Looking into the blockchain crystal ball

It has been heralded as having the potential to revolutionise the internet and change the nature of trust, but now the excitement around blockchain may give way to a more prosaic outlook.

More than ten years after the genesis of blockchain, the Australian Computer Society, or ACS, wanted to take a hard look at this hyped technology which has spawned glut of patents, a big shortage of specialist developers and trials by an array of sectors.

CSIRO Data61’s Foresight team undertook an investigation, aiming to provide an evidence-based look at what might happen, identifying ways to help Australia become a global leader in the technology. That culminated in the report: Blockchain 2030: A look at the future of Blockchain in Australia.

“We wanted to investigate our instincts that investments in blockchain did not necessarily represent the growing capabilities of the technology, but more the excessive hype surrounding it,” the report said.

What the future holds

The report explores eight scenarios for the future of blockchain technology in Australia. They offer a way of challenging the way we think about blockchain now, setting out and exploring important uncertainties and also providing a common set of narratives for industry, government and the community.

“These scenarios are designed to challenge the thinking of… stakeholders, and provoke discussion of plausible ‘sunny’ and ‘rainy’ days ahead for blockchain adoption in Australia,” the report said.

Data61 is well placed to conduct this analysis as one of the world’s top blockchain research organisations and author of five of the 30 most-cited blockchain research papers globally.

Hype Cycle analysis

The report used the Gartner Hype Cycle, a graphic representation of the maturity and adoption of technologies and applications; it shows how they are potentially relevant to harnessing new opportunities and solving business problems. The Gartner Hype Cycle suggests new technologies initially generate huge hype and inflated expectations before disillusionment sets in, when the hyperbolic expectations aren’t met.

“It’s fair to say that the hype around blockchain is fading and we’re likely heading towards what is sometimes called the ‘trough of disillusionment’,” Dr Alexandra Bratanova, Research Scientist at Data61 and lead author of the report said.

“Using the lens of the Gartner Hype Cycle… the next phase of development is what is known as the ‘plateau of productivity’, where technologies simply become a part of the fabric of the technology and business landscape.” Dr Bratanova said.

The report details Australia’s competitive advantage, already home to world-first blockchain applications in bonds operations, smart programmable money and international standards, and trials in energy, agriculture and the public sector.

Investment still growing fast

ACS President Yohan Ramasundara said investment in blockchain is still growing significantly.

“All-time cumulative venture capital funding in blockchain has grown at an accelerated pace, up from AUD$1.9 million in 2012 to AUD$7.6 billion as of November 2018,” the report said.

Current activity is largely concentrated in financial and insurance services, but there are many potential applications across Australian industry, Mr Ramasundara said.

Where is the trust?

An erosion of trust in centralised institutions, if it continues, could be the platform to ignite uptake of blockchain and other decentralised technologies.

“Given this context, blockchain and other decentralised technologies may be increasingly preferred to traditional intermediaries,” the report said.

Other trends likely to influence Australian development and adoption of blockchain include the shortage of developers, risks associated with scams and illegal activities and signs of limited scalability.

“Current high levels of energy consumption by public blockchains with proof-of-work consensus mechanisms, as well as broader digital infrastructure and cyber security concerns for the technology in general, may prove problematic for future blockchain adoption,” the report said.

Overcoming the divide

One key approach to overcome the divide between blockchain evangelists and sceptics, could be a shift in focus from asking, ‘What is blockchain?’ to “Why do we need blockchain?’ the report said. A shift in this direction is already happening, but it could be moved along by blockchain leaders in public and private sectors.

“This will further facilitate the transition from the ICO (initial coin offerings) ‘gold rush’ into targeted investment, open dialogue, benchmarking of the best use cases, and broader understanding of the potential benefits and costs of using blockchains with a problem focused, open-minded and anticipatory approach,” the report said.