When blockchain was created in 2009, the pioneers could never have imagined that the technology would massively attract big corporations and governments as it is today. After all, blockchain was developed to remove such centralized authorities from interfering or controlling transactional data.
But what we see today is a growing number of global technology companies and governments increasingly step up efforts to implement blockchain or regulate it. Of course, this wasn’t the case at the beginning when blockchain was highly regarded as a threat to the existing financial systems. As time goes on, though, more and more individuals and corporations have come to believe that it has real potential.
Notably, Facebook was so close to pulling a major land-grab. They planned the launch of their Libra coin before a wave of criticism saw several key partners abandon the project. But that hasn’t stopped the company from pushing on with Libra. Even China which was among the first countries to ban cryptocurrencies, has recently changed its stance and is now actively exploring blockchain.
Blockchain Going Institutional
Why are these corporations and state governments embracing blockchain now? First, it is important to note that blockchain has moved beyond the hype cycle—the phase characterized by confusion among stakeholders about what benefits blockchain brings to businesses compared to their existing processes. The current phase, where pilots and proofs of concepts (PoCs) are being explored and sometimes deployed, is called “blockchain-inspired” according to Gartner. Many enterprises and governments are embracing blockchain during this time in order to increase their competitive edge against early adopters.
However, to achieve that goal, they are joining forces. This includes teaming up with the institutions that determine law, regulation and capital flow in the industry. This can be seen through the lens of institutional investment, which boomed in the last year. Grayscale, a leading cryptocurrency investment fund, noted that over $600m was invested in its portfolio of products in 2019, more than in the previous five years combined. A large part of those investments—71 percent—was sourced from institutional investors. That trend is likely to continue in 2020.
Engaging Policymakers and Regulators
Apart from investors, the growth of institutional interest in blockchain and cryptocurrency is also fueled by regulators and policymakers. Last year, we saw the Securities and Exchange Commission (SEC) actively enforce the 2017 DAO Report. They were busy issuing various civil penalties against blockchain enterprises in the process.
Regulators have attempted to protect the public while not taking aggressive actions that could stifle innovation in this area. However, these developments will never be acceptable. Many see every piece of regulation as an obstacle to create a radically new innovation.
Institutionalization of Blockchain and Industry
There is a growing consensus that blockchain would only reach mainstream if the industry is willing to embrace institutionalization. That is, leverage the power of state and private institutions to create accessible products, regulatory framework and capital flows that would provide the foundations the industry needs to flourish. Unless institutions are engaged, it won’t be possible for blockchain to fulfill its true potential. These institutions provide not only the infrastructure. They also certainty that emerging technologies such as blockchain needs widespread adoption.
So in truth, the institutionalization of blockchain would greatly help accelerate its implementation across various industries. Perhaps that explains the reason why the most important blockchain solutions today are from leading technology giants. This includes notable organizations such as IBM, Microsoft, and Hyperledger.