TLDR: Almost 300 companies are already trying to build, regulate, define or integrate DLT, through participation in consortia or pilots of their own. Ambition with regards to the type use cases differs though, with most sticking to simple cost plays. Companies have not yet put blockchain into large-scale production, at least for financial services and manufacturing this is expected to change over the course of 2018 though.
In the first part of this mini-series, I’ve been writing about the value potential of using blockchain / distributed ledger technology (DLT) for large enterprises. I derived value potential from the inherent benefits of the technology itself as well as the new economic systems that it creates. Whereas using the technology can reduce cost (especially in collaboration scenarios), token economies can create completely new ways to interact with customers, to innovate business models, and opportunities beyond that.
According to an IDG survey, 13% of senior IT leaders have current plans to implement blockchain, and as per an IDC analysis, the enterprise spend on blockchain solutions will hit 2.1b in 2018. Likewise, the number of blockchain-related job postings has been increasing by 3x in 2017, with currently 14 job openings for every one blockchain developer. This is driven primarily by the financial services and manufacturing industries for which 2018 might be the year that blockchain moves from pilot projects to production.
In this second part of the series, I will look at the current state of adoption of DLT in the enterprise world.
Part 1: Where is the business value?
Part 2: What is the state of industry adoption? (this post)
Part 3: Which solutions are enterprise-ready?
Collaboration: Consortia, Alliances, & Initiatives
Since enabling more efficient and new types of collaboration between parties is one of the key themes of DLT, institutions are banding together in consortia trying to build, regulate, define or integrate distributed ledgers. Outlier Ventures runs a corporate tracker that currently shows around 300 companies involved in at least one such consortium.
Consortia can be distinguished between focussing on certain industries or focussing on certain platforms or types of use cases. Among the most prominent industry consortia are:
Exploration: Trials, Pilots, & Products
The banking, telecom and tech industry stand out from the other industries as they are not only exploring use cases, but also creating and patenting the foundational technologies. With regards to use cases, ambition is quite different between industries. While all industries explore efficiency-focussed use cases to transform their internal operations, only about half of them look beyond that, with the Tech and automotive industry currently pursuing the most ambitious goals (see below). Almost no companies have put blockchain into large-scale production or are using it for major commercial efforts yet though. According to EY, this is expected change at least for financial services and manufacturing over the course of 2018.
Focus areas by industry (for use cases see part 1)
Banking might the industry that’s closest to being production-ready, moving from small niche solutions and pilots to larger adoption step by step. Even though there doesn’t seem to be anything in production yet, there are many examples of pilots especially around payments and trading. Some 100 institutions signed up to pilot RippleNet for international payments. A couple of European banks founded We-Trade a a joint venture to develop a trade platform for commercial clients. JPMorgan has an internal blockchain team that developed its Ethereum-based inhouse blockchain solution Quorum, in which it incorporated ZCash’s privacy technology. ING developed a similar solution for private blockchain transactions. Bank of America is exploring opportunities for data sharing, RBC is experimenting with international payments, BBVA on FX matching, and BNP Paribas on dividend payments and stock splits. Of the credit card companies, Visa is piloting a B2B payments service and MasterCard a system for instant payment processing.
Within the Insurance industry, French insurance company AXA might be furthest ahead with a first live product; it has launched a new flight delay insurance product that uses the public Ethereum blockchain to store and process payouts. Across the industry, several pilots & trials are being conducted, mostly around payment and workflow improvements. ANZ is building a blockchain-based platform to ease the transfer of data and premium payments between brokers and insurers together with IBM. has been testing an internal token for money transfers between its global affiliates to avoid having to deal with currency conversions, and announced a solution for. And they developed a prototype for a more. Insurance broker is working with IBM to develop a blockchain-based insurance verification platform. And a group of completed a trial of an insurance asset trading platform.
The Telecom industry is approaching DLT from multiple angles. They are developing and patenting core technology elements, e.g. for digital currency payments for connected cars,for distributed storing of user data, and for cybersecurity measures to protect blockchain networks. , and are conducting venture investments in DLT startups. And they are pursuing modest to more ambitious goals. are trialing the settlement of wholesale international services. has created a new business entity centered around blockchain. And has plans to rebuild South Korea’s network infrastructure based on blockchain.
Tech companies have primarily been focussing on obtaining blockchain-related patents, started launching blockchain-as-a-service offerings (e.g.), and exploring enterprise solutions, especially around supply chain tracking and IOT. Microsoft also has a security-focussed , and works on and . Amazon collected a few patents, e.g. for and a, and offers hosting services. IBM collaborates with clients to pursue use cases such as Oracle got some patents, e.g. for and . Accenture also got some patents, e.g. around and out of their , and did a trial for a . Google hasn’t done much publicly yet, apart from a patent applications around. Cisco is collecting patents around e.g. and partners with IOTA to develop IOT-related use cases, and explore solutions to manage SupplyChain and for digital rights management.
