Blockchain Begins Earning Some Bitcoin-Like Skepticism

For years, throughout the volatility of cryptocurrency values, some industry experts have assured investors and innovators that blockchain is the disruptor in which the market should place its faith. Alas, there is no such thing as a sure bet, especially in the world of FinTech. And this week, experts have begun to voice their skepticism over distributed ledger technology’s (DLT) promise for a massive shakeup.

For some, the doubt stems from the recent spurt of non-blockchain companies making the sudden pivot to DLT, often (probably) in an effort to raise some quick cash and bump up their stock value. Photography giant Eastman Kodak recently announced such a blockchain pivot, but with some analysts suggesting the business move wasn’t actually too far from the realm of a smart deal.

Earlier this month, the company revealed plans to launch its own cryptocurrency in an effort to promote photographers’ ability to control image rights. Reports at the time said the venture was a potentially innovative, effective strategy in this field, but reports from The New York Times this week cast doubts over the company’s plans.

“It’s a bold gamble that has excited some investors,” the publication stated, “perplexed others and raised questions about how closely Kodak vetted its cryptocurrency business partners, who now include a paparazzi photo agency, a penny stock promoter and a company offering what has been called a ‘magic money-making machine.’”

The publication noted blockchain’s “talismanic effect in today’s stock market” and investors’ heightened appetite to “capitalize on the popularity of currencies like bitcoin and Ethereum” as other reasons to take Kodak’s latest venture with a bit of healthy skepticism.

Broader Doubts Emerge

In another piece penned in The Telegraph, author James Titcomb cast broader doubt not just over the companies making a sudden lurch for blockchain, but also over the technology as a whole.

“This position — bitcoin bad, blockchain good — is the ‘smart’ one if you work in finance, and it has now been repeated so often it has practically become gospel,” Titcomb wrote, highlighting the enhanced security of distributed ledgers that has the financial services industry so interested.

“That is the theory,” he continued. “The reality is not quite so great.”

Bitcoin and blockchain creator Satoshi Nakamoto developed these tools nearly a decade ago, he said.

“Yet in that time, few institutions of any real note have actually started to use it outside … their experimental divisions,” he said. “Billions of dollars have been invested in startups, but most of these appear to be blockchain for blockchain’s sake: identifying something that already exists and putting it on the blockchain for little apparent reason other than because the technology is in vogue.”

Titcomb isn’t alone in questioning whether blockchain is a bitcoin-like bubble. Cointelegraph released a similar article this week, highlighting hacks, a lack of government protection and hurdles for top use cases, like smart contracts, all standing in the way of blockchain making good on its promises.

(Possible) Scammers Emerge

Blockchain isn’t un-hackable, and regulators have recently warned about the potential of fraudulent initial coin offerings (ICOs). Unfortunately, for some blockchain backers, the warning wasn’t heeded.

Reports in Bitcoin.com this week covered news of blockchain startup Prodeum, a company based in Lithuania that vowed to use blockchain to upend the fruit and vegetable industry through its use of Ethereum. The company told investors that it was in discussions with the International Federation for Product Standards when it launched its ICO earlier this month. But the company’s website — and all social media accounts — suddenly disappeared, as did the money investors placed in the company.

Clearing the Air

With blockchain attracting so much attention and, now, a bit of skepticism, the National Institute of Standards and Technology (NIST) recently published a blockchain paper aimed at clearing some major misconceptions about the technology.

“Blockchain is a powerful new paradigm for business,” NIST computer scientist and one of the report’s authors, Dylan Yaga, said in a statement. “People should use it if it’s appropriate.”

“In the corporate world, there’s always a push to adopt new technologies,” Yaga continued. “Blockchain is today’s shiny new toy, and there’s a big push to adopt it because of that. We want to help people see past the hype, as lofty a goal as that is.”

In short, blockchain is no smoking gun. And while everyone from iced tea companies to photography firms have suddenly pushed into the blockchain realm, NIST’s report warns that businesses should tread carefully, as blockchain cannot, and should not, be used for anything and everything.

The Hype Endures

Amid this wave of skepticism, however, investors continued to power the blockchain hype.

Sawtooth Software, an enterprise-focused platform to build and deploy distributed ledgers, announced its version 1.0 release this week. The solution is developed by Hyperledger and is backed by Intel, among others. Already, top companies like Amazon Web Services are deploying the tool.

Another blockchain firm, Kadena, which was created by two JPMorgan developers in 2016, announced fresh investor support to the tune of $2.25 million this week. Metastable, Kilowatt Capital, Coinfund and Multicoin Capital provided the pre-Series A funding for the blockchain company.

And finally, another exchange-traded fund (ETF) made its debut this week. NextGen Protocol ETF went live on Monday (Jan. 30) on the New York Stock Exchange. The fund is targeted at companies working with blockchain or looking to deploy DLT-based solutions.