The reason I was initially interested in blockchain was the promise, I had been told, of this revolutionary technology to bring “the disinfectant sunlight” of transparency to supply chains, and allow companies and consumers to understand the provenance of the products they are purchasing.
I could see how this tech could be a gamechanger. Having studied ‘Blockchain as a Business Strategy’ at a top business school, I was convinced and started to describe myself as a blockchain evangelist – the world needed to wake up to this technology and step into this new trusted future, etc.
Roll forwards 18 months, and thousands of hours of deeper understanding of DLT and Blockchain, and I am no longer convinced that an “Excel spreadsheet in the clouds” is going to really make the kind of impact so many blockchain evangelists might think – but why?
Well, first off, let’s get clear that enterprise blockchain just isn’t blockchain; it’s neither public nor permissionless, and because of that it doesn’t give the level of transparency or openness that we associate with blockchain. But let’s ignore that as it’s not worth getting het up on what some may perceive as me splitting hairs (I’m not). The insurmountable challenge that blockchain for enterprise has can be summed up by the following sentence:
If the asset you’re tracking is not native to that chain, then it’s not feasible to accept the data recorded as “truth”.
Let’s break that down….
The only asset that is native to a given chain is the coins built on top. Bitcoins are “born” on chain, and we can track each one from its birth, and all the wallets that have held them and for how long – this data is available to view through the explorer.
But with the enterprise world the asset of course isn’t born on-chain – this creates a separation between the chain and the asset. In that space things can happen, whether by accident or on purpose, which means that when the chain is supposed to represent a single source of truth for the origination, reality of what the asset purports to be, and ownership of said asset, it simply can’t be relied upon.
Luxury goods provenance… whether it be a watch or a handbag, there will be ways to duplicate, replicate or steal the identifier on the real-world item allowing for fakes to enter the system and be sold.
Food supply chain transparency… at what point does the ‘organic milk’ you’re tracking go on chain? At the cow’s birth? When milked? When bottled? And the milk isn’t going to be tracked, it’ll be the bottle, or maybe just the sticker on the bottle – these things can fall off or be switched out, but the chain will never know and neither will the observer.
Asset tokenisation… buying tokenised gold, land, property etc is a nice idea, but there’s still no way as the “owner” of the tokenised asset to know that you really do own the asset in the real world, just because a ledger says so. Again, things can happen off ledger that you might never know about. What happens if the gold is stolen? The ledger says you still own it. Now what?
This separation between asset and chain, just creates far too much doubt to accept the ledger’s version of truth for many people. This is quite possibly why we are yet to see many real world blockchain projects emerge successfully from pilot.
This is not to say that DLT is completely redundant, but all expectations of its world-changing capabilities have been seriously overstated, and previously I feel that I may have been partly to blame on this exaggeration (albeit naively).
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.