Media companies haven’t done much yet, with some limited activities on use cases around advertisement and content management. Comcast launched an partnering with e.g. Disney, NBCUniversal, and Channel 4. Canadian Groupe Média TFO trials solutions to track copyrights.acquired a startup working on a content metadata solution. And just set up a team to explore blockchain use cases.
Among Healthcare payers and providers, there are only a few pilots trying to improve administrative processes so far. are running a pilot to improve admin data management, and is testing a solution for health care claims management.
Within the Pharmaceuticals industry, companies are trying out blockchain solutions in core parts of their value chain, particularly in clinical research and for supply chain tracking. is exploring its application for clinical trials and electronic health records. investigating use cases in clinical research as well. A working group comprising are exploring how they can improve supply chain security.
Automotive companies are quite ambitious in their exploration of DLT, trialing both efficiency use cases as well as exploring it to innovate their business models. and all conducted trials with tracking of vehicle data telematics tracking to prevent tampering when the car is resold. conducted a test to issue a corporate bond issuance. Toyota ran a trial on a for autonomous vehicle driving data and for a got a patent for car-to-car transactions to manage traffic. And also Volkswagen seems to have ambitious yet unspecific plans using DLT in the
In the Travel & Transportation industry, there’s a clear focus on using DLT to improve tracking and collaboration, even though is also testing a travel app platform for customer-facing solutions. has conducted a proof-of-concept for plane parts tracking. is exploring supply chain and workflows tracking solutions for aircraft maintenance. is using DLT to track internal contracts, and is working on a shared record of hotel inventories. and have both done trials to track the movement of shipping cargo. is testing a solution to track deliveries. And to uses DLT to share logistical and contractual data.
Retail companies are very much focused on supply chain tracking in their trials so far. wants to track origins and movements of food.tests products tracking to fight counterfeiting. is looking into a diamond tracking platform to avoid conflict diamonds. And explores supply chain tracking, too.
The Energy sector has seen some exploration of use cases but with limited impact yet. among others started to explore an use case around an energy trading platform, and at least seems to be exploring use cases beyond that. is exploring different use cases around e.g. electric car charging stations, land registry, and power supply. And the experiments with tracking of energy data on the Ethereum blockchain.
In the Chemicals industry, only BASF seems to have started any activities; they conducted a trial for .
Even though we see exploration and experimentation across all industries, a couple of major challenges still remain to get DLT adoption off the ground.
First, there is the maturity of the technology. Only few projects are close to being production-ready in an enterprise setting, especially Ethereum with the efforts coming out of the Ethereum Enterprise Alliance is making good progress, but all are still untested for large-scale commercial implementation.
There are challenges around adoption itself. There is still a lot of regulatory risk that might put invested efforts in jeopardy. And since most adoption scenarios would require all involved parties to be convinced to participate to achieve the full benefit, people are effectively dependent of the last adopters within a value network.
The price volatility is a big challenge in payment use cases. The number of options to mitigate it are increasing, e.g. using futures to hedge, or using a so-called stablecoin which have fiat-currency-pegged conversion rates. Still, it either limits use cases or creates additional efforts that might deteriorate a business case.
And last, there’s a self-made problem of many industry-led initiatives from betting too much on private (permissioned) blockchain solutions. This approach might seem obvious at first considering the need for privacy of business data vs. that data on public ledgers would be visible to everyone. The flip side however is that you would expect that every business partner joins every private blockchain of every business partner out there. And even if that would be feasible, these private networks are even more prone to misuse of trust as they are typically not Byzantine fault tolerant. Maybe privacy-based solutions (e.g. zero-knowledge proof) will offer a way out of the dilemma.
In the first part of this mini-series, I’ve been writing about the value potential of using blockchain / distributed ledger technology (DLT) for large enterprises. I derived value potential from the inherent benefits of the technology itself as well as the new economic systems that it creates. Whereas using the technology can reduce cost (especially in collaboration scenarios), token economies can create completely new ways to interact with customers, to innovate business models, and opportunities beyond that.
According to an IDG survey, 13% of senior IT leaders have current plans to implement blockchain, and as per an IDC analysis, the enterprise spend on blockchain solutions will hit 2.1b in 2018. Likewise, the number of blockchain-related job postings has been increasing by 3x in 2017, with currently 14 job openings for every one blockchain developer. This is driven primarily by the financial services and manufacturing industries for which 2018 might be the year that blockchain moves from pilot projects to production.
