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The bubble bursts: A necessary stage in Blockchain’s maturity

Main visual : The bubble bursts: A necessary stage in Blockchain’s maturity

In the first of two blogs, Frederik De Breuck, Head of Fujitsu’s Blockchain Innovation Center in Brussels, Belgium, reflects on news that blockchain adoption in enterprises is in retreat – for the time being.

I was quietly relieved to read a recent report from Bloomberg about a slowdown in the corporate adoption of blockchain. As analyst firm Gartner long ago recognized, new technologies always seem to attract massively inflated expectations – and it is only once these have been brought down to earth that meaningful progress and maturity start to emerge place.

Therefore, bursting the blockchain hype bubble is actually a good thing – it means the reality is starting to outshine the hype. Since Bloomberg cites a research paper from another analyst firm, Forrester, backed up by statements from Gartner, we can most likely safely assume it reflects what’s really going on out there, rather than a few scaremongering anecdotes stitched together for the sake of an eye-catching or provocative headline.

When it comes to corporate use of blockchain, which is also known as Distributed Ledger Technology (DLT), “the disconnect between the hype and the reality is significant – I’ve never seen anything like it… in terms of actual production use, it’s very rare”, says Gartner’s Rajesh Kandaswamy, as quoted by Bloomberg.

No place for guinea pigs

What’s causing this case of DLT indigestion?

The article says in-house pilot projects are being ditched due to issues with performance, oversight and operations. Those that do get off the ground tend to be small-scale Proofs of Concept (PoCs), as CIOs are, unsurprisingly, loath to bet the farm on DLT guinea pigs at this stage.

In this blog, I’m taking a look at performance, the first of the factors cited by Forrester for blockchain bombing. I’ll focus more on supervisory and deployment issues in a follow-up post.

Let’s roll this back a moment to remind ourselves why the blockchain excitement kicked off in the first place. Stripped back to its essentials, DLT is a database technology that enables information sharing with high transparency and reliability. It can’t be stressed enough that it is, however, not just about sharing data but about shared control over data.

That’s a big deal, as the proliferation of new digital technologies such as IoT means that businesses are generating large – no, make that unbelievably vast – volumes of data, some of which must be shared outside the business to achieve reasonable business benefits within the appropriate security envelope.

This is a trend that is only going to grow as companies increasingly work closely within entire ecosystems (better known as ‘business networks’. Exchange of a selective set of information on any scale brings security concerns.

However, the nature of DLTs makes them well-suited to handling these types of transactions. By using a DLT network and software with appropriate algorithms, it is possible to build a data exchange network for the appropriate information across multiple organizations and enable all participants to share data safely, securely and rapidly, using references, where relevant, to the complete datasets.

With increasing data processing and sharing, the need for faster processing of transactions is a must-have for appropriate enterprise use. However, performance remains an issue with certain DLTs.

Bitcoin, which still has the greatest popular visibility, is a ’permissionless‘ DLT – where participants are probably unknown to each other – in which a ‘proof of work’ (PoW) is required to validate a transaction. The problem is that each PoW takes at least 10 minutes, and often significantly longer.

Even without this bottleneck, the maximum transaction rate achievable with Bitcoin is around seven transactions per second – something that is far too slow for real-time use in most business applications.

Although uprated versions of Bitcoin are in the pipeline, this limitation has spurred numerous new DLTs both in the permissioned and the permissionless spheres, such as Ethereum, Ripple, Steem, IOTA and Hyperledger, where faster transaction rates, as well as more diversified applications, have been key drivers.

Fujitsu, for example, participates in Hyperledger, which is managed by the Linux Foundation, alongside organizations such as Airbus and American Express. We are a premium member of the Governing Board and a technical steering committee member of Hyperledger Fabric, one of six platforms currently under the Hyperledger umbrella.

It’s a platform for building distributed ledger solutions with a modular architecture that delivers a high degree of confidentiality, flexibility, resiliency, and scalability. One of Fabric’s key attributes is performance: because it is a ‘permissioned’ network, all participants are known to each other, simplifying the consensus mechanism significantly and allowing the maximum transaction rate to go beyond 1,000 per second.

Stepping back, everyone can readily understand why Forrester picked up enterprise reserve about DLT at this stage in the technology’s development.

The first flush of enthusiasm for blockchain was based on its implications for increased security and trust in electronic transactions and, in some cases, this went as far as destroying and rebuilding the entire economic fabric, but performance quickly became a discussion topic when enterprises tried to build larger scale applications.

The solutions to this issue, such as currently offered by Hyperledger Fabric, are becoming reality and it is my expectation is that we’ll soon see robust applications being built where processing speed is no longer a breaking point in development and adoption.

Focusing on the business relevance of blockchain remains a key part of our recently-launched rapid productization framework which enables the development of a Minimum Viable Product (MVP) in just five days. With this service, our goal is to take out the hype and focus on identifying the proof of business that makes a blockchain project relevant. Without this, it’s hardly surprising that some blockchain projects fail.

We are seeing a lot of interest in this service – you can find out more here. One of the key advances we are focusing on is how new DLTs makes building applications easier, in terms of both creating consensus among users and in building the applications themselves.