Why the hype surrounding blockchain may die down this year

The hype surrounding blockchain technology will fade this year as the cost and complexity of implementing solutions based on the digital ledger technology becomes apparent, according to a report from data analytics firm GlobalData.

The research-based report said that many of the early blockchain projects will either be quietly shelved in favour of more traditional approaches or they will evolve in a way which reduces their dependence on blockchain technology.

Blockchain is an electronic ledger of transactions that is maintained in blocks of records. The decentralised ledgers are jointly held and run by all participants In theory, cryptography-based security makes them tamper-proof.

"We are entering a new phase in the evolution of blockchain technology," said Gary Barnett, chief analyst, technology thematic research at GlobalData. "Over the next 24 months the more outlandish claims made by proponents of blockchain will be debunked and technology providers and users alike will begin looking with clearer eyes at the narrow but significant set of use-cases where blockchain and distributed ledger technology can add real value," 

The report also classified the technology's use cases into three sub-zones under asset registries, financial services platforms and industrial platforms.

It said that the industry was being shaped by a host of startups, platform providers and consortia on the supply side working with such customers as Goldman Sachs, Santander and Credit China FinTech in the financial services sector and IBM, Microsoft, Intel and Telstra in the technology sector. The report said that the British, Swedish and Singaporean governments have embraced blockchain technology too.

Barnett also said that blockchain needs co-operation and hence the most successful blockchain initiatives will be developed by consortia that combine technology providers and industry participants who are willing to invest in the process transformation and integration.

“Internal blockchain projects are the most likely to fail; there is no use case for blockchain within a single organisation, the value of blockchain lies in its ability to provide a transaction platform for multiple, disparate, parties,” he said, adding that big consulting firms that can combine technology capability with consulting will be the medium-term winners.

In addition, the report said that most of the key players in the next phase of blockchain will be the technology-savvy systems integrators and the big software providers who participate in established eco-systems.