In this second part of the series, I will look at the current state of adoption of DLT in the enterprise world.
Part 1: Where is the business value?
Part 2: What is the state of industry adoption? (this post)
Part 3: Which solutions are enterprise-ready?
Collaboration: Consortia, Alliances, & Initiatives
Since enabling more efficient and new types of collaboration between parties is one of the key themes of DLT, institutions are banding together in consortia trying to build, regulate, define or integrate distributed ledgers. Outlier Ventures runs a corporate tracker that currently shows around 300 companies involved in at least one such consortium.
Consortia can be distinguished between focussing on certain industries or focussing on certain platforms or types of use cases. Among the most prominent industry consortia are:
- R3 was started in 2015 as a consortium of the financial services industry to build the open source DLT solution Corda. It has since evolved into a software startup that offers DLT-related services to the by now 100+ consortium members such as Bank of America, Deutsche Bank, RBC, or UniCredit, its business model is still in development though.
- The Blockchain Insurance Industry Initiative (B3i) is a consortium of insurers and reinsurers to explore the potential of DLT. It was founded in 2016 and currently comprises 15 members such as Allianz, Generali, Munich Re, or Zürich IG.
- The Hashed Health Consortium was launched by the DLT advisory and development firm Hashed Health in 2016 to advance the use of blockchain protocols in healthcare. Little is known about high-profile members though, and there are efforts for a different vendor-agnostic consortiumfrom within the industry.
- The Mobility Open Blockchain Initiative (Mobi) was launched in 2018as a consortium of the automotive industry comprising manufacturers and suppliers such as BMW, Renault, GM, or Bosch to explore DLT use cases around mobility services.
- The Hyperledger project was started by the Linux Foundation in 2015 to build open source blockchain platforms and related tools such as its flagship solution, the permissioned blockchain Fabric. Its members include e.g. Accenture, American Express, IBM, and SAP.
- The Ethereum Enterprise Alliance (EEA) is a community of enterprises that are building applications on the Ethereum platform that was founded in 2017 and quickly grew to 150+ members such as Accenture, Microsoft, JPM, or UBS.
- Founded in 2017, the Trusted IoT Alliance is a cross-industry consortium that develops use cases that leverage blockchain infrastructure to secure and scale IoT ecosystems. Its enterprise members include e.g. Bosch, Cisco, and UBS.
- The Decentralized Identity Foundation is a community of companies working on DLT-based identity management solutions that formed a consortium to improve interoperability in 2017. It includes e.g. Hyperledger, Microsoft, IBM, and Accenture.
Exploration: Trials, Pilots, & Products
The banking, telecom and tech industry stand out from the other industries as they are not only exploring use cases, but also creating and patenting the foundational technologies. With regards to use cases, ambition is quite different between industries. While all industries explore efficiency-focussed use cases to transform their internal operations, only about half of them look beyond that, with the Tech and automotive industry currently pursuing the most ambitious goals (see below). Almost no companies have put blockchain into large-scale production or are using it for major commercial efforts yet though. According to EY, this is expected change at least for financial services and manufacturing over the course of 2018.
Focus areas by industry (for use cases see part 1)
Banking might the industry that’s closest to being production-ready, moving from small niche solutions and pilots to larger adoption step by step. Even though there doesn’t seem to be anything in production yet, there are many examples of pilots especially around payments and trading. Some 100 institutions signed up to pilot RippleNet for international payments. A couple of European banks founded We-Trade a a joint venture to develop a trade platform for commercial clients. JPMorgan has an internal blockchain team that developed its Ethereum-based inhouse blockchain solution Quorum, in which it incorporated ZCash’s privacy technology. ING developed a similar solution for private blockchain transactions. Bank of America is exploring opportunities for data sharing, RBC is experimenting with international payments, BBVA on FX matching, and BNP Paribas on dividend payments and stock splits. Of the credit card companies, Visa is piloting a B2B payments service and MasterCard a system for instant payment processing.
Within the Insurance industry, French insurance company AXA might be furthest ahead with a first live product; it has launched a new flight delay insurance product that uses the public Ethereum blockchain to store and process payouts. Across the industry, several pilots & trials are being conducted, mostly around payment and workflow improvements. ANZ is building a blockchain-based platform to ease the transfer of data and premium payments between brokers and insurers together with IBM. has been testing an internal token for money transfers between its global affiliates to avoid having to deal with currency conversions, and announced a solution for. And they developed a prototype for a more. Insurance broker is working with IBM to develop a blockchain-based insurance verification platform. And a group of completed a trial of an insurance asset trading platform.
