74 percent of global blockchain-savvy executives now say there is a compelling case for adoption of blockchain according to a latest survey by Deloitte that surveyed 1,000 executives from seven countries and across nine industries/sectors.
Further, majority of firms are moving forward with adoption of the technology, with 34 percent of the surveyed respondents saying their firms are already having some blockchain system in production and 41 percent saying they expect their organizations to deploy the technology within the next 12 months.
The survey indicated that traditional enterprises are putting more resources behind blockchain than they had been in order to improve efficiency and develop new business models and revenue sources. 40 percent of the respondents said their firms will invest $5 million or more in blockchain in the coming year.
Deloitte says that blockchain is being adopted in legacy banking systems including the well-established ones who are now developing "more sensible, pragmatic business ecosystem disruption" as a shift of attitude towards blockchain. The firm say that significant traction will be realized as more forms adopt the technology and as its cost savings, competitive advantages, and ROI benefits become more pronounced.
The survey, which reveals the direction where the technology is headed, says that the executives see the technology as having great potential to reinvent processes across the business value chain. Deloitte said that although the technology is rolling out in a more moderated fashion than expected when this year's stats are compared to 2016 stats, the adoption remains promising.
The firm said in the survey that based on their assessment of the technology's adoption figures/rates now and in three years to come, they "strongly believe that organizations need to evolve their thinking around the technology." Leading the onslaught are startups or emerging disruptors or those that "entered their respective industry segments as startups" and now grown to a position where they can now disrupt larger players in their markets.
"However, the only real mistake we believe organizations can make regarding blockchain right now is to do nothing. Even without a completely solid business case to implement, we believe that organizations should at the very least, keep an eye on blockchain so that they can take advantage of opportunities when they present themselves."
The executives surveyed have excellent-to-expert knowledge of the technology and their responses show that there is huge interest and investment of the technology in a wide range of use cases. The 2016 survey indicated that 40 percent of surveyed senior executives still have little or no knowledge about blockchain. More than a quarter viewed blockchain as a top-five priority for 2017.
The survey which was carried out in Asia Pacific, Canada, Europe, Middle East, and Africa (EMEA) had 103 respondents in Canada, 284 in United States, 103 in Mexico, 150 in U.K., 132 in Germany, 205 in China and 76 in France. 23 percent of respondents work in financial services firms, 18 percent in technology/media/telecommunications, 14 percent in consumer products and manufacturing, 11 percent in health care, and 7 and 6 percent in oil and gas industry and automotive respectively.
Adoption rates differ from country to country
Still on adoption of blockchain, PwC released another study yesterday revealing that 84 percent of respondents (who hailed from Australia, China, Denmark, France, Germany, Hong Kong, India, Italy, Japan, Netherlands, Singapore, Sweden, the UAE, the U.K., and the U.S.) have blockchain initiatives in their firms, with 25 percent having fully live blockchain implementations or launched pilot projects.
According to this study, the U.S. and China (29 percent and 18 percent respectively) are the leading markets for blockchain development but the center of influence will shift to China (30 percent) from the U.S. (18 percent). China is also progressing in developing the technology and the Ministry of Industry and Information Technology in collaboration with Internet service provider Tencent Holdings published a report on blockchain in financial services.
The study said that blockchain will enhance “the transparency of financial transactions, strengthen the flexibility of system operation, and automate processes, thus affecting the record keeping, accounting and payment settlement methods of financial services.” Other countries notable include Australia, Japan, Hong Kong, Denmark, India, and U.K.
Continued adoption is itself a huge bet for global financial systems as for any single oganization globally
Market intelligence firm Juniper Research released survey results earlier this month showing that financial firms can save up to over US$27 billion on cross-border settlement transactions before the end of 2030 if they adopted blockchain. Blockchain would see them reducing the cost by over 11% on the basis of on-chain transactions. The research say that blockchain adoption should see banks saving up to 50 percent of existing costs within a few years.
The survey results reveal that the savings would increase from an annual figure of around under US$1 billion per year until 2024 and US$8 billion per year until 2027 to US$27 billion per year by 2030.
