C-Suite Briefing 5 Blockchain Trends for 2020 - Deloitte
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C-Suite Briefing | Contents # C-Suite Briefing 5 Blockchain Trends for 2020 March 2020 0
5 Blockchain Trends for 2020 | Contents Contents A glance back… 2 The Hype is Over 3 Evolving platforms 4 Adoption Rates across Industries 6 Governance is Critical 9 The Rise of Tokens 13 1
5 Blockchain Trends for 2020 | A glance back…
A glance back…
Now that we’ve settled into 2020 and the beginning of a new decade,
we have the opportunity to look back at how far we’ve come, and how
far we have to go.
Moving forward in 2020 of industry players into conversation
“This is the beginning of
Now eleven years on from the mining on blockchain, moving away from the
of the genesis block on the bitcoin FSI focus that we had years ago the decade of
network, Blockchain technology’s predicted.
Blockchain and I think
popularity has seen a historic rise
and a significant fall. 2020 brings True, the adoption of the technology in 2020, we’ll start to
with it an opportunity for the has not occurred with the ferocity
technology to move further away which the crypto hype of 2017
see the global
from experimental PoCs and pursue indicated to many. Rather, we have recognition of crypto
more significant investment for real seen the slow and challenging growth
business-ready solutions. of ecosystem consortia highlighting
assets in the FS
that companies are waking up to the industry.”
Where did 2019 leave us? idea that to go far, they ought to go
Like a small child, the early years of together. 1 Antonio Senatore, EMEA Blockchain
a nascent technology bring dramatic Lead
growth spurts coupled with a Blockchain is here to stay. And 2020
changing personality and growing is the start of her decade.
pains. This rings especially true for
young adolescent Blockchain, who Top 5 Trends
turned 11 only weeks ago. Despite
her youth, her tenth year was full of
moments which will define the The Hype is Over
coming years.
Evolving Platforms
2019 saw the proposition of
Facebook’s Libra and the People’s
Bank of China’s announcement that Adoption rates across
they would soon launch a sovereign industries
digital yuan. These bold reveals,
which bring the potential of a global Governance is critical
digital currency ever closer, caused
ripples across the global financial
services sector. The Rise of Tokens
Across the board, we saw greater
participation from government and
central banks in discussions
regarding the regulatory environment
that this disruptive technology should
exist in. And in the growing
blockchain community, we observed
a move away from ‘get-rich-schemes’
grabbing the headlines in the
Blockchain space and more viable
solutions and consortia taking their
place. 2019 brought a broader range
1
World Economic Forum
2
5 Blockchain Trends for 2020 | The Hype is Over
The Hype is Over
The Deloitte 2019 Blockchain Survey showed that blockchain adoption
has shifted. As the technology matures, we have seen a move away
from experiments toward the development of robust enterprise ready
solutions.
The corporate blockchain hype this trend and a greater focus Additional signs of blockchain’s
cycle is slowing developing on utilising the maturation could be seen in the
In recent years, Blockchain has been technology to solve real business
diverse—and sometimes discordant
heralded as a major disrupter on issues and deliver value. responses of surveyed `CEOs; the
track to rattle almost every industry barriers to entry that they faced
from agriculture and manufacturing 2019 revealed the emerging shared varied, as did the perceived
to FS and insurance. While in many belief that blockchain is real and that advantages of blockchain which they
cases, the technology’s promise can it can serve as a pragmatic solution identified. Such diversity of thought
be clearly seen, faith in Blockchain to business problems. Even leaders, can be viewed as a mark of
has fallen victim to “the massive initially wary of tech-based solutions, maturation because it reflects an
hype and irrational exuberance in theappeared to see potential in the enhanced sense of seriousness in
past, driven largely over a Bitcoin- technology. Specific supporting consideration of the technology’s
buying frenzy.” 2 indications from our 2019 Global possibilities and limitations.
Blockchain Survey include the
In the wake of the hype, a tendency increasing perception of blockchain Now, in 2020, we can see that the
toward Blockchain tourism developed as a top-five strategic priority, the prevailing question among executives
– where we would see intrigued sustained levels of blockchain is no longer, “Will the technology
companies come to gawk at the investment, and the improved work?” but rather, “How can we
technology, kick it around for a few sentiments measured across an array make technology work for us?”
weeks before deciding they were of attitude statements, including the
more comfortable where they share of respondents who agree that
currently were. But as we moved blockchain offers compelling use
through 2019, we saw a fall away in cases.
Learnings for the year ahead
2
Forbes
3
5 Blockchain Trends for 2020 | Evolving platforms
Evolving platforms
The leading platforms at the end of 2020 will be those that can offer a
unique combination of features to players and consortia building
enterprise level solutions.
