As the price of Bitcoin (BTC) continues to hit all-time highs, the hype around enterprise blockchain adoption may seem to be diminishing.
Enterprise blockchain started gaining traction in 2017 when the price of Bitcoin reached nearly $ 20,000. During this time, major companies, such as IBM, JP Morgan and Walmart, announced plans to integrate blockchain networks into business processes such as supply chain management. A number of innovative startups have also started building their blockchain networks for enterprise use.
One such startup was Insolar, a company founded in 2018 with the goal of providing transparent and efficient business networks to enterprises through blockchain systems. Peter Fedchenkov, chief revenue officer and co-founder of Insolar, told Cointelegraph that the company initially started out as an Ethereum ERC-20 token aimed at operating a decentralized grocery market. However, Fedchenkov realized that the Ethereum blockchain was unable to facilitate this project, so the company moved to developing the enterprise blockchain.
Initially, Insolar was successful. According to Fedchenkov, the company signed an agreement with a Fortune 500 customer in 2019 to implement Insolar’s “Assured Ledger Technology”, a framework that provides interoperability, nodeless deployment and other capabilities designed to facilitate corporate blockchain implementation.
Nearly two years later, Fedchenkov shared that Insolar has halted operations due to what he believes is a lack of blockchain adoption for enterprises:
“During our first year, we noticed that everyone was excited about blockchain and what it could do in some business operations like supply chain management. But what we’ve seen recently is that the blockchain is falling short of expectations.”
Fedchenkov explained that the COVID-19 pandemic was a major cause of delay in adopting blockchain for enterprises, noting that proof of concept budgets have been cut. In turn, Insolar – which was once a promising blockchain startup with a wide range of partnerships with companies such as Uranium One and universities such as the University of California, Berkeley – has been unable to raise additional funding. Fedchenkov said: “We tried unsuccessfully to hold a round of venture capital, but given the current climate and sentiment around the corporate blockchain, we were unable to find backers.
Fedchenkov also noted in the company’s blog post that “blockchain technology spent 2020 lying in a trough of disappointment along the Gartner Hype Cycle.”
The blockchain enterprise is not dead
But is this really the case for all enterprise blockchain companies? Martha Bennett, Vice President and Principal Analyst at Forrester, told Cointelegraph that her optimistic remarks from the mid-2020s remain valid:
“The pandemic has shaken up both start-ups and the company’s in-house ventures. Some have lost budget and funding, but others are thriving. I speak regularly with startups that have continued to receive additional funding through 2020, and which in 2021 are starting to receive calls from potential investors. ; I’ve seen some double volume during 2020. ”
According to Bennett, the blockchain startups that achieve success regardless of the epidemic are located in different industries, each of which cater to specific use cases. While these companies differ, Bennett explained that they each share certain characteristics.
First and foremost, Bennett noted that these companies are not leading with “blockchain,” noting that organizations, in general, have moved past the noise of buzzwords and are more focused on solutions and outcomes:
“Having a clear value proposition and a statement of benefits is essential. Some of these startups don’t even mention that they have a blockchain component in their pool during the sale unless specifically requested.”
On Bennett’s view, Fedchenkov stated that one of the mistakes Insolar made was focusing mainly on the technology and intellectual property around it. He noted that the company should have discussed actual use cases and business applications with clients.
Additionally, Bennett believes that today’s successful companies typically offer solutions where the blockchain is only one essential part within a deeper and broader set. Other technologies, such as artificial intelligence or data analytics, are also needed to deliver the full value proposition.
Although Insolar built a groundbreaking proposal, Fedchenkov shared that companies are not yet ready to adopt a blockchain-based solution due to the lack of proven value and complexity of the technology.
Finally, Bennett explained that companies interested in blockchain-based solutions already understand what an “enterprise class” means in terms of size, security, maintenance, etc. Additionally, these companies are aware of their own industry-specific regulatory mandates and requirements. Prospective clients.
Product market suitability is clearly a critical component to the success of enterprise blockchain companies. Unfortunately, Fedchenkov noticed that Insolar was popular from the start, as the company attempted to pursue multiple markets (supply chain, financial services, energy) simultaneously. “Even saying,“ I focus on the supply chain is not enough. ”You have to be more specific.“ This was our mistake, because we wanted to cover the entire market, ”Fedchenkov said.
Are blockchain private networks doomed to failure?
While some institutional blockchain companies that boast of private permission networks seem to be struggling, solutions that include open public networks appear to be on the rise. According to Vidchenkov, Insolar was a hybrid solution that combined private and public networks. Although the company is closed, he remains optimistic that in the next 10 years, companies will start adopting generic blockchain models.
While it’s hard to predict, Paul Brody, global blockchain pioneer at Ernst & Young, told Cointelegraph that EY is on track to grow the enterprise blockchain business by more than 100% this year. Brody further noted that the company has seen a significant drop in demand for private blockchains:
Clients demand generic blockchain solutions based on open standards, and they are looking for solutions that have a future roadmap in an ecosystem. A good example of this is product traceability – which is a very high demand – but large users are thinking beyond just traceability towards inventory management, supply chain management and supply chain finance. “
When asked why some companies are struggling in the enterprise’s blockchain space, Brody explained that the private blockchain has a relatively weak value proposition, noting that it is difficult to build a scalable ecosystem with many participants.
On Brody’s view, Fedchenkov stated that one thing he learned from Insolar is that it is difficult to sell a blockchain solution to the different companies that need to participate. “Blockchain is not necessary for one company only, but for many, and this makes it difficult to sell because these companies have to change their business operations,” he said.
Despite these concerns, Bennett made it clear that she does not see a significant shift from private to public networks today from an enterprise perspective. She also noted that private blockchain networks have not become irrelevant:
“In principle, companies are not opposed to this concept but do not intend, in general, to deal with unauthorized public networks so that there is less volatility and greater technical maturity. But there is definitely a more nuanced approach to architecture. For example, you can have it. Your ledger on the blockchain is private but use the public blockchain to gain consensus. “