Enterprise blockchain’s biggest challenge: getting competitors to work together

Businesses that can’t learn to play nice with each other will be left behind by the blockchain revolution.

That was the message of a panel on “How is Blockchain Technology Evolving?” at MIT Media Lab’s day-long look at The Business of Blockchain on May 2. The event attracted companies like small blockchain startups, major consulting firms, and multinationals at the top of the Fortune 500.

Panelists noted that blockchain consortia which were supposed to solve industry-wide supply chain bottlenecks are having difficulty moving past the proof of concept stage with permissioned enterprise blockchains. One of the main reasons is that executives and decision makers don’t really understand blockchain yet, said Simon Whitehouse, senior managing director for financial services, growth, and strategy at Accenture.

“[G]o to someone running the department … and say, ‘tell me about blockchain’ and they’ll go ‘ummm’ quite often,” he said. “I think there’s a giant learning curve right now, especially outside labs and outside innovation functions in government and in corporations.”

Those executives aren’t alone. A recent Harris Poll found that while 89% of Americans—and that’s across all age groups—are at least aware of Bitcoin, only 43% rated themselves at least fairly familiar with it. That rises to 50% in the 35-44 age group and drops back to 43% for 45-54—the two demographics most likely to be at the decision-maker level. And that’s only when it comes to Bitcoin, not the blockchain technology that underlies it.

And indeed, at the MIT conference, two attendees from different divisions of a company in the top 10 of the Fortune 500 said they were in innovation/learning functions.

“Until we’ve got enough people at a level of maturity that are saying, ‘I can see pros and cons, and I can see why I might want to play,’ and crucially, ‘I can see how I might start to play,’” that won’t change, said Whitehouse. “[W]e’re talking about joining [industries] up that are currently fragmented.”

These industry consortia “show a lot of promise, but they also require [cooperation by] corporations that have been competing against each other for decades, if not hundreds of years,” said Monica Quaintance, head of research and networks at Kadena, a blockchain-as-a-service company. “And so, there’s a strong disinclination to play nice with each other, even though it’s often something that they all want.”

She gave the example of a pilot program Kadena ran for a consortium of health insurers to share information about doctors’ offices. “This isn’t even HIPAA protected data,” she said, noting that “insurance companies get fined if they don’t know where their doctors are and who’s taking what insurance and how many employees they have and all of this information.”

Managing an ever-changing database requires a lot of calling and fact-checking, and insurers and doctors’ offices hate it she said. “It was a perfect case for, if everybody could just play nice and share their information, everybody could win. And, it was a successful pilot—we got five companies to stand up and use it.”

But when things went off the rails, Quaintance said, “was when it went forward into, who’s going to maintain it. We are still on hold. They have a lot of promise, but it’s hard to get people to play nice.”

Dan Robinson, a research partner at cryptocurrency-focused hedge fund Paradigm, agreed, saying these “social problems are almost intractable. Nobody wants to sign on to somebody else’s blockchain. People really want to form this consortia, write a press release about it, but they don’t really want to put their business critical methods on there until it’s been proven.”

The result, he predicts, is that what he considers a “much worse technology”—public blockchains like Ethereum—will almost inevitably succeed.

According to Neha Narula, director of digital currency initiative at MIT Media Lab, there’s yet another, related problem. While working together on an enterprise blockchain consortium may solve a company’s supply chain problems and make its business more efficient, it will also do the same for its competitors.

“Why would I want to build on something that I know is going to end up furthering your business, making you wealthy, possibly at my detriment,” she asked. “I’d rather build on something that is unowned, that no one really controls. [Businesses] are going to have to figure out how to un-own what they’re working on really fast, and get to a point where it doesn’t feel like there’s a single company controlling it.”

One solution is to build a permissioned enterprise blockchain on top of a public, permissionless one said Quaintance. That is something her company, Kadena, intends to launch this year, she added.

She compared it to a Main Street, in which “you can build your store on the street and people can come in and your back office stuff happens off the street,” she said. “But, you provide a central place where everybody can connect to each other. We’re getting much better traction with this whole public and private at the same time then we were ever getting from permissioned blockchain.”