McKinsey & Company has released a report titled “Blockchain’s Occam Problem” in which it claimed that use of blockchain technology by corporates in the past one year has failed to match the hype in reality or delivering its actual benefits.
In its report, it has showcased the state of blockchain technology in businesses and corporates. It has found that over 100 supposed use cases presented, a vast majority of pilot projects and proofs-of-concept are stuck in the development phase or in the verge of being shut down. And, many projects have even failed to raise funds in the Series C rounds.
This is happening, despite billions of dollar are being pumped into the technology to make it work across different sectors of the industries. The report also notes that VC funding for startups has reached $1 billion in 2017 and IBM has spent over $200 million on a blockchain-powered data sharing solution. Many leading technology firms including Google has also spent significantly on developing blockchain technology.
The McKinsey report explains:
“A particular concern, given the amount of money and time spent, is that little of substance has been achieved. Of the many use cases, a large number are still at the idea stage, while others are in development but with no output. The bottom line is that despite billions of dollars of investment, and nearly as many headlines, evidence for practical scalable use for blockchain is thin on the ground.”
The report mentions the reason for limited offtake of the blockchain technology or lack of progress among corporates. In some cases, it mentions that corporates fear that the implementation of this latest tech will cannibalize its established revenue streams. And, another problem is that companies would rather create a public utility or shared utility that will benefit the entire industry including its competitor.
Additionally, the report mentions that many corporates pursue blockchain pilots only for reputational value which means the real purpose is to get some positive press rather solving any valid problems.
The report further explains:
“McKinsey’s work with financial services leaders over the past two years suggests those at the blockchain ‘coalface’ have begun to have doubts. In fact, as other industries have geared up, the mood music at some levels in financial services has been increasing of caution (even as senior executives have made confident pronouncements to the contrary). The fact was that billions of dollars had been sunk but hardly any use cases made technological, commercial, and strategic sense or could be delivered at scale.”
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