Shelved Projects Show Blockchain’s Hype Can Fall Short of Reality

With the crypto industry under fire, some blockchain projects are also on the chopping block.

It wasn’t supposed to be this way.  

After all, blockchains — distributed ledgers whose promise has been to transform business models — do not necessarily need cryptos. Public blockchains do; private ones don’t. 

But the high-profile shuttering of two private blockchain projects in just the past few weeks underscores that blockchain may have been a solution in search of a problem.  

So far, in the post-FTX era, there’s been no great decoupling of fortunes between crumbling crypto and the blockchain, a reaction some would say is not coincidental.

At a high level, blockchains allow data and digital assets to be tracked across peer-to-peer interactions in a decentralized fashion. As to just what those digital assets could be, the sky’s the proverbial limit, spanning contracts, non-fungible tokens (NFTs), software, content, movies, music, and more. 

Some High Profile Hits

Enterprise blockchain efforts took a high-profile hit this month as TradeLens, a blockchain system developed by A.P. Moller - Maersk (Maersk) and IBM shut down. At a high level, the ambition had been to digitize supply chains, share information (bills of lading and enhanced container tracking) and reduce fragmentation. The announcement, according to the site, noted that the desired “level of cooperation and support has not been possible to achieve at this point in time.”

Separately, the Australian Securities Exchange shelved its blockchain project, which ostensibly would have improved transaction settlements. The reasons? The distributed ledger tech wound up being too complex and the project kept getting delayed (it was slated to go live two years ago). In the meantime, ASX is taking a pre-tax charge of about $164 million as it abandons the project.

Note the reasons for the scuttling mentioned above: Complexity and lack of collaboration. These pain points run counter to the promise that blockchain enthusiasts have embraced over the years: Participate in a “trustless” permissionless environment, and all sorts of positive operational benefits ensue.  

It’s worth noting that, in the case of TradeLens, the project had tracked tens of millions of shipping containers, logging 36 million electronic shipping documents and the negatives still outweighed the positives.

It may be the case that blockchain is seeing a double whammy. Public blockchains tied to cryptos will be called into question as various exchanges and platforms teeter and topple in the continued fallout stemming from the FTX collapse. And for the private projects, the simple fact remains that corporate belt-tightening demands that enterprises take a cold hard look at tech projects that have been in the works for years and have not paid any real dividends.

The pressures are also becoming more pronounced in other ways, not just on costs. Consider the fact, as detailed in its “Blockchain Payments Tracker,” that although many firms see advantages in embracing blockchain, there are headwinds that might stymie the leap from exploration to deployment. Among those risks: Regulations and profits, as seen in the chart below.