Security Concerns, Government Initiatives Show Blockchain Is Stuck In Testing Phase

Toward the start of the new year, many analysts labeled 2017 the Year of Blockchain Experimentation, with 2018 set to be the Year of Blockchain Implementation.

Not so fast, said analysts at KPMG. Head of Tech Growth Patrick Imbach spoke with reporters at IT Pro this week, telling the publication that blockchain won’t have a tangible impact on the market until at least next year.

“It was hype in 2017; it will remain hype,” he predicted. “I hear loads of chatter about blockchain, in particular in the U.K. Whilst everyone acknowledges the potential, I think it’s very early stages — we’re at the hype stage.”

The sentiment is a sharp diversion from separate analysis and commentary largely pinning 2018 as the year that working blockchain applications and solutions will roll out onto the market.

“I’m not sure, actually, whether some sort of tangible use cases and commercial models based on blockchain technologies will evolve over the next months,” said Imbach. “We’re still a little bit early in that process. I wouldn’t expect any exciting commercial opportunities to arise in large numbers any time soon — in the U.K., particularly.”

While that may come as a disappointment to some, the blockchain market continues to embrace its moment of experimentation, collaboration and exploration. This week’s Blockchain Tracker highlights the latest in this initiative, as well as other signs that blockchain isn’t ready for its main stage debut quite yet.

Collaboration Continues

Blockchain consortia exploded onto the market in 2017, and the collaborative spirit hasn’t waned. This week, Hyperledger announced 11 new members to its blockchain consortia, including several B2B companies like 8Common, which is exploring blockchain for travel and expense management and commercial card solutions, as well as supply chain technology company FORFIRM.

It’s a win for Hyperledger, which saw a bumpy start to the year, thanks to Dec. 2017 reports that several of its members either left the consortium or reduced their financial investment in the initiative.

Innovation continues to breed a competitive spirit in the world of blockchain too, with Algorithmia announcing a competition this week that wants developers to create an Ethereum blockchain-based solution that uses machine learning and artificial intelligence. Algorithmia is offering three Ethereum tokens (currently worth more than $2,500, reports in VentureBeat said) to the team that can develop an algorithm to determine voter preferences for the last presidential election.

In China, JD.com launched another initiative to promote blockchain innovation and exploration with the creation of a new accelerator program aimed at supporting startups and developers that create blockchain-based artificial intelligence solutions. AI Catapult, as the accelerator is called, will enable teams to “test real-world applications of their technologies at scale,” again signaling expectations for these tools to land on the real-world market — eventually.

Security in Doubt

In another sign that blockchain isn’t quite ready to deliver on all of its promises, reports from Motherboard, citing a research report from U.S. and Singapore researchers, suggests smart contracts are actually quite vulnerable to hacks, despite the ultra-secure reputation for blockchain.

“We’re dealing with applications that have two very unpleasant traits: They manage your money, and they cannot be amended,” said University College London assistant professor of computer science Ilya Sergey, who co-authored the report, in an interview with Motherboard.

The report found 34,200 smart contracts stored on Ethereum were vulnerable to a hack and estimated that millions of dollars were at risk due to vulnerable smart contracts that control digital wallets, mobile apps and tokens or store money, the publication explained.

Governments Remain Interested

Government support can be a critical component for getting any innovation off the ground. Luckily, regulators and policymakers across the globe continue to show a willingness to at least discuss distributed ledger technology.

The European Commission (EC) offered its cautious support for blockchain technology, reports in Bitcoin Magazine said this week, with EC Vice President Valdis Dombrovskis urging member states to embrace the technology to promote financial services competition, while highlighting the security threats cryptocurrencies present.

“Based on the assessment of risks and opportunities and the suitability of the existing regulatory framework for these instruments, the Commission will determine if regulatory action at EU level is required,” Dombrovskis stated.

Taiwan central bank Governor Yang Chin-long also made public remarks this week in support of blockchain, although he focused his attention on the potential for distributed ledgers to enable advancements in government programs like pollution control and citizen health tracking. Further, the central bank, Chin-long said, will “try to explore the feasibility of enhancing the security and efficiency of payment systems using decentralized ledger technology.

Finally, the U.S. is now home to an unexpected blockchain hotbed. Wyoming’s House of Representatives unanimously voted to pass two blockchain-related bills that support innovation of blockchain technology in the state. The legislation is now headed to the state Senate for approval.