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Data / Operations

Enterprise Blockchain Is Doomed

But the next generation of blockchain technology doesn’t have to be. Here’s why...
Jan 31st, 2023 7:51am by
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It’s hard to think of a technology more championed for its potential than blockchain. At the same time, I don’t know of another technology associated with more deployment failures and abandoned projects — the latest being the shutdowns of Maersk/IBM TradeLens and the Australian Securities Exchange’s blockchain.

It’s not hard to see why so many business and technology leaders got excited about blockchains. This technology has the ability to provide highly valuable outcomes for businesses of all sizes. The biggest draw is that blockchain can enable real-time data sharing across multiple parties, clouds and geographies — and it can guarantee that all copies, regardless of where they are or who owns or operates them, are always consistent, complete and correct.

For any business — and certainly for supply chains and financial services — those accuracy and efficiency outcomes are powerful. Think about it: If a car manufacturer can’t communicate with its partners in real time, it will struggle to ship cars faster and more cost effectively. Chocolate providers can’t track the source of cacao beans and communicate provenance to buyers without accurate supply chain tracking. And travel agencies can’t give their passengers the best itineraries at the best price if they don’t have access to the latest information on available seats and customer profiles.

Despite its potential, so far blockchain has not lived up to those promises. But this doesn’t have to be the end of the story.

Why First-Gen Blockchains Fail in Enterprise Settings

There are a variety of reasons why first-generation blockchains like Ethereum and Hyperledger Fabric continue to fail in enterprise settings, but the tl;dr is simple: They are too costly, too complex and take way too much time to implement before seeing real return on investment. Other missing features and capabilities in first-generation chains include:

  • No support for data models – Unlock databases, where the data model (schema) is one of the most business-critical elements of the solution, both public and private blockchains ignore data types, leaving would-be adopters to figure out how to shoehorn their critical business data into a bunch of typeless strings — an architectural mess that’s a bit like trying to build a house on a foundation of wet spaghetti noodles.
  • No support for files – Related to the data model problems, first-generation chains “forgot” that most business data actually still lives in files, leaving would-be users with the difficulty of sorting out how (and where) the majority of their business data would actually get represented and managed.
  • No SaaS offering or horizontal scaling – First-generation blockchains are the epitome of 1990 “DIY” data-center technology — pure vertical scaling with “single box” deployments and no support for SaaS-style deployment and adoption simplicity, making any attempt to use the technology an expensive staffing, support and infrastructure setup burden even before a would-be project gets off the ground.
  • No cloud integration – Plagued by cryptocurrency-induced anti-establishment paranoia, first-generation blockchains avoided any use of (or integration with) modern public cloud data services, making every integration project — queues, streaming, cloud databases, etc. — somewhere between “expensive” and “nightmare” on the complexity and cost scale.

… and the list goes on. It’s no wonder that even well-designed and fully funded blockchain projects by Fortune 100 companies have continued to fail left and right: The technology simply wasn’t ready for use in a corporate environment.

What Next-Gen Blockchains Have Learned from Failures

When we look at history, often the second wave of a technology ends up succeeding where the first wave failed. Emerging second-generation blockchains have been able to learn from the mishaps and missing features of the first generation, and there are real glimmers of success in the latest innovations:

  • Instead of focusing on “dark web” support with servers that could run outside of the view of U.S. or European regulators, second- generation blockchains embrace public clouds as both an implementation technique for scaling and as an integration target to make developers’ lives easier.
  • Rather than a “spaghetti foundation” of nothing but strings, second-generation blockchains offer data models that work just like a normal database table, making it easy to define, store and use business data as companies have done for decades.
  • Files in second-generation systems are first-class entities, as easy and built-in as any other data type, with no need for cumbersome, expensive or complicated third-party solutions to store semi-structured or unstructured data.
  • Solutions are offered as low-code SaaS services, with no infrastructure to deploy, no downtime or staffing needed for upgrades and seamless behind-the-scenes scalability and fault tolerance out of the box.
  • Compliance programs such as SOC2 and GDPR are built into the core of the platform, ready for mission-critical storage and PII/PHI data handling out of the box.

The Future of Business Blockchain Is Brighter than the Present

Blockchain project failures to date don’t mean the technology is doomed forever. Done right, distributed ledgers and blockchains represent the most cost-effective way to perform business-to-business data sharing and have the potential to save companies millions in reconciliation expenses that result from out-of-date, incomplete or partially incorrect data. Simply not having those problems — or the personnel needed to address them on a daily basis — can significantly help the bottom line.

We are still in the early days of innovating for the next wave of Web3 technology. While these early failures are frustrating, they also provide critical product feedback needed to course correct and bring the next generation of blockchains to their full potential as business and cloud infrastructure solutions.

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TNS owner Insight Partners is an investor in: Pragma, Simply.
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