2018 saw a much needed clean up of The Blockchain Trilemma The balance of these three
the Blockchain ecosystem as characteristics is thus a major
overhyped projects failed and shady consideration for any blockchain
How do the different networks
get-rich-quick schemes were weeded network provider, as well as for their
measure up?
out; 2019 brought the rise of customers who choose to build their
Blockchain’s viable platforms and Corda Ethereum VeChain solutions on the network
more pragmatic developers such as
VeChain, Corda, Hyperledger, and Decentralisation In 2019, we saw a diversification in
Ethereum; Now in 2020, the leaders the industries investing in blockchain
will emerge based on the unique with a particular rise in players from
combination of features that they supply chain, life sciences and TMT.
offer to companies and consortia Their needs differ from the needs of
building production level solutions. the initial forerunner, FSI, and thus
the network that appeals the most,
also differs.
Decentralisation
Security Scalability
What has often been coined as ‘the
blockchain trilemma’, refers to the
trade off in any network between
scalability, decentralization and
security. Any two will succeed at the
expense of the third.
Scalability Security
/Futile
4
5 Blockchain Trends for 2020 | Evolving platforms 5
5 Blockchain Trends for 2020 | Adoption Rates across Industries
Adoption Rates across Industries
2019 brought a greater diversification to the pool of players and
ecosystems investing in Blockchain technology – We anticipate that
diverse adoption will continue throughout 2020.
Adoption across industries is not Industries where we are seeing The possibility of utilising blockchain
even rapid adoption and potential for technology in clinical trials and
2020 pharmaceutical supply chains have
Deloitte’s 2019 Global Blockchain
been at the centre of much
Survey revealed that blockchain is As new industries explore blockchain
experimentation in the past 12
going through a path of diffusion applications they do so in ways that
across industries far beyond its initial reflects their own respective months. While few have reached
fintech applications. More operational and strategic needs. production, we envisage that there
organizations in more sectors—such Regulatory issues emerged as a will be a wave of solutions which will
as technology, media, central concern of respondents in the go live once regulatory concerns
telecommunications, life sciences, 2019 survey which may shed light on have been abated.
health care, and government—are why some industries, more that
expanding and diversifying their others, have found it more difficult to Another area of interest, is that of
blockchain initiatives. identify opportunities to implement digitising health records, a
blockchain solutions in their particularly challenging
With leaders across industries looking business. We have seen particular transformation that appears
at potential applications, many may interest emerge from the Life Science inextricably linked to the emergence
wonder; How are different industries & Healthcare sector as well as of self-sovereign identification. The
adopting and leveraging blockchain Farming and Supply Chain. FSI have WEF and the World Bank have
technology? Why might companies in expanded their suite of use-cases acknowledged the need for this
one industry—but not others—be and also promise to be a sector in development to realise a more
highly concerned about a particular which we will see further Blockchain inclusive and patient-led healthcare
kind of barrier to adoption? Do growth in 2020. experience and we look forward to
blockchain attitudes and investments significant developments in the
vary by industry because of Life Sciences and Healthcare coming year.
something inherent about the
technology? Or is it something about Farming and Supply Chain
different industries’ individual
cultures?
Figure 1, confirms that Blockchain
investment across industries is
varied. TMT leads with 49% of
respondents confirming that their
company is planning a spend of at
least US$5 million in the coming
year. This industry also leads the
adoption charge with 32% of There may be nowhere that
respondents saying that they have blockchain can have a more
already implemented blockchain in immediate and meaningful impact
some area of their business. than in life sciences and health
Interestingly, TMT’s intention to The supply chain is at the heart of
care—an industry in which data
invest has increased by 4% over the every manufacturing organization; it
transparency, speed of access,
2018 figure, indicating a steady is the channel through which
immutability, traceability, and
increase in belief in the technology. information, materials, services, and
trustworthiness can provide the
financial resources flow from idea to
information necessary for life-altering
end-use delivery in a life cycle of
decisions.
value-added transactions.
6
5 Blockchain Trends for 2020 | Adoption Rates across Industries 7
5 Blockchain Trends for 2020 | Adoption Rates across Industries
Blockchain is a technology which Financial Services Although investment in Blockchain
enables scrutiny and optimisation of projects and ICOs was down in 2019
Financial services was the sector
processes in a supply chain that over 2018, we can expect a steady
tipped to see both the most
traditionally fall outside of enterprise increase in this figure throughout
disruption and most significant
solutions. We anticipate that its rise 2020. Interest remains high,
investment in Blockchain technology.
could lead to an evolution of supply particularly with governments joining
Although other sectors now look like
chain management and logistics in the conversation to provide financial
they may rival it, the previous
the not so distant future. The IBM institutions with regulatory clarity
statement remains largely true. The
Foodtrust platform established itself around the technology.
news in 2019 was dominated by
as a meaningful provider in the Track
projects like Libra, Calibra, J.P
and Trace space in 2019, working
Morgan’s stable coin and the
with Walmart, Carrefour and Nestle.
