The optimistic predictions of the Blockchain technology for next year may be accurate, but many factors will have to fit.
The American market research company Forrester recently published its Blockchain technology predictions for 2021. The report reveals interesting findings, noting that 2020 has been an important year for the growth of Blockchain technology at the enterprise level and the DLT technology space.
Martha Bennet, Forrester senior analyst and co-author of the report, told Cointelegraph that Blockchain’s predictions at the enterprise level are based on tipping points that show definitive changes rather than continuing trends. For example, the report predicts that 30% of global projects will go into production next year. This is partly due to the impact of the COVID-19 pandemic.
According to Bennet, many of the Blockchain-based systems in place today share a common factor: less time to resolve discrepancies. In some cases, this could even be instantaneous. Bennet noted that this common factor applies to supply chain use cases as well as financial services:
„It’s not just about needing fewer people to perform certain tasks; it’s also about shortening the time taken and freeing up liquidity. A key point is that it is possible to make this a reality today, in the context of existing processes and operating models“.
Development „takes time
While this may be true, Bennet shared that longer-term strategic projects in financial services tend to revolve around possible changes in market structure and operating models. Many of these cases also require regulatory adjustments. „This requires time, resources and effort. This is the main reason why the volatility and uncertainty related to COVID have led many banks to withdraw for the time being from some of these longer-term DLDD-related projects,“ said Bennet.
The report also notes that almost all initiatives that will move from the pilot phase to the production phase next year will be implemented on Blockchain business platforms that use the cloud. These are likely to include solutions from Alibaba, Huawei, IBM, Microsoft, OneConnect and Oracle.
Allistair Rennie, CEO of IBM Blockchain, told Cointelegraph that the prediction that 30% of Blockchain projects at the enterprise level will go into production next year is consistent with what IBM has seen with clients so far:
„Due to the increasing strain that the pandemic has placed on supply chains, clients are finding that there is an urgent need to accelerate their digital transformation to emerge stronger than before. We are seeing both expansions of existing and new Blockchain projects. The most successful are those that are underpinned by strong business use cases and have clearly defined value to add to the business.
The most critical technical prediction: Zero-knowledge proofs
From a technical perspective, Bennet mentioned that the most critical prediction in the report is the growing need for Zero-knowledge proofs. „Zero-knowledge proofs are necessary because of the challenges of preserving confidentiality that currently hold back projects,“ he said. The report also outlines the problem that ZKPs can solve:
„For companies that do not want to rely on established encryption techniques, the only options have been to keep only the hashes in the chain or to use constructs such as selective replication or private data collections. In many cases, existing techniques also do not address the exposure problems that arise from metadata.“
Recently, however, much progress has been made around ZKPs, for example, a ZKP project is being developed by the accounting firm Ernst & Young. Known as „Nightfall“, it is a privacy software that will allow private Blockchain-based transactions using ZKPs. Paul Brody, global leader of Blockchain at Ernst & Young, told Cointelegraph that the firm’s top priority in the coming year is to make Nightfall and ZKPs easier to use for developers:
„The biggest challenge in using and implementing ZKPs is that they are much more complex than coding a smart contract without privacy. I would compare it to adding SSL and encryption to web pages in the early days – it’s not something most people learn when they learn Solidity development and right now, it’s not that easy to implement“.
Brody also shared that the work around Nightfall is focused on increasing the level of privacy of transactions by hiding the metadata that could be inferred when analysing network activity. And while the product currently supports private transfers and payments with regulatory compliance, Brody explained that the company wants to expand this by creating new privacy tools. „If we do our job well, people will move from developing DApps (decentralized applications) to developing ZApps (Zero-knowledge proofs applications),“ he said.
In addition, IBM’s Blockchain platform uses ZKPs to preserve data privacy. Ramesh Gopinath, vice president of IBM’s Blockchain solutions, told Cointelegraph that IBM is using ZKPs and related Crypto Method schemes, such as multipartite secure calculations to enable reliable privacy preservation analyses along with AI data in the Blockchain. The Forrester report notes that IBM will be one of the most widely used Blockchain platforms for production-ready projects next year.
The Baseline Protocol is another open source project that relies heavily on ZKPs to coordinate confidential workflows between companies. John Wolpert, group executive for the core business network of software company Blockchain ConsenSys, explained that in the protocol, ZKPs allow companies with different record keeping systems to be verifiably synchronised, record by record, without sharing confidential information.
Predictions of public DeFi and Blockchain
Forrester’s report also predicts that Decentralised Finance, or DeFi, will negatively affect the adoption of public Blockchain. According to the report, technology leaders at the enterprise level are now open to discussing the role of public Blockchains. Unfortunately, the rise of DeFi in 2020 has led to questionable activity in public networks such as Ethereum. „This has re-associated Blockchains with Wild West cryptosystems and will continue to alienate informed decision makers and risks,“ the report states.
Kyle Thomas, CEO of Provide – an enterprise level Blockchain provider working with SAP and Coke One North America – disagrees, telling Cointelegraph that organizations will soon see public Blockchains in the same way they do on the Internet: „A large share of the market is at stake as ‚Enterprise DeFi‘ becomes a reality with every passing day.
Echoing Thomas, PwC cyber security expert Kevin Feng, former chief operating officer of Blockchain VeChain, told Cointelegraph that while DeFi’s space may resemble the ICO frenzy of 2017, it is different in that DeFi illustrates the power of smart contracts for financial services.
As such, Feng mentioned that the DeFi space will likely make companies wary of public Blockchains in the short term, but as the space matures, public Blockchains will prove better for financial use cases: „If we look at the DeFi from another angle, it shows how the Blockchain could be used for financial use cases, which is the missing piece for corporate level Blockchain use cases.