Enterprise Blockchain: Not a pipe dream but still a work in progress

If I had one BTC for every article I've read in the last three years predicting "this is the year of Enterprise Blockchain" I'd be enjoying ocean sunsets as the only mandatory meeting on my calendar each day.

A recent article from Coinbase celebrating Oracle's entrance into the Enterprise Blockchain market reiterates this prediction for 2018. It does a fine job summarizing the checklist of operational requirements for enterprise systems and how Blockchain must align. But as with most other Enterprise Blockchain endorsements I've read, it overlooks one unique potential that I believe is the tipping point for Enterprise Blockchain— native monetization.

Enterprise Blockchain will continue to be wishful thinking until it finds a way to natively support monetization at the platform level, allowing network participants to settle their transactions "on chain" rather than monetizing business interactions using conventional means outside of their blockchain network. Enterprise Blockchain platform vendors must provide a native store of value along with related features (e.g. digital wallets) to enable real time financial exchange between network counterparties. This native store of value must have readily-redeemable financial value in the real world, not just a form of "Monopoly money" for participants inside the network. Getting to this point will involve a lot more than just adding generic support for tokens. It means having direct, real time interoperability with external financial instruments and public blockchain networks from smart contracts running inside the private blockchain network. And yes, that includes interoperability with cryptocurrencies.

It’s predictable that Oracle would be a new entrant into the Enterprise Blockchain space. As a software company Oracle has continuously reinvented its messaging to find new ways of promoting its cash cow, data management. It makes perfect sense for Oracle to join the ranks of Enterprise Blockchain platform providers, because without a means of monetization, Enterprise Blockchain might be considered just another emergent distributed data management technology, and a rather complicated one at that! Convincing any C-suite executive to replace their existing operational workflow, storage, and transactional systems with Blockchain is going to be extremely difficult until we can show the path to full end-to-end transactional computing, including identity management and financial settlement on the blockchain itself. Even then, moving proof-of-concept efforts from the Innovation group to the production IT shop is going to require a much more compelling value proposition to gain widespread adoption.

While identity on blockchain is also another critical platform feature, there is already an entire domain of important blockchain work underway to facilitate self-sovereign identity. But transactions between participants on any private-permissioned enterprise network must also support end-to-end financial settlement in real time. So, while identity is already on most Enterprise Blockchain roadmaps, native monetization remains a common void. Too quickly we forget, this is what started it all! This is what Bitcoin delivered to the world as an autonomous peer-to-peer payment network— the immediate and final transfer of value in real time. It is a huge deficiency in many Enterprise Blockchain platform strategies today, which overlook the ability to monetize business processes end-to-end using programmable money.

Here's how I think 2018 will play out for Enterprise Blockchain: Microsoft will continue to say and do whatever is necessary to drive blockchain hosting to their Azure cloud, with good success. HP and Oracle will continue to beat the drums of their emergent Enterprise Blockchain strategies off in the distance. IBM will expand its leading strategy, squarely and entirely focused on the enterprise space, and begin to enhance its platform vision to support interoperability between private and public networks, providing an operational presence on key public networks like Sovrin and Stellar. It will also add support for digital asset portability between public and private networks, and enable its customers to issue and support their own tokens and digital assets. You might even see IBM add native support for one or more cryptocurrencies.

On the other side of the spectrum, having started in the domain of public networks and cryptocurrencies, I think you'll see Consensys begin to expand their einterprise strategy, developing new platform features and perhaps combining efforts with the likes of Enterprise Ethereum Alliance, JP Morgan's Quorum initiative, and other Ethereum derivatives to support a more comprehensive enterprise focus. Unlike IBM who needs to retrofit digital asset and cryptocurrencies into its platform, those based on Ethereum will have intrinsic access to a native asset— Ether. However, the challenge of enterprise-enabling Ethereum may turn out to be much more onerous.

What happens to players like R3? Difficult to determine, but I suspect strategic pivots and acquisitions are forthcoming in the blockchain software space in general. For R3 in particular, whose ownership is composed of a federation of big banks, I could see them pivot to a specialty consortium focused on one or more use cases with their Corda software, e.g. a SWIFT interbank messaging alternative, or a new bank-owned trade finance syndicate. However, it is difficult for me to see Corda supporting a viable long term business model for R3 as a stand alone software company and enterprise Blockchain platform provider.

Sadly, I don't think 2018 is going to be the year of widespread blockchain adoption in the enterprise. But I do believe it will be the year where the clear winners in the Enterprise Blockchain platform space begin to emerge and take their place, with some consolidation among the smaller players. There may even be a few showdowns between the big guys. I also believe it will be the year when the public and private blockchain domains begin to converge, with cryptocurrencies and digital tokenization of real world value becoming much more prolific within the enterprise.