6 Things We Learned from Analysing 227 Corporates in the Blockchain Ecosystem

Today, we are launching our open Blockchain Corporate Tracker which lists 227 corporates active in the blockchain space. This is a companion tracker to our widely-used Blockchain Startup Tracker that we launched back in May and now has over 1150 blockchain projects listed; everything from startups that have raised a Series D round to startups with nothing more than a prototype. The Startup Tracker captures the bottom-up innovation from startups; while the Corporate Tracker tracks top-down innovation from corporates. Together, the two trackers provide a comprehensive live overview of the blockchain ecosystem.

Corporate Innovation vs. Startup Innovation

No one person or group has a monopoly on innovation. For every maverick innovator like Steve Jobs and Bill Gates, 3M develops the Post-it note and Amazon changes computing with AWS. Individuals build upon the work and ideas of those that came before them. Tim Berners-Lee could not have invented the World Wide Web without Vint Cerf and Bob Kahn. Satoshi Nakamoto didn’t create Bitcoin in a vacuum. He/they built on the work from Hal Finney, Eric Zimmerman, David Chaum, and Adam Back amongst others.

As innovations diffuse through the economy, they tend to follow a similar trajectory. In the first phase 0 the sustaining innovation phase - existing businesses use new technology to reduce costs and better serve the needs of customers in their market and create new products that meet forecasted future needs. The market research and consulting industries are built upon the idea from phase one that you can forecast future needs. The second phase, the disruptive innovation phase - as per Clayton Christensen - creates new markets and serves new customers in ways that are difficult to predict. The blockchain market is currently in this first stage of the innovation cycle. Corporates are experimenting with blockchains to reduce costs or better serve existing customers. R3 is running trails to increase efficiencies in settlement, clearing and trade financing. Even some of the more interesting use cases such as blockchain-based electronic health records is a sustaining innovation. Blockchains will be used to do things that are already being done but in a better way. Startups like Ripple and Digital Assets that help incumbents to this end are growing the fastest.

The second disruptive phase will allow startups to create new decentralised markets and build services that were not possible before. Examples of disruptive innovation today includes OpenBazaar in commerce, Golem for computing, Storj for storage, and JAAK for content distribution. Each of these startups removes ‘trust brokers’ from markets and creating new business models. Other services like swarm robots that use the blockchain for decision-making, or artificial intelligence data marketplaces are the kind of convergent services that are possible in the medium-term. Our whitepaper on blockchain-enabled convergence explores the possibilities of how blockchains, artificial intelligence, autonomous robotics, 3D printing, augmented and virtual reality are converging.

At Outlier Ventures we are building a unique Web 3.0 Venture Platform that brings together startups, investors, academia but also importantly corporates to help establish and grow a healthy and thriving blockchain ecosystem. As such we have deep relationships with companies like EY, Cisco, Intel where we connect them with blockchain startups as well as in some cases venture with them ourselves. 

Together the Blockchain Corporate Tracker and the Blockchain Startup Tracker will capture the development of the blockchain ecosystem from today’s sustaining innovations through to tomorrow’s disruptive innovations.

5 Things We Learned from Analysing 227 Corporates in the Blockchain Ecosystem

1. The Consortia Approach

R3 and Hyperledger are the two main routes for finance and technology companies wanting to be involved in the blockchain ecosystem (As this goes to writing, Goldman Sachs and Santander have confirmed that will not be participating in the latest round of R3 funding thereby leaving the consortium, it has been suggested that a further 5 banks may also leave). The challenges of a consortium approach are already becoming clear specifically control of product development, ownership of IP and how to meet the specific business needs of a diverse group of participants.

Industry-specific consortia are one approach that solves the problem of different needs: Post-Trade Distributed Ledger (PTDL) and Blockchain Insurance Industry Initiative (B3i) are early examples. The Russia Blockchain Consortium, The Global Blockchain Council (GBC) in Dubai, Financial Blockchain Shenzhen Consortium (FSBC) and ChinaLedger in China and Blockchain Collaborative Consortium (BCCC) in Japan are examples of country-specific consortia. The fact that China, UAE, Japan and Russia are all supporting country-specific consortia shows the value the political establishment has already seen in blockchains. Essentially, if blockchains do turn out to be the next phase of the web, The Web of Trust or Web 3.0, then China, UAE, Japan and Russia can not afford to allow the US to develop and own the network.

Prediction: More corporates will go it alone and leave consortia once they have acquired the necessary experience to build themselves. Expect to see more industry and region specific consortia. Healthcare, Manufacturing and Entertainment are possibilities, as well as regional consortia in Latin America and India.

2. Proof-of-Concepts Still Dominate

Nealy half, 46% of corporates, have conducted a proof-of-concept. These proof-of-concepts are mainly around clearing and settlement, post-trade infrastructure, cross-border payments and trade finance. The POCs are generally at the transaction layer, as these are the building blocks are required to lay the foundations for more complex marketplaces in the future. We expect to see the variety of proof-of-concepts to increase as insurance, manufacturing, technology and healthcare companies begin experimenting with more robust and mature blockchain solutions, both open-source and permissioned.

From our network of corporate relationships, we know RWE is exploring P2P energy grids and securing 3D printing. Intel is developing solutions for ticketing and the Internet of Things. Cisco is experimenting around health, security and e-government with Guardtime, the Estonian security startup we introduced. Philips Health, who we helped on their journey to create their blockchain lab are actively working on developing a health ledger to secure patient data with startups like Tieron.

Prediction: The next 12 months will see real-world blockchain products launched and commercialised, most likely in emerging markets with lower regulatory burdens. Expect to see banks and financial services providers launch products that serve emerging markets first and then over time these products will come to developed markets.

