2021 is the year enterprise (permissioned) blockchain begins its long climb out of the ‘trough of disillusionment’. (See Gartner Hype Cycle for Blockchain Technologies, 2020). The climb will be slower than the recent stellar rise in Bitcoin’s price, but it will move forward nonetheless, surely and steadily.
Our annual Gartner survey of blockchain service providers revealed that 14% of enterprise blockchain projects moved into production in 2020, up from 5% in 2019. (See Blockchain Trials show Business Executives Drive Focused Solutions to Production). We expect production use cases to keep growing by double digit percentages in 2021, as three key trends push the permissioned blockchain market up the Gartner Hype Cycle ‘slope of enlightenment’.
Trend 1: Maturation of Cryptocurrencies and Central Bank Digital Currencies
As it turns out, Bitcoin’s stellar appreciation is not inconsequential to the growth of enterprise (permissioned) blockchain. Bitcoin is now endorsed by mainstream investors like Stanley Druckenmiller and Paul Tudor Jones and is a growing piece of MicroStrategy’s corporate balance sheet, courtesy of CEO Michael Saylor.
Large mainstream bitcoin holdings should fuel innovation in Decentralized Finance applications where bitcoin can be used to collateralize loans, borrowings and other financial instruments, rather than just sit around as a stored (digital-gold-like) value.
- Schizophrenic U.S. Regulatory landscape We’ve seen both encouraging rules come out of the OCC bank regulator (see Federally Chartered Banks and Thrifts may Engage in Certain Stablecoin Activities and Federally Chartered Banks and Thrifts may Provide Custody Services for Crypto Assets) and discouraging innovation-killer rules coming out of U.S. Treasury and FinCEN (Why a16z Opposes Secretary Mnuchin’s FinCEN Midnight Crypto Rulemaking) We believe the pendulum will swing towards the middle in 2021, as a more crypto-friendly Biden Administration takes hold.
- CeDeFi – Centralized Decentralized Finance By 2022, DeFi technology will be ready for early enterprise adoption as long as regulatory guidance is clear. Maturing Defi applications will be embraced by traditional centralized financial companies and integrated into blended CeDeFi offerings (see What You Need to Know About Blockchain DeFi) bringing together the best of both centralized and decentralized financial systems – old school regulatory protections with new school innovative financial infrastructure and products.
- Central Bank Digital currencies – at least forty countries are experimenting with digitizing their fiat sovereign currency, of which about five – most notably China- have already issued it. Tokenizing fiat currency into stablecoins will no doubt increase blockchain distributed ledger financial transactions and accelerate technology adoption.
Trend 2: Truth in Supply Chain – driven in part by Environmental, Social, Governance (ESG) goals
We are seeing several promising supply-chain related use cases that support ESG goals. ESG criteria are used to help investors determine if a company is environmentally conscientious, socially responsible, and governed ethically. These criteria are data driven and the richer and more reliable the data, the more trustworthy are the ESG criteria.
Hence the use of blockchain to record and audit authenticated provenance data that leverage the Gartner model for Truth Assessment – see How to Detect Fakes in a Zero-Trust World Using Artificial Intelligence and Blockchain referenced in Figure 1 below.
Now we are seeing several production systems that use this model and align with ESG goals. Upcoming Gartner research will dive into these case studies, summarized below:
- Context Labs’ Immutably platform (contextlabs.com) services the Oil and Gas industry (including producers and investors) by enabling provenanced, proofed and auditable data on emissions in order to improve the quality and reliability of ESG metrics, and to help oil and gas companies reduce their carbon footprints. For example, the firm tracks and ingests public satellite and other sourced data on fuel use, flaring, methane emissions and spills. Once data are cleansed and analyzed, transformed ESG indicators and supporting data are written to the blockchain and tracked thereafter.
- Settlemint (Settlemint.com) works with Colruyt in Belgium and its supply chain to authenticate the provenance of pigs traced on the blockchain — from ‘farm to fork’ — for pig meat labeled ‘bio’. For livestock and agricultural products, the ‘bio’ label means the food follows the rules of the EU Regulation on Organic Farming. Several tools and techniques are used to establish ‘bio’ provenance. For example, IoT sensors attached to the pigs’ ears trace the food they consume by measuring how much time the pigs spend dipping into feeding troughs, and how much time the pigs spend outdoors in sunlight.
- Copperwire (copperwire.io) works with a leading organic mattress brand in the U.S. to authenticate the provenance of it’s natural and GOTS-certified organic mattress materials, such as wool, latex and cotton. It uses cameras, sensors, tags and other means to gather required contextual information at the source.
Trend 3: Blockchain Middleware Abstraction Layers
Enterprise adoption of blockchain technology is difficult today. There are too many decisions an enterprise has to make – they have to pick a blockchain platform, a smart contract development environment, tools to develop decentralized applications, figure out how they will interoperate across blockchain platforms, integrate with legacy systems, and communicate with other blockchain network participants when data standards are generally scarce. These are just some of the thorny decisions an enterprise must make around still-immature blockchain technology, where skills are scarce, rewards are not entirely clear, and governance by taskforce or consortia is at best difficult and at worst a failure.
Several technology options are emerging and gaining traction on the market. We categorize them as ‘blockchain abstraction middleware’ solutions that shield enterprise users from the backend technical complexity of blockchain. We break these solutions down into two categories and we expect more entrepreneurial companies to contribute solutions to these categories in 2021:
- Trusted integration brokers like chain.link that interface between legacy systems and smart contracts on multiple blockchains
- Blockchain Abstraction Platforms from vendors like Copperwire and Settlemint that shield developers and users from the complexities of having to write code for specific blockchain backends resident in specific infrastructure, using native smart contract and application development tools. In contrast, these abstraction platforms are chain and cloud agnostic.
What’s Next after these Top Trends?
There are plenty other innovative uses coming up for blockchain – but not enough steam to put these into the top trends. These two stand out:
- Coldchain vaccine tracking – we may see this start up in 2021
- Personalized healthcare – where blockchain provides trusted data for personalized medicine and healthcare
- Clinical trials’ supporting authenticated data sharing and collaboration
- Government voting systems
- Fake News Prevention
Societal benefits are perhaps the ultimate crown jewels for decentralized public blockchains but one thing we can be sure of- these benefits won’t make it into the top 2021 trends. Governments are slow to change and social media networks’ business models don’t currently support authenticating news sources. Let’s hope these use cases start materializing in 2022 and the full promise of decentralized public blockchains is achieved.