It has been unclear for many banks how to adopt or implement the technology, and the survey indicates exactly the areas where banks would realize cost reductions by adopting blockchain, including in treasury operations and compliance. Some departments would obviously realize better savings that others. For instance, automation of money-laundering checks by deploying blockchain would lead to cost reductions of up to 50% within a couple of years.
The survey also alluded to the fact that most banks will obviously not overhaul legacy systems into blockchain overnight, but like other technological adoption and changes, the adoption would take place gradually. Therefore, as a consequence, these firms would also expect gradual cost savings as adoption increases. It says that efficiency enhancements as a result of blockchain deployment will also benefit other industries related to blockchain including food export trade by cutting costs associated with fraud by almost half within a period of 12 years.
Further a report by IHS Markit projected that global blockchain business would grow from US$2.5 billion in 2017 to reach a figure of US$2 trillion in 2030. The research agreed that the financial sector would be one of the major beneficiaries of blockchain. In other words, since the financial vertical market will be the largest-value market to use blockchain as IHS projects, it is important for adoption of blockchain to increase more in the banking and financial sector currently.
Apart from cross-border settlement transactions, other areas in the financial world that will reap the benefits of adopting distributed ledger technology include collateral management, assets custody, derivatives, claims management, share trading and corporate actions processing. The report said that, for instance, market capitalization of all world’s stock markets is equal to $73 trillion and even small cost savings and efficiency gains can lead to significant business value for companies and industries that decide to introduce blockchain technology.
The PwC research previously mentioned also said that 46 percent of respondents identified financial sector as the leader in terms of blockchain development in the next three to five years. Other sectors with emerging potential for use of blockchain include energy and utilities (14 percent), healthcare (14 percent), and industrial manufacturing (12 percent).
PwC identifies four key areas for focus for any organization that wants to look to take the first steps in exploring blockchain. These include making a business case for adoption (purpose of the initiative), building an ecosystem (need for consortium and collaborations to work on common set of rules to govern blockchains); designing deliberately around what users can see and do; and navigating of regulatory uncertainty since regulatory requirements will evolve over the coming years.
Challenges to adoption are already clearly defined
However, the survey by Deloitte highlights some myriad challenges that may be preventing further adoption. For instance, although a massive 74 percent see potential of blockchain in helping their organization, only 34 percent have initiated deployment in some way because of the underlying challenges.
First, because many enterprise executives are struggling to see that blockchain represents a fundamental change to their business. That explains why majority haven't deployed. Also, 21 percent of global respondents—and 30 percent of US respondents said that they "still lack a compelling application to justify its implementation."
Usually, major technology changes like these would require organizations to take time to learn in addition to massive capital investments. Itself, blockchain is a technology whose catch and innovations are still young and most are in the trial periods. So a good number of organizations would either be compelled to continue with legacy systems awaiting progress and developments in the sphere or adopt a "wait and see" attitude." That spells a huge responsibility for blockchain tech leaders, developers and innovators.
Again, in the Deloitte survey, a full one third of the respondents said they believe that their " current return on investment (ROI) in blockchain technology remains “uncertain.” However, the Deloitte survey focused on the "enterprise organizations implementing legacy-constrained solutions" an not the startups or emerging disruptors hence it does not show how the innovation is affecting each industry sector. An earlier survey by
Another challenge has to do with the problem of adopting blockchain in legacy systems. Many legacy firms are struggling to make it fit in into already existing business paradigm, which is not easy -- there is learning curves and the fact that established legacy business processes present some limitations to adoption. Most of these firms are, according to Deloitte, focusing on what is possible and then dealing with what challenges arise.
Regulatory uncertainty, trust among users and ability to bring a network together are the three major barriers to adoption of blockchain (scoring 48%, 45% and 44% respectively) among businesses according to a study released yesterday by ‘Big Four’ auditing firm PricewaterhouseCoopers (PwC). PwC examined 600 executives in 15 countries on their development of blockchain and opinions about its potential.
Apart from the three, other problems include separate blockchain not working together (41%), inability to scale (29 %), intellectual property concerns (30%), and audit compliance concerns (20%).
