Even though the Bitcoin prices are soaring, the craze for enterprise blockchain adoption shows a gradual decline.
Enterprise Blockchain rose in prominence in 2017 when the price of Bitcoin reached a threshold of $20,000. During the same time, blue-chip companies like IBM, Walmart, and JP Morgan announced their plans to include blockchain networks into supply chain management processes. Apart from them, some innovative startups building blockchain networks for enterprise use.
One such startup was Insolar which was found in 2018 to bring efficient business networks to enterprises using blockchain. Peter Fedchenkov, the Chief Revenue Officer and co-founder of Insolar, mentioned that they started the company as an Ethereum ERC-20 token. The intention was to create and portray it as a future decentralized grocery marketplace. However, soon they realized that the Ethereum blockchain could not facilitate the project. Hence the company moved to enterprise blockchain development.
In the beginning, Insolar was quite successful, and they signed a contract with a Fortune 500 client in 2019. They wanted to implement Insolar’s “Assured Ledger Technology,” a platform that gave inter-operability, nodeless deployment, and other facilities to implement blockchain for companies quickly.
However, after two years, Fedchenkov shared that their venture Insolar ceased operations as there were no takers to adopt enterprise blockchain.
Fedchenkov felt that COVID-19 was partly responsible for the lack of enterprise blockchain adoption, saying that people have cut on their spending in this field. Apart from that, Insolar- which had shown promise till now with tie-ups with Uranium One and Universities of California was unable to get any extra funding.
Enterprise Blockchain Is Not Dead
However, is this case valid for all enterprise blockchain companies? Martha Bennett, the Vice President and Principal Analyst at Forrester, told Cointelegraph that her observations from mid-2020 are accurate even now.
As per Bennett, the blockchain startups that found success and were not affected by the pandemic were working in different industries and catered to specific uses. While the companies may be varied, each one of them had some particular characteristics.
Firstly, these companies do not lead with “blockchain,” saying that enterprises, on the whole, have become more focused on solutions and their outcomes.
In reply to Bennet’s point, Fedchenkov said that one big mistake their start-up made was paying full attention only to technology and the IP related to it. He said that the company should have discussed actual use cases and their business applications with future clients.
Apart from this, Bennett believed that these days successful companies would give solutions where the blockchain was just one part of a bigger stack. Other technologies like AI or data analytics are necessary too if you want to deliver full value.
Even though Insolar managed to enforce an exciting proposition, the enterprises were not prepared to adopt the pure blockchain-based solution as there was a lack of value and understanding for this technology.
In the end, Bennett explained that companies that were interested in Blockchain-based solutions have understood what the enterprise-grade meant in terms of scale, maintenance, and security, etc. Also, the companies knew about regulatory mandates and specific requirements of the customers.
It is evident the product-market fit is essential for any enterprise blockchain company to succeed. Fedchenkov said that Insolar was already spread thin from the beginning as his company tried to enter multiple markets like supply chain, financial services, etc., all at the same time. Just saying that we are focused on the supply chain is not sufficient; you have to be specific. Since they wanted to cover the entire market, they diversified, and that was the reason for failure.
Are Private Blockchain Networks Doomed?
While some enterprise blockchain companies that boast of having private permission networks are struggling, solutions that use open networks are gaining traction. As per Fedchenkov, Insolar was hybrid in nature and combined both private and public networks. Although the company is now shut down, he is hopeful that in the next 10 years, enterprises will continue to adopt blockchain models.
Though this is hard to predict, Paul Brody, the global blockchain lead at Ernst and Young, also told Cointelegraph that EY is on track to grow the enterprise blockchain business by nearly 100%. Brody also noted that the firm has also seen a drop in demand for private blockchains.
When Brody was asked why some of the companies in the enterprise blockchain space are still struggling to succeed, he mentioned that these private blockchains have a fragile value proposition. Without sufficient participants, it is quite tough to make a scalable ecosystem.
In reply to this point, Fedchenkov said that a significant fact that one thing he has learned from Insolar is that it is tough to sell a blockchain solution to multiple companies. Blockchain is not just for one company, it has to be for many, so it is difficult to sell to all of them.
Despite all these points, Bennett also said that it is evident that there is no significant shift from private to public networks from an enterprising point of view.