At this week’s Money 20/20 Europe fintech event in Amsterdam, Netherlands, I heard something that underlines exactly the kind of hype cycle we are in right now with blockchain.
“Let’s just call it a blockchain anyway, we’ll get funding,” one delegate said to another.
Whether it was a joke or the person was being serious doesn’t matter. But the comment highlights the way in which the term blockchain is being used by companies of all sizes, often in the wrong way.
Blockchain was pioneered by the creators of bitcoin and is the technology that underpins that cryptocurrency. It is a public ledger of activity in bitcoin that cannot be changed or tampered with because of the complex cryptography behind it.
Many industries have begun to take the principles of that technology and apply it to their own problems. And some have been conducting successful trials.
Others, however, have just been jumping on the hype. A venture capitalist told me at the event during a private conversation about a company that had pitched to him about blockchain, but had no actual application of the technology. That start-up did not get funding.
But sadly, the comment I overheard and mentioned above is kind of true. Think about some of the publicly-listed companies that have added a blockchain element and seen their shares spike. Nasdaq-listed L acquired blockchain company Ziddu and saw its shares soar 2,000 percent. Overstock.com announced a big pivot to blockchain. And even legacy camera company Kodak said it would launch its own cryptocurrency, which sounds crazy to me.
There are, of course, some companies doing good work with blockchain technology. And there is a lot of promise in the technology. The CEOs of ING and BBVA both told me at the show that they think blockchain could be widespread across the banking industry in five years.
Despite the optimism, which often borders on hype, there needs to be some realism because adoption of the technology still faces stumbling blocks. One of the key concerns is if blockchain can scale across different industries and companies. One bank might be using a certain blockchain solution, while another firm could be using something different. It’s unclear whether the different blockchains will work together.
There’s also the question of whether blockchain is even needed for certain processes.
Adding blockchain to your company name to boost share price or raise money has echoes of the dotcom bubble and we all know how that ended.