Blockchain & cryptocurrencies: gungho or hell no?

Luno, the digital currency company with offices in Cape Town, had just announced a US$9-million Series B funding round, and its plans to expand to several new European markets, taking its Bitcoin wallet to 40 countries in total.

It seemed like cryptocurrency and blockchain interest might be finally tipping from a fairly geeky quadrant of the internet to something a bit more mainstream.

Until in walked Gartner with a hefty, and probably justified, dose of realism around blockchain during its Symposium/ITxpo last week.

“We have not moved beyond financial services into some of the areas that we thought would have moved faster,” said Don Scheibenreif, VP distinguished analyst at Gartner.

“We’re not seeing the use cases yet, and it’s a matter of risk.”

To be fair, blockchain did make an appearance in Gartner’s top 10 strategic technologies to pay attention to in 2018. Here, in addition to the financial services applications, research VP Brian Burke flagged government uses such as land registries, identity cards, voting and health records as ones to watch.

Burke also spotlighted the potential for the technology in the supply chain, where blockchain-enabled “smart contracts can reduce administrative costs of shipping freight all over the world.”

He raised a red flag about the promise of blockchain exceeding the stage that the technology has currently reached, and said that significant barriers are still in place.

‘Blockchain is going to be a lot more than a new way to pay our bills’

“It is still in the early deployment stages, we’ve got very few large deployments, we’ve got a lot of misguided vanity projects, and a lot of projects where blockchain is being used where it is not really required,” said Burke.

Speaking about the 1000 initial coin offerings (ICOs) that have taken place this year, and subsequent mixed responses to cryptocurrencies from governments around the world, Burke said: “This is really the wild west, who knows where this is going to end up right now.”

Research VP, Leigh McMullen, was enthusiastic about the potential for blockchain technology to replace middle management within organisations: “A trust mechanism and a nonrepudiation mechanism inside an enterprise, that’s a super-clever use case.”

So while the analyst house certainly wasn’t knocking blockchain, it was being very level-headed. “Some of these things take time to pull off,” said McMullen.

The watchword throughout was caution around the maturity of the technology and security. The latter is the elephant in the room, particularly when it comes to the internet of things and blockchain, according to Nick Jones, VP distinguished analyst at Gartner.

While blockchain can have a huge impact on the IoT world, it’s not going to be plain sailing. Within the next 7 to 15 years, quantum computing could mean current blockchain cryptography, based on public key, is crackable within hours. And the standards for quantum-based cryptography, which will prevent this, are currently still being figured out. Not to mention that unforgeable blockchain info is meaningless if the IoT devices had all been hacked at the outset, said Jones.

His advice for organisations is to restrict their blockchain, and especially blockchain and IoT, activities to education, pilots and short-term apps for the moment.

“Blockchain is going to be a lot more than a new way to pay our bills,” said Jones. “Because in the future, more machines are going to be using blockchain than people. But today, in 2017, it is a very, very immature technology.”

From 2020 businesses could start looking at small-scale, non-critical things involving blockchain and IoT. And finally, “work with consortia,” said Jones.

“This is an eco-system play so working with consortia is probably lower risk than doing things on your own.”

Feature image: BTC Keychain via Flickr (CC BY 2.0, resized)