Interbank Information Network as
Undoubtedly, there is room for other
well as Central Bank Digital
players here and we would expect to
Currencies (CDBCs) from the
see an increase in interest
European Central Bank and The
throughout 2020.
People’s Bank of China. Financial
sector players big and small have
entered the blockchain game.
85 Blockchain Trends for 2020 | Governance is Critical
Governance is Critical
As the technology matures, we can see that the core challenge in the
path of Blockchain’s large-scale adoption is stakeholder management and
bringing competitors and unlikely collaborators together to solve shared
problems.
2019 made clear that technology Core Challenges in developing driving a shared objective. A working
barriers are not holding blockchain blockchain consortia group does not operate as a legal
back – but rather human barriers. entity – each participant owns and
With our clients, we have discovered 1 Allying with competitors operates their own node.
that many of the core benefits of
blockchain technology are only
realized through collaborating with
other parties in the ecosystem or 2 Agreeing on participants
indeed forging new cross-industry
partnerships. In short, a solution’s
value is often directly linked to the Reaching consensus on
3 Private Sector Entity
value of the network it serves. shared goals A separate and autonomous legal
entity is created in order to establish
McKinsey has suggested that
a private sector entity governance
Blockchain is still three to five years
4 Defining a funding structure structure. The platform is typically
away from feasibility at scale,
offered as a utility for participants
primarily because of the difficulty of
who operate their individual nodes.
resolving the “coopetition” paradox
Sharing both risks and The project tends to be jointly funded
to establish common standards. 5
successes by founding members as core
Gartner’s senior VP for technology,
stakeholders in the Steering
Peter Sondergaard echoed this,
Committee.
‘there are still technical things that Consortia Governance Models
you need to solve and scale and
there are still counter-aspects – Three major governance options are
business model wise – that aren’t emerging for blockchain consortia;
necessarily fully clear.’
Emerging Governance Models
Hybrid
Centralized governance has allowed
A hybrid governance model can
business leaders to experiment with
typically involve a shared
the technology while sidestepping
Working Group infrastructure operator as a key
controversial questions around
As in a traditional working group, this facilitator to create an organization
security, consensus, identity and
governance models works on the jointly owned in the industry.
anonymity, among others. Yet the
basis of equal power and Members follow the organisation’s
centralized model also creates new
contribution. Decisions are made directives and contribute in order to
risks around how the technology,
through consensus and members drive a common objective.
economics and governance of the
contribute resources in the pursuit of
blockchain are controlled.
The core benefits of Blockchain technology are realized through
collaborating with others parties in an ecosystem and establishing a
consortia.
95 Blockchain Trends for 2020 | Governance is Critical
Blockchain Consortia
Blockchain Consortia
Strategic Considerations
Goals of collaboration
Which goals do the involved parties
want to achieve? How will success be
measured?
Responsibilities of involved
parties
What is expected of each involved
party? What are the major
responsibilities and how are they
divided?
Contribution
How high should the financial
contribution be for each involved party?
Should it be possible to contribute
partially or fully in FTE?
Intellectual Property
Should the intellectual property lie with
all involved parties or only with those
who took part in the technical
development?
Technology Considerations
Which Blockchain technology or
platforms should be used? Will it be
possible to change the technology
depending on the project progress?
Confidentiality Agreement
In which cases will it be allowed to
share information about the project?
Will involved parties be restricted from
independent projects?
Legal Entity
Is it planned to found a legal entity for
the project? What are the strategic
considerations and which parties would
take part?
105 Blockchain Trends for 2020 | Governance is Critical
The human challenges that arise in the building of a blockchain solution require personal collaborations to be remedied
What have we learned from Blockchain solutions so far?
Adoption is the measure of success Do not underestimate the human factor
The key to a successful consortium is industry wide Collaboration is hard
adoption
Understanding the individual and company interest for
Consortium needs to be established in such a manner participation
that will entice others to participate
Buy-in from decision makers is needed; Participants
In an industry consortia, one company should not have must be willing to commit time and resources to
the position to have more power than the rest of the support the initiative
participants
Building a community platform in addition to the
technical platform is key for stakeholder engagement
Decision making should be based on level of
A strong business case for all participants
participation
Equal participation can slow down decision making Start with an efficiency case as the business case is
much easier to assess
Votes should reflect investment and sub committees
should reflect interests The platform needs to bring some form of value to all
participants.