3. The Importance of China

China makes up 17% of all corporates involved in the blockchain industry, putting it almost neck and neck with the United States at 19%. Like The Internet and mobile industry, it is unlikely the Chinese government will allow Western companies to develop blockchain standards outside of China. Based on the recent white paper released by the Ministry of Industry and IT, the Chinese government will support both FSBC and China Ledger to ensure it can control the technology and push for global adoption of its own standards. The white paper states:

“[We] hope that all sectors work together to actively grasp the blockchain development trends and regulations...to create a favourable environment for development [and] accelerate the promotion of China's blockchain technology and industrial development.”

When it comes to mobile commerce and mobile payments, China is already way ahead of the Western world and it comes as no surprise that they are taking a leading role in blockchain development. The 'Three Big Mountains' - Baidu, Alibaba and Tencent - are all involved in the space in some capacity. Baidu invested in Circle, and Alibaba and Tencent are using the technology in their payment products, Ant Financial and WeBank.

Prediction: The Chinese government will play an increasingly active role in the space, guiding development and providing industry-specific government-approved blockchains for corporates and startups to build on. Baidu, Alibaba and Tencent will take a leading role in the industry, potentially allowing these giants to finally expand Westwards into new markets. 

4. Silence from Tech Leaders

The big story is less about the corporates active in the blockchain space; it’s more about the ones that are missing. Or at least not visible. Microsoft, Intel and IBM are offering blockchain-as-a-service solutions (BaaS) to startups and corporates. But there has been almost no public activity from Facebook, Google, or Amazon in the space. Apple has not publicly said anything about blockchain specifically but it has allowed Circle, the blockchain-payments startup, to integrate with iMessage. Considering the disruptive threat of blockchain technologies and decentralised business model, it is unlikely these companies are not internally exploring blockchains. The reason for the silence could be because the industry is still too small to be worth exploring to these global-scale businesses or because internal development is still progressing. Either way expect the leading tech players to enter the scene in the next 12 months.

Prediction: In the next 12 months, Amazon will launch a dedicated blockchain service as part of AWS driving greater adoption, just like it has done this month with MXNet deep learning framework. In 12-24 months, Apple will build or buy a blockchain-based payment company - probably Circle - integrating it into Apple Pay, bringing blockchain payments to the masses.

6. Very Few Corporate Acquisitions...Yet

It is still very early days in the blockchain space with only two public acquisitions; Rakuten, the Japanese e-commerce and Internet giant, buying Bitnet; and the acquisition of ChangeCoin by Airbnb. Both acquisitions were talent acquisitions and have not led a wave of corporate acquisitions. As proof-of-concepts turn into real products and blockchain solutions mature, we expect a flurry of acquisitions for technology firms. Banks and professional services firms will find it much harder to acquire blockchain startups; the blockchain leads from BNP Paribas, UBS, Barclays, and Deloitte have already left to join or found startups.

Prediction: In the next 2-3 years, protocol startups that reach scale like Credits, BigChainDB, Chain, Monax, or Guardtime are likely to be acquired by the large IT vendors like Cisco, IBM, Microsoft and Google to bolster their own blockchain-as-a-service solutions and teams.

5. Professional Services Finding Their Place In The Ecosystem

IT Consulting & Professional Services form the 3rd largest category and within that, the most interesting is the Professional Services category that includes the ‘Big 4’ accounting and auditors - EY, Deloitte, PWC & KPMG. It should come as no surprise that ledger technology innovation is interesting to them, as well as the fact that their most important clients from the finance sector are heavily investing in the space.

Each of The Big 4 are all attempting to find their place in this fast moving ecosystem somewhere in between consulting, implementation, and channel partner. In some cases this sees them stray into the classic IT consultancy of Accenture and Cognizant who are also building their own BaaS (Blockchain-as-a-Service) offerings.

In the case of Deloitte they were one of the first movers and chose to go down the implementation route building over 20 prototypes with a variety of partners including BlockCypher, Bloq, ConsenSys Enterprise, Loyyal and Stellar. However, to date, it’s unclear exactly how the company intends to commercialise any of the prototypes given the restrictions placed on them and after most of the dedicated team left to found their own startup, Nuco. Their slightly unfocused approach has confused many in the ecosystem who are unsure if they are a competitor or partner given the wide number of use-cases they have been experimenting with in POCS some as varied as consumer warranty apps.

KPMG are taking a more traditional approach offering their Digital Ledger Services backed by Microsoft’s Blockchain-as-a-service (BaaS) solution to client's showing how they can collaborate rather than compete with IT providers. PWC on the other hand have been more cautious only publishing some ad-hoc thought leadership without a dedicated blockchain team after their lead, Jeremy Drane, left to set-up a blockchain startup called Libra. EY, in our mind, seem to have the clearest and most focused approach (disclaimer: EY have sponsored Outlier Ventures events in the past). They have explicitly ruled out building their own POCs or BaaS offering choosing instead to acting as channel partners to startups acting as a bridge to their clients recently running a successful blockchain accelerator with strong alumnus including JAAK, Adjoint, Tallysticks, BitFury, Blockverify, and BTL Group.  

Prediction: The Big 4 will move away from implementation towards partnering with IT vendors to be able to offer BaaS solutions to their clients. This relationship role is valuable for startups to acquire corporate customers and grow, and for corporate clients to have access to blockchain talent and solutions. We would expect more legal services firms to follow the EY strategy and become more active in 2017 building up blockchain for LawTech and RegTech.

Have a look at the full tracker here. If you liked this article, please share with your network.