Lessons learned from the first generation of Enterprise Blockchain projects
In 2017, enterprise blockchain was hot. The Australian Stock Exchange was modernizing how stock trades settled with a blockchain-based replacement for their legacy CHESS system. Supply chains were being streamlined by Maersk and IBM’s TradeLens project. And the Blockchain Insurance Industry Initiative (or B3i), was creating a world-wide industry platform that promised to transform how insurance companies managed risks.
Despite their initial promise, five years later these projects had been shut down, leading to the natural question: what went wrong with the first generation approach to building enterprise blockchain projects?
While many factors contributed on the business side, a large part of the core problem was that these 1st generation blockchain pioneers approached these projects as large custom development build outs engaging dozens or hundreds of developers. This meant core components had to be built from scratch, and it could take years of manual effort to result in production grade, tested, certified and scalable solutions. They simply lacked the tools they needed to cost effectively get to market with their solutions.
One hard earned lesson: while blockchain gets all the attention, the blockchain itself accounts for only about 5-10% of any given blockchain-based solution. The other 90-95% is made up of everything that sits between the blockchain and the user interface itself: wallets, digital asset management, asset tokenization, messaging, user management, off-chain data flows, integration points with existing systems, and various other layers of essential plumbing.
While these components are complex, they aren’t unique. They don’t need bespoke code any more than buildings need hand-crafted wastewater pipes. Yet that’s what 1st generation enterprise blockchain projects had to do: create everything from scratch. This led to projects that stretched on for years and spent tens of millions of dollars on development, only to fall short of providing business value and a return on investment.
This created a clear path forward. If enterprises didn’t have to reinvent basic solutions, they could shift their development costs to the business logic for their use cases. That could mean millions more dollars focused on what matters most to companies.
Surely that would be better. But even if a SaaS company could create a plug-and-play scalable, highly compliant and performant solution, could it generate enough adoption to really push enterprise blockchain adoption forward?