As major cryptocurrency prices flounder to multi-month and, for some, all-time, lows, the distributed ledger technology that underpins virtual currencies has come under fire.
Blockchain technology allows counterparts and organizations to record transactions on a decentralized permanent ledger that are immutable and transparent. To crypto bugs, the technology is more efficient and secure than current databases and is set to disrupt current practices, claims that have, for the most part, come without challenge.
However, for all the hype and promise, a research group has found that the opaque technology is anything but transformative and far from disrupting current industry practices.
Read: Opinion: Roubini: Blockchain is one of the most overhyped technologies ever
In a joint report for Monitoring, Evaluation, Research and Learning (MERL) Technology, Christine Murphy, social researcher at Social Solutions International and John Burg and Jean Paul Pétraud, fellows at USAID, found that a host of blockchain-based projects underdelivered.
“We documented 43 blockchain use cases through internet searches, most of which were described with glowing claims like ‘operational costs… reduced up to 90%,’ or with the assurance of ‘accurate and secure data capture and storage,’” they wrote. “We found a proliferation of press releases, white papers and persuasively written articles. However, we found no documentation or evidence of the results blockchain was purported to have achieved in these claims.”
To date, blockchain has escaped the criticism poured on cryptocurrencies. In fact, a number of high profile names in finance have openly praised the technology, while denouncing the coins that require a blockchain to operate on. That includes Steve Strongin, head of Goldman Sachs
Investment Research, and JPMorgan Case & Co
CEO Jamie Dimon.
Read: Most cryptocurrencies are heading to zero, says Goldman analysts
But the MERL report highlights the concerns many have with the nascent industry. “We fared no better when we reached out directly to several blockchain firms, via email, phone, and in person. Not one was willing to share data on program results, MERL processes, or adaptive management for potential scale-up,” they wrote.
Read: Survey finds a surprising barrier to blockchain adoption
Still, for some large-scale firms, blockchain projects are proving anything but outright failures. At the forefront is IBM
It created the first commercially available blockchain technology offering with the IBM Blockchain Platform.
To date, the American multinational company has experimented with upward of 500 projects, according to Ramesh Gopinath, VP, of Blockchain Solutions at IBM.
Gopinath told MarketWatch a lot of smaller blockchain-based projects fail because they don’t understand the time required to get a project off the ground. For instance, IBM’s latest blockchain initiative, IBM Food Trust, was a project that began more than two years ago.
“If you don’t work through all the major steps [governance, scalability, interoperability and confidentiality], you’ll end up failing,” he said.
It’s a sentiment shared by the research group: “Blockchain firms supporting development pilots are not practicing what they preach—improving transparency—by sharing data and lessons learned about what is working, what isn’t working and why.”
Nevertheless, if the failure rate of blockchain-based projects is a trend rather than a blip, it may have provided a greater lesson in 21st-century technology.
“But, in the end, it may turn out that the real value of blockchain wasn’t the application of the technology itself, but rather as an impetus to question what we do, why we do it and how we could do it better,” the research team said.
Read: Opinion: Bitcoin is close to becoming worthless
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