtual Property
Respondents identified 35 unique industries that they believe will be meaningfully disrupted in the next five years.
Top five factors accelerating blockchain adoption:
- Data Resiliency
- Transparency
- New Business Models
- Trust
- Decentralized Control
Top five factors hindering blockchain adoption:
- Speculation
- Stage of Development
- Unproven Value
- Regulation
- Scalability -- 78 percent of people believe it will take at least 3 to 5 years for scalability to be resolved.
"The No. 1 problem people see as hindering blockchain adoption is scalability. 78 percent of people believe it will take at least 3 - 5 years for scalability to be solved. When asked how scalability will be solved on the protocol level, the responses were indecisive, showing there are still more questions than answers." -- Michael Skok
"The survey found that blockchain based applications are difficult to use. With Bitcoin and other cryptoassets providing the first application-level use cases on the blockchain, they've had the most focus to make them useable. 9 percent of people have found the difficulty an inhibitor to using wallets. While custodial exchanges make holding cryptoassets easy, given the quantity of hacks, 62 percent of people are uncomfortable with exchanges holding their cryptoassets." - UnderscoreVC Future of Blockchain Survey
Hundreds of companies are addressing the blockchain opportunities: Respondents recognize incumbents like IBM doing interesting things in the space and see some of the top up-and-coming companies as:
dApps, ICOs and Tokens: Respondents were split 50/50 when asked if every dApp will need its own individual token. According to Skok, this area of the survey was the most debated topic.
- While 60 percent of people believe the number of companies attempting a token offering in 2018 will be greater than 2017, only 17 percent of people believe ICOs will replace VC.
- One in three survey respondents had purchased tokens as part of an ICO. Of them, 56 percent are still holding their tokens and only 6 percent have traded back into a fiat currency.
- 61 percent of respondents believe there will be more than 10,000 cryptocurrencies within 10 years.
According to Skok, the need for tokens was a hot area of debate. Does each dApp need its own token? The answer is not clear at this time. Skok notes that the bubble with ICOs and tokens highlights a need for clearer regulations.
There are thousands of data points in this survey that are not highlighted in this post. My conversation with Skok can be summarized by the following: We are super early, more research is required on blockchain infrastructure -- investing on improving existing blockchains versus newly designed blockchains, and consensus approaches for distributed apps and tokens.
I plan to continue the conversation with Skok and UnderscoreVC's extraordinary community of blockchain experts in upcoming interviews on DisrupTV.
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