The reality of large enterprises adopting blockchain technology

Monday, January 30, 2023, 1:06 p.m

Toby Gilbert

from Toby GilbertCEO and co-founder of Coinweb

It is important to make a clear distinction between blockchain technology and the token economy, more commonly referred to as crypto. Although the two are inextricably linked, as in most cases crypto is required to reward blockchain participants to manage them (miners and/or validators), both exist today at different stages of their life cycles.

Crypto has been aggressively traded over the past seven years, driven by speculative investors hoping that token prices will rise. This is a far cry from the intended purpose of crypto, where projects go to great lengths to prove that their tokens have real utility within their platforms.

However, the underlying technology, unlike the token economy, is in its infancy, with only a handful of use cases breaking through, usually focused on tokenization, not to be confused with native platform tokens as mentioned above.

Stable tokens, NFTs and tokenization of real-world assets are being adopted by companies such as BMW, LVMH, Audi, as well as a number of football clubs and other large enterprises. Blockchain technology is more than capable of handling this application today, albeit with pain points that include the need to hold two types of tokens, the one you use and the second as the primary fee base for operating the former, variable gas fees , varying network speeds, barriers around fiat on and off, and a number of others that project the likes of Polygon, Circle and us at Coinweb as working to resolve.

Blockchain technology promises significantly more than tokenization, which is largely an improvement on existing technologies where point systems have been widely used for decades.

The ability to automate costly manual processes in legacy systems from supply chains to banking can deliver significant cost savings and speed up processes that have no excuse for being slow in this day and age, such as the international banking messaging system for payments Swift .

However, we are simply not there in terms of development, despite the many projects on the market, and this is evidenced by the drastically low volume of traffic flowing through the circuits today. To put it in perspective, Southeast Asian ride-hailing app Grab has around 60 million customers, of which 30 million are active daily, and given the wide range of services they provide, it’s not out of the realm of possibility that each user uses the platform twice a day, that’s 60 million transactions a day. Ethereum processes a total of one to two million transactions per day!

There is no doubt that large enterprises are interested in the technology with emerging green shoots, but there is a lack of understanding and an easy-to-use product in the market, crowded with protocols, few of which are stress tested and constant news of bad actors committing fraud.

Reliable information is hard to come by, so while businesses are cautiously inquisitive, driven largely by FOMO, they must conduct a thorough education process that takes time.

If the enterprise promises a PR coup, high transaction volume or is willing to pay fees, then the protocols will give them time to educate them with a view to getting them to upgrade to their platform. Problem number 1 starts here; The teams that typically train enterprises are completely biased towards their own platform, which carries several risks, such as regular outages, as seen with Solana, and even worse, catastrophic platform failure, as we saw with Terra. Not a great prospect if you’re a large-scale enterprise with millions of customers.

Problem number 2; once an enterprise business has been trained and sold on the technology, they are left with the difficult task of not only rolling the dice on which platform to upgrade to, but also how to connect their legacy systems to it and design, build and ship a product that supports the technology . Not to mention acquiring and operating regulatory licenses in multiple jurisdictions.

This is the real barrier to entry and where many ideas die before they become reality. Developers tend to specialize in a particular blockchain and existing products (wallets etc) are cumbersome at best and building from scratch takes time and expertise which is in short supply as it is absorbed by well-funded blockchain projects that pay over the odds for a particular experience.

There is no doubt that large enterprises can accelerate and ensure blockchain adoption, transforming the use case of crypto from a speculative investment to a true utility driving supply, demand and stability.

For this to happen, protocols must prove that they reliably process transactions, regulation must be put in place to protect retail users and clarify use cases in a number of countries, particularly the United States, and a usable product must be delivered , opening up the developer space and lowering the barrier to entry. In the meantime, we will continue to educate and build.

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