Blockchain Technology Interest Waning - OSCON
July 25, 2019
Beth Kindig
Lead Tech Analyst
The O’Reilly Open Source Convention (OSCON) is an annual convention for the discussion of free and open source software. Open source has seen tremendous support over the last decade after going through a dark winter of software commercialization in the 80s and 90s. A historical turning point was when Netscape released the Netscape Communicator internet suite as free software in 1998 and the source code was used to spur Mozilla Firefox, Thunderbird, SeaMonkey and KompoZer.
Background on Open Source:
Proponents of Free and Open Source (FOSS) during the 90s included heavy weight Microsoft, Oracle and IBM. For instance, a Microsoft executive stated in 2001 that “open source is an intellectual property destroyer. I can’t imagine something that could be worse than this for the software business and intellectual-property business.” Fast forward nearly two decades, and Microsoft has reversed direction, and is pining for the open source community to accept the company as a contributor and supporter of open source.
Tim O’Reilly of O’Reilly Media, and the founder of OSCON, was at the strategy session in April of 1998 when the term open source was coined. Open source software today has won the war with most software development containing open source code and many previously opposed corporations changing their stance to support FOSS. According to the Open Source Initiative, the movement has caused a $60 billion loss for proprietary software, which correlates to $60 billion in customer savings per year.
This year’s conference reflected the relative calm confidence around open source development with most keynotes used for marketing purposes to win over the attendees on using their services rather than anything news breaking. Google, Amazon, Microsoft and IBM were among those bidding for the crowd in the keynotes.
Blockchain Technology Decline: False Signal?
Interesting enough, O’Reilly’s insights showed blockchain technology losing interest from software developers in the keynote on developer audience insights. The term fell 18 points in their rank points to number 26 on search terms. Kubernetes, the open source container framework, was effectively number 1.
According to Brian Behlendorf of Hyperledger, blockchain technology is not likely to create the next Amazon or Google as it’s more of a cooperative consortium. In his session, “2019: Year of professionalization for open source blockchain,” he pointed out that 45% of companies stated they would join with their competitor on blockchain technology development.
With that said, 80% of companies have not put blockchain technology into production and the market is very early. Many mistakenly think blockchain technology is synonymous with crypto, however, some of the most compelling use cases today include traceability with the food supply chain, judicial consortium chain, routing and settling insurance claims, and digital identity within businesses and government agencies. These uses are currently being explored by companies, such as Wal-mart with FoodTrust, LegalX Chain, the Intelligent Health Care Network and the OrgBook.
Here are a few more companies putting blockchain technology into use:
- NASA for secure flight data
- Honeywell for used aircraft parts market
- Chinese Central Bank’s has processed $4.36 billion on blockchain trade platform
- Malta is using smart contracts to initiate and register rent remittance
- Visa is planning to join a growing list of blockchain-based international payment providers
Behlendorf also pointed out that the United States is more averse to centralized technologies overall. Intermediaries in finance, such as SWIFT, are more comfortable for people in the United States compared to other countries around the world. Therefore, the trends presented by O’Reilly may not be reflective of blockchain’s use globally.
In addition, venture funding in blockchain technology has reportedly tumbled 60% in 2019 from $1.6 billion, down from $4.1 billion in venture funding in 2018, according to CB Insights. Taking a closer look, CB Insights reported an increase in early stage funding from 80% of equity deals in 2017 to 88% of equity deals in 2019, with funding nearly non-existent at Series D and E.
There are a few conclusions you can draw from this information:
- Blockchain technology is incipient and not able to stand up to the premature pressure that initial coin offerings placed on the technology. With ICOs now fizzling, there is more wariness around blockchain than what is deserved (and scaring off VCs)
- Blockchain technology is less of a venture-funded effort and more of a development effort, like a programming language or an internet protocol, with not much ROI to offer investors
- Blockchain technology will be developed in-house at companies rather than requiring a startup ecosystem (similar to a new programming language)
- Crypto is consolidating and other industries will need to be the impetus for blockchain’s commercialization
In the early 2000s, Python was a neglected programming language. Today, Python is the most widely used programming language, with the majority of the growth in the last five years. I think we are very early on blockchain and its potential should not be dismissed.
Conclusion:
Blockchain databases are revolutionary and will disrupt the way many industries record and share data (beyond the financial industry). The recent withdraw of blockchain development interest is very common for new technologies. You can think of disruptive technology products like an ocean wave that comes in stronger with each attempt. Crypto pushed blockchain too hard, too soon. The market saw dollar signs rather than carefully architecting sustainable blockchain applications. We will be keeping an eye on companies for cheap, early investments in this area.
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