115 Blockchain Trends for 2020 | Governance is Critical “Coopetition” —a willingness to work with your competitors and others in your industrial ecosystem toward some common purpose. 12
5 Blockchain Trends for 2020 | The Rise of Tokens
The Rise of Tokens
From art to property, the way we invest in assets is on the verge of
fundamental change. Tokens are becoming more sophisticated and
aren’t as far away from mainstream adoption as we might think.
Digital technologies have in recent Non-fungible tokens (NFTs) have Ready to Play?
years made possible a new class of seen a rise in the past 18 months, Considerations for Financial
assets called “digital assets.” We carving out a niche in the Ethereum Institutions entering the token
define a digital asset as “something ecosystem in which they are economy
represented in a digital form that has governed. The most common non
an intrinsic or acquire value.” There fungible token standard, ERC-721,
is no practical limit as to what can be saw dramatic growth of 350% in Platform Integration
characterized digitally and therefore 2019 largely driven by decentralised
be considered a digital asset. gaming. Although this is a niche area Platform selection should be guided by
Examples of digital assets include of the market, this rise and the new regulatory requirements, service
land, goods, certificates, identity, ERC1155 standard suggests that we offering, product strategy and size
and scale of community.
works of art and literature, rewards, will see increased numbers of
and even currency, among many mainstream players in this arena by
others. the end of 2020. Business Model
A new token economy could make It goes without saying that obstacles Where to play is a core question to be
the financial industry more continue to stand in the way of answered. The choice may vary from
accessible, cheaper, faster and widespread adoption, principally in advisor to token exchange broker
easier, thereby possibly unlocking the form of regulation. The bold depending on the institutions business
model.
trillions of euros in currently illiquid suggestion from industry in 2019 of
assets, and vastly increasing the an imminent digital currency will
volume of trade. push governments to provide Cybersecurity
guidelines on this unchartered
Tokens have been broadly sorted territory sooner than they may have Sufficient security measures need to
into two categories; Fungible and envisaged paving the way for the rise be ensured to secure the entire value
Non-fungible. of tokens to mainstream society. We chain when interacting with a
blockchain platform. SECaaS (Security
can remain confident that only
Fungible Token; Fungibility refers as a Service) could be an additional
institutions that engage with the revenue stream.
to the ability of a good or asset to
technology, plan for the future and
be interchanged for another good
adapt to the realities will thrive.
or asset for like kind. Therefore a Jurisdiction
fungible token is one which might
represent currency, crude oil, Ensuring a token’s compliance across
shares, bonds. Each token, or jurisdictions will bring new
fraction of a token, is equivalent to complexities which require
consideration.
the next.
Non-fungible Tokens; a non- Compliance
fungible token represents an asset
or commodity which is not MiFID, AML and KYC regulation still
interchangeable. NFTs are designed applies to the token economy. Tax
to be special or unique. Two tokens considerations should not be left
representing different cars are not behind either with a move into the
digital economy.
interchangeable as the underlying
asset is different and unlikely to be
valued equally.
135 Blockchain Trends for 2020 | The Rise of Tokens
Deloitte Blockchain at Deloitte Bibliography
Our people collaborate globally with clients, regulators, https://channels.theinnovationenterprise.com/articles/w
and policy makers on how blockchain and digital assets hy-blockchain-hype-must-end
are changing the face of business and government
today. New ecosystems are developing blockchain- https://www.forbes.com/sites/forbestechcouncil/2019/0
based infrastructure and solutions to create innovative 8/23/blockchain-still-shows-great-promise-after-the-
business models and disrupt traditional ones. This is hype/#7cde540f4ecb
occurring in every industry and in most jurisdictions
globally. Our deep business acumen and global, https://hbr.org/2019/10/the-5-kinds-of-blockchain-
industry-leading audit and assurance, consulting, tax, projects-and-which-to-watch-out-for
and risk and advisory services help organizations across
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Reach out to our leaders to discuss the evolving functions/mckinsey-digital/our-insights/blockchain-
momentum of blockchain and digital assets, begin beyond-the-hype-what-is-the-strategic-business-value
prioritizing initiatives, and understand how to manage
the opportunities and pain points associated with https://www.mckinsey.com/business-
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predictions-2020
https://www2.deloitte.com/content/dam/Deloitte/lu/Doc
uments/financial-services/lu-tokenization-of-assets-
disrupting-financial-industry.pdf
14To find out more, contact:
David Dalton
Partner | Head of EMEA Blockchain Lab
Deloitte Ireland
ddalton@deloitte.ie
Antonio Senatore
Director | Global Blockchain CTO & EMEA Blockchain Lab Lead
Deloitte Ireland
asenatore@deloitte.ie
Amy Pugh
Manager | EMEA Blockchain Lab
Deloitte Ireland
apugh@deloitte.ie
Hannah Lynch
Analyst | EMEA Blockchain Lab
Deloitte Ireland
hlynch@deloitte.ie
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