Industry executives and experts share their predictions for 2021. Read them in this 13th annual VMblog.com series exclusive.
What Enterprise Needs from Blockchain Technology in 2021
By
Mrinal Manohar, Co-founder and CEO of CasperLabs
The blockchain and cryptocurrency ecosystems
have advanced significantly in 2020. Even during volatile market events -
double digit drops in March and now bitcoin all-time-highs at the very end of
the year - the progression, adoption, and integration of blockchain technology
into both consumer and enterprise realms has continued. Among consumers, the
most significant blockchain event this year has been the growing decentralized
finance (DeFi) ecosystem. Among enterprises, however, 2020 has been a hallmark
year, with notable announcements from Visa, Square, PayPal, Fidelity, CitiGroup, and more. As more enterprises
invest in crypto and build solutions with blockchain technology, we anticipate
a set of trends, expectations, and architectures to emerge to fit enterprise
needs.
1. Enterprises will expect
flexible and customizable privacy when building blockchain solutions.
Today's layer 1 blockchain platforms largely
force enterprise partners to choose between two architectures: public or
private/permissioned. Public networks, which by default submit all transaction
history to a public ledger, are not ideal for enterprise adoption in today's
ecosystem. With the exception of a few particularly innovative, crypto-first
enterprises, most businesses do not wish for records of their transactions to
be publicly available.
Private networks, on the other hand, have the
tendency to box enterprises into stagnant, inflexible tech architectures.
Enterprise solutions on private networks do not benefit from the security,
immutability, or network benefits of public blockchains, and more closely
resemble modern database SaaS offerings than game-changing blockchain
solutions.
Enterprises will seek out and build on
blockchain networks that can seamlessly support any permutation of privacy and
confidentiality enterprises need now and in the future. Blockchain networks
that support hybrid solutions - e.g. transactions happening on private networks
and being ‘exported' to a public chain for security - will emerge as ecosystem
leads for enterprise adoptions.
If this enterprise adoption roadmap forward
sounds familiar, it's not a coincidence. SaaS providers delivered similar
compromises when building the playbook that drove enterprise cloud adoption.
Flexibility and security are key to realizing this vision of a
blockchain-supported enterprise tech future.
2. Enterprises will migrate to
networks that support smart contract upgradeability.
Enterprises expect to have control over the
code that powers their products and services. The vast majority of today's
public and hybrid blockchain solutions do not enable upgradeable code; once a
smart contract is deployed on a mainnet, it is immutable. If a new, updated
contract is released, the community must collectively phase out the old smart
contract. Blockchain platforms that support contract upgradeability enable
enterprises to launch smart contracts into production with control over their
code.
3. Blockchain will emerge as a
key component of the enterprise tech stack.
Enterprise adoption of blockchain technology
is measured, slow, and evolutionary. Blockchain solutions that ask enterprises
to replace entire portions of their tech stack will not find much
product-market fit in today's ecosystem. Blockchain solution providers would
benefit from specifically identifying portions in industry tech stacks and
adopting a ‘horizontal' approach to blockchain integration. Enterprise adoption
will continue with solution providers replacing one piece of a tech stack at a
time rather than attempting to upturn the entire stack all at once.
4. Enterprise blockchain
investment and innovation will flow towards esoteric forms of debt.
Esoteric forms of debt are especially ripe for
innovation and optimization with blockchain-based smart contracting. Take, for
example, mezzanine debt. Mezzanine debt falls in between senior debt and
equity. The management and execution of mezzanine debt are subject to a variety
of trigger points, each of which could benefit from the automation of smart
contracts. We anticipate businesses to continue building blockchain solutions
with a focus on niche, esoteric financial instruments, particularly debt.
Overall, in 2021 we are confident the blockchain
and crypto ecosystem will continue to attract innovation and investment from a
growing number of enterprises across industries and geographies.
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About the Author
Mrinal Manohar is the
Co-founder and CEO of CasperLabs, the company behind the Casper blockchain.
Prior to founding CasperLabs, he was a principal and the Technology / Media /
Telecom sector head at a ~$1b long-only hedge fund, a private equity associate
at Bain Capital in Boston, and an associate consultant at Bain and Company. He
has an MS from Carnegie Mellon University and has been passionate about
computer science ever since he began programming at age 11. He has been
personally investing in the blockchain industry since 2012.