Is now the right time for tech providers to get into blockchain?
This peer-to-peer technology is best known as the home for cryptocurrencies, including bitcoin. But some market watchers predict blockchain will be used in many other areas, possibly transforming entire industries.
So how big is the blockchain opportunity?
As usual, it depends on who you ask.
One market watcher, WinterGreen Research, estimates the current market for blockchain products and services is worth more than $700 million. Of that, WinterGreen estimates, just two suppliers — IBM and Microsoft — account for just over half. IBM reportedly has some 1,500 people dedicated to the technology.
By big-tech standards, $700 million isn’t much. Apple alone just reported revenue from its iPhone sales in the most recent quarter at $29.9 billion.
However, looking ahead, blockchain could get a whole lot bigger.
Market watcher IHS Markit is especially bullish. It believes the total blockchain market is worth $2.5 billion now, and will grow to $2 trillion by 2030. Admittedly, that’s more than a decade away. But IHS analyst Don Tait says blockchain technology is “poised to ripple through virtually every industry, affecting almost all organizations in the coming years.”
Currently, almost all blockchain activity is in finance. And for good reason: the technology can save financial-services organizations big money.
According to a new report from Juniper Research, banks that integrate blockchain can dramatically lower costs in payment processing and reconciliation, treasury operations and compliance.
More specifically, Juniper predicts that banks deploying blockchain will realize savings on cross-border settlement transactions of more than $27 billion by 2030, reducing their costs by more than 10% per on-chain transaction.
5 growth markets
At IHS Markit, Tait and his colleagues foresee blockchain taking off in 5 main markets:
> Finance: Blockchain could be used for a wide range of processes. These include cross-border payments, share trading, securities, claims management, derivatives, asset custody, currency, collateral management and corporate actions processing.
> Supply chain and logistics: Blockchain could transform this area by reducing barriers and reducing complexity.
> Identity management: Public blockchains could provide a decentralized registration of digital identities, and discovery of public keys needed to verify digital signatures.
> Retail & e-commerce: Possible blockchain applications include trade promotions, decentralized marketplaces, payments, smart contracts, supply chain and more.
> Healthcare: Blockchain could minimize the sale of counterfeit drugs, now a $200 billion/year drain on the industry. It could also be used to create a common database of health information, improving patient privacy and reducing time-consuming administrative tasks for doctors.
On the other hand…
Not everyone is on board. Research and advisory firm Forrester, for one, estimates that only 1 in 10 blockchain experiments will ever become of a company’s operations. Mainly because many organizations are finding blockchain difficult to implement.
Indeed, a recent survey of CIOs, conducted by research and advisory firm Gartner, finds that only 1% have actually adopted blockchain. And only 8% of the CIOs are in either short-term planning or active experimentation with blockchain.
One barrier, the CIOs told Gartner, is skills. Among the nearly 300 CIOs who are in short-term planning or have already invested in blockchain initiatives, about a quarter (23%) said blockchain requires the most new skills to implement of any technology area. Almost as many (18%) said that blockchain skills are the most difficult to find.
“The disconnect between the hype and the reality is significant — I’ve never seen anything like it,” Gartner market analyst Rajesh Kandaswamy recently told Bloomberg News. “In terms of actual production use, it’s very rare.”
So is this a market to jump into? Depends on who you ask.