Looking back 12 months, our (Prysm's) review of 2019 was naive, to say the least. We cited challenges to a successful 2020 for enterprise blockchain. And, while those predictions were not far off, they were overshadowed by a global shore-up of innovation budgeting, a mountain of layoffs and just about every other form of disaster that might get in the way of a technology revolution.
To say that 2020 was a complete miss for enterprise blockchain would not be accurate. A few new networks and major corporate initiatives were announced, including PharmaLedger, Dole and a group of major Japanese maintenance companies, the Japanese government and IOTA.
But many of these projects barely grew. According to Prysm Group internal data dating back to 2016, the average enterprise blockchain consortium has gained less than one new participant beyond its founding members. There are a few outliers such as Italy’s banking network Spunta. But, for an industry whose primary purpose is to build a network adopted by other future members, this is not an encouraging figure.
Over the last year we have seen consulting firms, technology providers and large cloud players look to better define their strategies for enterprise blockchain in hopes of trying to push the industry past the trough of disillusionment. In 2021, we see major firms at a crossroads between a private versus public approach for enterprise blockchain.
There are key differences in the way major players seek to establish themselves on the private versus public spectrum. As you can see from our chart here, some are betting on a single protocol, some are spreading their bets. The variety of strategies raises the question of who, if anyone, will be the best positioned for 2021?
Most major firms sit on the private end of the strategic spectrum. In the single protocol top left quadrant, we see dominant players such as IBM and R3 with their respective commitments to Hyperledger Fabric and Corda. IBM has seen some internal shifts and a realignment of its blockchain strategy with its cloud offering. R3 has unveiled a series of major partnerships over the year, first with ConsenSys spin-off Kaleido and then with IBM itself.
A third major player, ConsenSys, remains fully supportive of Ethereum, and with the acquisition of Quorum from JPMorgan it has cemented its position in enterprise offering. It now looks well-positioned to be involved in all initiatives surrounding the number two public blockchain network.
In the protocol agnostic bottom left quadrant, Salesforce remains focused on private initiatives for its 150,000 clients and Accenture now has alliances across the full spectrum of available private chains. This has allowed the consulting firm to spread its bets across several competing platforms and hedge against any potential losers.
Deloitte, PwC and KPMG have focused primarily on building proof-of-concepts on private chains for their clients and they have yet to showcase a consortium in full production.
Amazon Web Services (AWS) has taken a user-friendly approach, allowing clients to easily launch networks on Hyperledger Fabric and Ethereum with just a few clicks. While AWS has announced some initial customers with appealing use cases like Legal & General in the reinsurance business and Nestle in supply chain tracking, it has yet to show a multi-party consortium coming together, which will be needed in order to capture the economic value of this network based technology.
Others firms are embracing the public path at the crossroads, like EY with its now full commitment to public Ethereum. EY hopes the network started by Vitalik Buterin, now shifting towards its new proof-of-stake consensus model, will be able to scale and lower its transaction costs, two key hurdles that will need to be overcome in order to position the platform to become the bedrock of potentially billions of enterprise transactions.
Thinking about the crossroads we are at for enterprise blockchain, the burning question is, who will win? Is it winner take all? Probably not. But one would guess there will be losers as well as winners. And with blockchain technology expected to generate $1.7 trillion in economic value in the next decade, these firms will be working to push forward their approach in attempts of grabbing a piece of that trillion-dollar pie.
As uncertainties remain of even what will take place tomorrow in the world of blockchain, it is near impossible to predict how the future will shape up in the year to come. But by looking at the history of internet development perhaps we can find some clues.
We know from this past that it was a single open internet built on the TCP/IP protocol that pushed aside many early attempts of closed networks and went on to dominate. Looking to the right-side quadrants of our chart, does that signal a public approach will win? We think that is likely going to be the case in the long run.
We also know that rather than interoperability of many different systems, one system went on to command the market. If it is one protocol to rule them all, then is it ConsenSys' and EY’s bet on Ethereum that will pay off? If we accept their designation of the largest public network (after Bitcoin) as the TCP/IP of internet 3.0, then perhaps yes, and surely they would be well-positioned to capture the largest slice of the coveted internet of value pie.
Based on our experience working with many of the firms making these decisions, the signals seem to indicate that enterprise networks will, over time, transition to a winning open blockchain network. Looking back to our 2019 review, I remain convinced that demonstrating value, putting in place the right incentives design and an early, adaptable governance will be the three key components to take them there.
UPDATE: This post has been changed to note that Deloitte, PwC and KPMG have worked to build private chains for their clients, not the Big 4, which includes EY.