Enterprise Blockchain Viability Grows with Scalability, Privacy, and Liquidity Improvements

Enterprise blockchain technology, once hampered by limitations in scalability, privacy, and on-chain liquidity, is now poised for a comeback due to significant advancements in these critical areas, according to Paul Brody, founder and chief executive of Nightfall Networks and former Global Blockchain Leader at EY. The author argues that while early attempts at enterprise blockchain between 2017 and 2023 failed, they were not due to a flawed concept but rather because the technology arrived before the necessary infrastructure and market conditions were in place.

Brody draws a parallel to the dot-com bubble, citing Pets.com, which received $110 million in initial funding but ultimately failed. The issue, as stated in the article, was not the idea of selling dog food online but that the logistics, customer habits, and unit economics were not yet mature enough to support the business. Similarly, dozens of companies that pursued enterprise blockchain during the 2017-2023 period were, according to Brody, simply too early. Many of these initiatives, backed by major financial institutions like Deutsche Bank and HSBC, and technology firms like IBM, struggled with fundamental issues.

Past Challenges and Current Solutions

Nearly all enterprise systems today tend to fail at the boundaries between companies, either due to information being out of sync or the cost of real-time proprietary integrations. Blockchains offered a potential solution by enabling shared information and business logic across an open ecosystem. However, early enterprise blockchain solutions required significant workarounds to compensate for a lack of native privacy, as no company wants its competition to see sensitive operational details. These efforts resulted in systems that were uniformly slow, expensive, and failed to gain traction. Many users who experienced these permissioned systems concluded that blockchain did not work for them.

However, the landscape has changed. Improvements in Ethereum’s scalability have addressed previous bottlenecks. In 2020, Ethereum handled about 1 million transactions daily, with costs per transaction sometimes reaching $30-50. Today, according to the article, most Ethereum transactions cost under a penny, and the network’s capacity is projected to reach billions of transactions per day. This enhanced scalability is a crucial enabler for enterprise adoption.

Privacy, a key stumbling block for past initiatives, has also seen substantial development. While privacy is not yet a default setting, a wide array of privacy tools and systems are now available, including privacy pools, zero-knowledge roll-ups, and dedicated privacy chains. This availability makes it possible to run business operations at scale with a high degree of privacy, addressing a core concern for enterprises.

Furthermore, the emergence of on-chain liquidity, largely driven by stablecoins, is transforming the financial possibilities for blockchain. Regulators globally have provided a framework for stablecoins, leading to significant liquidity. Transaction volume for stablecoins reached nearly $1.8 trillion in June, providing a foundation for financial transactions within blockchain ecosystems.

Tangible Enterprise Benefits

These combined advancements offer tangible benefits for enterprises. Microsoft’s Xbox network, for instance, moved to smart contracts for handling royalties, reducing the time to access monthly statements from 45 days to just four minutes, all while processing over 2 million transactions daily. Beyond operational efficiencies, the integration of on-chain data for inventories, contracts, purchase orders, and invoices can enable direct access to working capital. For example, firms can potentially reduce inventory by 35-75% by moving away from traditional spreadsheets and EDI messages. Moreover, having verifiable on-chain data can improve access to credit and facilitate immediate and efficient factoring of receivables.

Brody suggests that by combining the operational benefits of blockchains with their financial capabilities, a single ecosystem can emerge where assets can be managed, traded, and paid for efficiently. While uncertainties remain, such as the exact amount of capital invested in past failed ventures and the long-term regulatory landscape for stablecoins, the current technological maturity and market conditions indicate that enterprise blockchain is once again a viable consideration. The article concludes that it is time to explore these possibilities again.

Why This Matters

The materials describe a narrow update: The article argues that enterprise blockchain, which previously failed due to a lack of scalability, privacy, and on-chain liquidity, is now viable due to significant advancements in these areas. The exact amount of money collectively incinerated by the crypto industry trying enterprise blockchain between 2017 and 2023.

Broader Context

Source materials place the opinion in this context: The article is an opinion piece by Paul Brody, founder and chief executive of Nightfall Networks, and former Global Blockchain Leader at EY.