The Telecom industry is approaching DLT from multiple angles. They are developing and patenting core technology elements, e.g. for digital currency payments for connected cars,for distributed storing of user data, and for cybersecurity measures to protect blockchain networks. , and are conducting venture investments in DLT startups. And they are pursuing modest to more ambitious goals. are trialing the settlement of wholesale international services. has created a new business entity centered around blockchain. And has plans to rebuild South Korea’s network infrastructure based on blockchain.
Tech companies have primarily been focussing on obtaining blockchain-related patents, started launching blockchain-as-a-service offerings (e.g.), and exploring enterprise solutions, especially around supply chain tracking and IOT. Microsoft also has a security-focussed , and works on and . Amazon collected a few patents, e.g. for and a, and offers hosting services. IBM collaborates with clients to pursue use cases such as Oracle got some patents, e.g. for and . Accenture also got some patents, e.g. around and out of their , and did a trial for a . Google hasn’t done much publicly yet, apart from a patent applications around. Cisco is collecting patents around e.g. and partners with IOTA to develop IOT-related use cases, and explore solutions to manage SupplyChain and for digital rights management.
Media companies haven’t done much yet, with some limited activities on use cases around advertisement and content management. Comcast launched an partnering with e.g. Disney, NBCUniversal, and Channel 4. Canadian Groupe Média TFO trials solutions to track copyrights.acquired a startup working on a content metadata solution. And just set up a team to explore blockchain use cases.
Among Healthcare payers and providers, there are only a few pilots trying to improve administrative processes so far. are running a pilot to improve admin data management, and is testing a solution for health care claims management.
Within the Pharmaceuticals industry, companies are trying out blockchain solutions in core parts of their value chain, particularly in clinical research and for supply chain tracking. is exploring its application for clinical trials and electronic health records. investigating use cases in clinical research as well. A working group comprising are exploring how they can improve supply chain security.
Automotive companies are quite ambitious in their exploration of DLT, trialing both efficiency use cases as well as exploring it to innovate their business models. and all conducted trials with tracking of vehicle data telematics tracking to prevent tampering when the car is resold. conducted a test to issue a corporate bond issuance. Toyota ran a trial on a for autonomous vehicle driving data and for a got a patent for car-to-car transactions to manage traffic. And also Volkswagen seems to have ambitious yet unspecific plans using DLT in the
In the Travel & Transportation industry, there’s a clear focus on using DLT to improve tracking and collaboration, even though is also testing a travel app platform for customer-facing solutions. has conducted a proof-of-concept for plane parts tracking. is exploring supply chain and workflows tracking solutions for aircraft maintenance. is using DLT to track internal contracts, and is working on a shared record of hotel inventories. and have both done trials to track the movement of shipping cargo. is testing a solution to track deliveries. And to uses DLT to share logistical and contractual data.
Retail companies are very much focused on supply chain tracking in their trials so far. wants to track origins and movements of food.tests products tracking to fight counterfeiting. is looking into a diamond tracking platform to avoid conflict diamonds. And explores supply chain tracking, too.
The Energy sector has seen some exploration of use cases but with limited impact yet. among others started to explore an use case around an energy trading platform, and at least seems to be exploring use cases beyond that. is exploring different use cases around e.g. electric car charging stations, land registry, and power supply. And the experiments with tracking of energy data on the Ethereum blockchain.
In the Chemicals industry, only BASF seems to have started any activities; they conducted a trial for .
Even though we see exploration and experimentation across all industries, a couple of major challenges still remain to get DLT adoption off the ground.
First, there is the maturity of the technology. Only few projects are close to being production-ready in an enterprise setting, especially Ethereum with the efforts coming out of the Ethereum Enterprise Alliance is making good progress, but all are still untested for large-scale commercial implementation.
There are challenges around adoption itself. There is still a lot of regulatory risk that might put invested efforts in jeopardy. And since most adoption scenarios would require all involved parties to be convinced to participate to achieve the full benefit, people are effectively dependent of the last adopters within a value network.
The price volatility is a big challenge in payment use cases. The number of options to mitigate it are increasing, e.g. using futures to hedge, or using a so-called stablecoin which have fiat-currency-pegged conversion rates. Still, it either limits use cases or creates additional efforts that might deteriorate a business case.
And last, there’s a self-made problem of many industry-led initiatives from betting too much on private (permissioned) blockchain solutions. This approach might seem obvious at first considering the need for privacy of business data vs. that data on public ledgers would be visible to everyone. The flip side however is that you would expect that every business partner joins every private blockchain of every business partner out there. And even if that would be feasible, these private networks are even more prone to misuse of trust as they are typically not Byzantine fault tolerant. Maybe privacy-based solutions (e.g. zero-knowledge proof) will offer a way out of the dilemma.