Blockchain, which is the technology underlying cryptocurrencies, has been widely adopted last and this year and adoption seems to increase. There is no doubt that it can deliver the massive benefits touted and many firms agree to them. The adoption appears huge for already digital firms compared to "traditional" firms that are still struggling to digitize operations.
Adoption is also number one concern/issue for cryptocurrency leaders
It is believed that the further adoption of blockchain would see more usability for cryptocurrencies and many leaders of cryptocurrency firms view adoption as the next obvious course of action for survival of projects. Ideally, even though prices have gone so low, activity is increasing around adoption issues as institutional money continued to pour. Many feel that current adoption should sustain prices in the future.
Just today, Charlie Lee, the founder of Litecoin LTC spoke to CNBC Money saying that the crypto community needs to shift focus more on crypto adoption and scalability solutions such as Lightning Network and sidechains. He said earlier this August that the "trader type" users were driving the cryptocurrency ecosystem’s price swings with the feeling that their fortunes are rising and falling.
He alluded to the fact that the most important issues and topics now should be technologies underlying crypto, on [crypto] adoption, and on how to [effectively] scale [blockchain networks]. He said while the prices currently reflect volatility, future prices will be a reflection of the success of cryptocurrencies, alluding to the fact that increased adoption would help boost value of cryptocurrencies. The former Google employee and former director of engineering at Coinbase said that he would want more talk around issues on effective scaling solutions such as Lightning Network and sidechains in the upcoming Litecoin Summit on September 14th.
“With the [crypto] prices currently depressed, it’s actually a good time for people to sit down and have their head down [or focused] to get stuff done. This is what I’ve seen [happen] the past bear markets.”
Ethereum co-founder Joseph Lubin said that they are " still witnessing a tremendous surge of interest and activity in the digital currency industry" even as crypto prices slumped considerably. He said that when cryptocurrency prices surged to all-time highs last year, developer activity also increased by “two orders of magnitude.”
He also said that these swings would not stop the ecosystem from growing. He said that cryptocurrency bubbles of the past (each of which was extremely larger compared to the previous ones) were characterized by a tremendous surge in activity like what is currently happening, alluding to the fact that the current activity may also burst up prices later. He said we would “absolutely” see another bubble as investors get excited about the potential of the technology.
Ethereum co-founder Vitalik Buterin has for a long time called on the need to focus on cryptocurrency adoption and only recently indicated that issues such as ETF and funds should not steal the show.
Recently, he posted a number of questions he alluded as some of the most pressing for cryptocurrency community to look at as below:
- “Bitmain and affiliated pools now have ~53% of all bitcoin hashpower. Isn’t this a really big problem?”
- “Why aren’t there any useful large-scale applications yet?”
- “Why are there not yet good solutions to account security? When will the problem of account hacks and thefts be solved?”
- “How can decentralized apps work well even with 5-10 second blockchain latency?”
- “PoW is burning billions of dollars per year, even more than all scams and thefts combined. Isn’t this a big tragedy?”
- “What are the centralization risks in proof of stake?”
- “Given how EOS governance has turned into an epic fail, doesn’t this mean that all on-chain governance including DAOs is fundamentally flawed? How can any DAO deal with bribe attacks, plutocrats and other risks?”
Skepticism verses optimism
However, 39 percent of the broad global sample by Deloitte said the technology is overhyped -- that number is 44 percent in United States, up from 34 percent in a 2016 survey by Deloitte.
Despite the early adopters who are pushing the technology to bring it mainstream, some skeptics "view blockchain as the over-hyped engine behind a volatile and unregulated financial market." Most of the skeptics are outside United States with only 18 percent of U.S. respondents agreeing with the statement that "blockchain was just “a database for money” with little application outside of financial services" compared to 61 percent of respondents in France and the United Kingdom who agreed with that statement.
Otherwise, 59 percent of early adopters say the technology can disrupt and revolutionize their industries, and the overall economy. However, currently, there are very few active use cases they can employ to advance their beliefs.
Among those who feel that the potential of blockchain is over-communicated while its real-worl benefits remain elusive, some blockchain fatigue” is beginning to set in.