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Blockchain Thrives On Big Money And Big Ideas

Dave Hecker is CTO at iTechArt, a top-tier custom software development company that builds great products for VC-backed startups.

Starting around 2014, a steady flow of journalists and IT professionals were proclaiming that blockchain technology had officially come of age and would soon change the way we work and live. The revolution never happened, but these predictions didn’t stop, leaving some to wonder what blockchain was actually good for or if the whole thing had just been hype. Today, the average citizen still can’t define the term blockchain, let alone mention a blockchain-powered application besides Bitcoin, but things are starting to change.

The blockchain ecosystem seems to have reached critical mass and is poised to start affecting real people in the real world, just not in the way that many expected. We were promised mind-blowing consumer apps and other cool blockchain toys, but so far it’s just been about cryptocurrencies and the recent NFT craze. I believe there are two reasons for this: 1) Blockchain is surprisingly hard to explain to non-technical people, and 2) it’s a whole lot of work to build useful blockchain-enabled apps.

It’s rare that a technology is so hard to explain that it affects its adoption, but after 10 years of blockchain hype, the average non-technical CEO remains hard-pressed to explain what blockchain really is. Understanding blockchain means learning some new concepts around cryptography, algorithms and networking. Blockchains run on the server side, so there’s nothing to see, touch or share, meaning it has to be explained on the whiteboard. With blockchain being such a highly complex and abstract technology, it’s no surprise that non-technical business leaders are slow to jump on the bandwagon. Revolutionary as it may be, the CEO of a large corporation won’t invest in something they don’t understand — and neither will venture capitalists, small businesses or governments.

Tech-savvy people, however, have gone the other way. By 2016, gung-ho techies around the globe fueled the mania by producing a dizzying array of products, frameworks, coins and apps — most of which wound up being abandoned because they weren’t useful enough. It turns out, you can do cool things with blockchain, but if you want people to use it, you have to think big. The most practical (and commercially viable) applications for blockchain are big, bold, complex and require a large team of skilled developers to implement.

Finding engineers with blockchain expertise remains a barrier to adoption. In 2021, the majority of engineers with blockchain experience worked with it only as a hobby project. Truly experienced engineers are pricey, which makes building a large team of solid blockchain developers prohibitively expensive for the average startup. This leaves it in the hands of the big players — the well-funded companies that are in a position to assemble a blockchain engineering team at any cost and actually build something potentially useful.

Big companies, however, are slow to change and can’t easily pounce on the latest technologies. The more technical ones (think IBM) have jumped in to stake their claim in the blockchain world, and that’s resulted in a maze of platforms, frameworks and standards but precious few useful apps being produced. In fact, Gartner predicted in 2019 that 90% of enterprise blockchain projects would require replacement within 18 months due to the rapid, chaotic and highly fragmented blockchain platform market.

In 2021, things finally seem to be changing. Enterprise leaders and decision makers are increasingly understanding what blockchain is and how it can change their industries. A more balanced view of blockchain embraces the reality that big enterprise applications are more viable than novel things consumers can play with. Attention (and capital) is moving away from the startup that can do something cool with blockchain and favoring ambitious platforms and applications that leverage blockchain in a way that will affect us all soon.

At the risk of being yet another author claiming blockchain’s time has come, I say blockchain is ready for prime time. As more senior engineering professionals get involved and apply their experience to the field, standards and best practices emerge, which drives progress. A jaw-dropping amount of capital has been made available to the industry, opening the door for smart startups with big ideas to get the funding needed to achieve ambitious goals.

Andreessen Horowitz recently launched a $2.2 billion fund that is mostly focused on cryptocurrency (which is powered by blockchain) and is sure to fuel the maturation of the blockchain world at a rapid clip. With huge amounts of money funding massive efforts to do bold but practical things with blockchain, I expect we’ll see everyday use of blockchain-enabled applications within a few years.

Another world where blockchain is gaining traction is the public sector. Governments have the potential to be some of the biggest benefactors of this new technology, but most have been slow to really dig in. China bucks this trend, having gained a head start by leveraging its deep pockets and centralized leadership to aggressively invest in blockchain at many levels. The EU has spent quite some time creating a less exciting but well-considered blockchain strategy, setting the stage for investment and innovation in Europe. Meanwhile, in the U.S., the government has finally begun paying attention to blockchain, albeit mostly in hopes of not losing ground to China. Even state-level governments are getting involved, with Wyoming recently passing legislation to be the first state to recognize a DAO as a legal entity.

Will Wyoming realize its objective of being the “top blockchain location in the world”? I have my doubts. But when state legislators are “getting” blockchain enough to produce this kind of news, all signs point to change. The complexity and huge expense of building with blockchain have been barriers for a long time, but the sector is looking less like a just-shaken snow globe every day and more like a burgeoning field equipped for serious innovation and change. Who knows, as more governments and well-funded startups step up to the plate, we just might start to see the game-changing apps we’ve been waiting for all these years.

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