Finance could lead $13bn blockchain spend surge
When it comes to cryptocurrency and blockchain technology, there never really has been a shortage of opinions.
Berkshire Hathaway’s Chairman and CEO Warren Buffett recently stated in an interview that while blockchain, or distributed ledger technology (DLT), was an “ingenious” idea, he simultaneously said investment in the cryptocurrency Bitcoin a “delusion”, adding that it attracts “charlatans”.
“You can stare at it all day, and no little Bitcoins come out or anything like that. It’s a delusion, basically,” he told CNBC.
So, it’s somewhat surprising to note that IDC (International Data Corporation) expects blockchain spending to hit nearly US$2.9 billion in 2019 and reach a potential peak of US$12.4 billion by 2022.
According to James Wester, research director at Worldwide Blockchain Strategies, blockchain is maturing rapidly, and the industry has reached an inflection point where implementations are moving quickly beyond the pilot and proof of concept phase.
The positive outlay around the technology follows a report by KPMG, that found tech leaders from large companies around the globe still had strong expectations for blockchain— its potential to enhance business efficiency being the top draw.
IDC expects global blockchain spending will be led by the financial sector, where the banking, securities and investment services, and insurance industries will invest more than US$1.1 billion (combined) in blockchain solutions this year.
HSBC, one of the world’s largest banks, settled US$250 billion worth of forex trades using blockchain last year in a “milestone” for blockchain use beyond proof-of-concept. The bank’s Chief Digital Officer of Germany told TechHQ ahead of Blockchain Summit Frankfurt; “It is live and proven. Not a large fraction of Blockchain projects move into this stage of successful implementation.
“I think we are still very much at the beginning of the potential scope of adoption,” he added. “But the real power of blockchain based processes will unfold if the industry starts combining current processes and products with a multitude of additional data sources— like IoT-based data within the trade and shipping industries— that are securely delivered into a ledger of data.”
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Jessica Goepfert, Program Vice President of Consumer Insights and Analytics feels that use cases that comprise the blockchain opportunity are developing as swiftly as the technologies enabling it.
“We are continuing to monitor and measure these developments on a regular basis and are inspired by the various forms of innovation blockchain delivers,” she said.
From a technology perspective, IT services and business services (combined) will account for nearly 70 percent of all blockchain spending in 2019 with IT services receiving additional new investment over the forecast period.
Blockchain platform software will be the largest segment of spending outside of the services category and the second fastest growing category overall with a five-year CAGR of 81.2 percent, following IT services with a CAGR of 82.8 percent.
The United States will be the geographic region that will see the largest blockchain spending in 2019 (US$1.1 billion), followed by Western Europe (US$674 million) and China (US$319 million).
All nine regions covered in the spending guide will see phenomenal spending growth over the 2018-2022 forecast period led by Japan and Canada with five-year CAGRs of 110 percent and 90%, respectively.
According to Stacey Soohoo, IDC’s Research Manager of Consumer Insights and Analysis, with several breakthroughs in 2018, blockchain has come a long way since 2017, the year of blockchain experimentation and awareness.
“2019 will be a year of mainstream adoption but will rely heavily on reshaping the ideology of a blockchain revolution,” she said.