The B-Word: why are high-profile blockchain projects failing?
The recent failures of large-scale blockchain projects by both the Australian Securities Exchange and a joint IBM / Maersk shipping platform have spotlighted the difficulties of such major transformations. What lessons can telecoms companies learn when pursuing their own blockchain ventures?
As the crypto market continues to reel from the collapse of FTX, the arrest of its founder in the Bahamas, and trouble brewing for Binance, in less miniseries-worthy developments, the Australian Securities Exchange (ASX) has quietly announced that its blockchain-based replacement is no longer happening.
In development since January 2016, the new exchange, developed in partnership with Digital Asset, would have been a world’s first of its kind, replacing the 25-year-old Clearing House Electronic Subregister System (CHESS) with a nimbler, more cost-efficient alternative.
Stock settlement time remains, at two days on average, sluggish at best, and attempts to speed up the process have proven difficult. In the US, a great deal of time and effort was spent on turbo-charging the process to one business day in the wake of the great meme stock rush of 2021.
Ensuring that each of the various ledgers of those involved in any given trade are accurate and up to date is the big challenge – therefore, would a single ledger, such as one based on blockchain, not be an obvious response to the problem?
The ASX said the decision, the outcome of an independent delivery review by Accenture, was taken “in light of the solution uncertainty”. Despite this, the report states that 63% of the project’s deliverables had reached the testing phase, albeit with “significant gaps in Test, Analysis and Design, and overall Program and Project Management”.
In a lengthy blog post, Tim Bray, former AWS vice-president and co-author of XML, dished the dirt on Amazon’s (brief) involvement in the project, and the reasons why they didn’t get involved. In short, he diagnosed a case of too much money being poured into a technology for which there were no solid business use cases:
“The things they wanted to do were perfectly reasonable. Some of them were damn exciting. They all needed databases. They could all make use of ledger-like data structures, also cryptographic hashing and signing. But, um, why did they need blockchain? Severe lack of clarity on that.”
Bray and his team were sceptical over blockchain because “we just couldn’t convince ourselves that the real world wanted zero-trust” as opposed to a central, accountable authority overseeing transactions on a “trust but verify” basis.
With a zero-trust system like decentralised and distributed blockchain, every user on a network is treated as a possible threat, and access to systems within a network is only granted if the user has been authenticated. Effectively, in a zero-trust house, every internal door is locked, whereas a trust but verify house is one with a locked front door but no internal doors.
From the trading floor to the shipping port, it was also recently announced that IBM and Maersk’s TradeLens, the only successful blockchain managing a public shipping network, is shutting down after four years.
Once handling 700 million events and 6 million documents per year, TradeLens digitised the vast quantities of information contained within the mostly manual paperwork that trade depends on to standardise global shipping and logistics.
However, even an ongoing supply chain crisis couldn’t help it reach a sufficient level of commercial viability, and the 300 or so firms that did sign up were reluctant to share business-sensitive data on the platform – hardly a vote of confidence in the integrity of the blockchain.
Bertrand Chen, chief executive of rival blockchain trading platform GSBN, blamed TradeLens’ “bigger focus on technology than business,” adding: “which problem does it solve? If it does not resonate with end users, it won’t work.”
After so many years of botched attempts and thwarted pilots, is blockchain incapable of overcoming its issues around regulation, interoperability and scalability making it impractical for use in, say, securities trading or shipping logistics?
The qualities that made blockchain so disruptive and enticing to the Sam Bankman-Frieds of the world – lack of regulation, standardisation, and a glossary of staggeringly alienating jargon – makes it equally off-putting to the businesses who could fund the next stage of large-scale use cases. As things stand, the risk for investors and enterprises is just too great.
Though some smaller enterprises are successfully making use of blockchain in the telecoms space –DENT Wireless‘ token-based marketplace for mobile data and the Telcoin currency being two of them – these remain far from the massive transformative digital projects that the ASX and IBM / Maersk ventures represented.
For now though, the search for a cryptelco killer app continues…