Blockchain exiting ‘hype cycle’, says US GovLab chief

By on 05/05/2019 | Updated on 24/09/2020
Stefaan Verhulst, co-founder of the Governance Laboratory, speaking about the uses of Blockchain at the Putting Citizens First conference

Blockchain technologies have passed rapidly through a “hype cycle”, the head of a public sector innovation lab said last week – and what’s coming out of the other side is a narrower but more realistic set of applications for the emerging tech.

“In respect of the ‘hype cycle’, blockchain is one of the technologies that, in my lifetime, was the quickest high in the cycle, and the quickest ‘down’ [to fall] in the cycle,” Stefaan Verhulst told delegates at the Putting Citizens First conference – which was organised by Global Government Forum in partnership with Yesser and EY, and held on 30 April in Saudi Arabia.

Verhulst is co-founder of the Governance Laboratory (GovLab) at New York University, a research foundation that works on how to transform governance using advances in science and technology. Asked by conference chairman Richard Thompson, editor of the Middle East Economic Digest (MEED), if he was saying that “we have passed the peak with blockchain”, Verhulst answered: “I believe we have passed the peak. Many people believe blockchain is not such an important technology any more but I think we are becoming more sophisticated about what we can do with blockchain.”

After the hype, what’s left?

A blockchain is a decentralised, distributed and public digital ledger used to record transactions across many computers, so that any involved record cannot be altered without the alteration of all subsequent blocks. Transactions are grouped in blocks, recorded one after the other in a chain of blocks: the ‘blockchain’.

Within financial services, the potential uses include speeding up and simplifying cross-border payments; smart contracts; and improving online identity management. Verhulst described an initiative entitled ‘Blockchange’: a GovLab project exploring how blockchain can be used to drive social change via more than 90 case studies.

He described three types of applications, “from a governance point of view, where blockchain could make a difference if applied in an appropriate manner”: ‘track-and-trace’; smarter contracting; and identity.

Start with the goal, not the tool

Naming use cases of the technology in action, Verhulst cited diamond miner and trader De Beers application of blockchain technology to track its stones throughout their value chain, so consumers can know if the diamond is “trustworthy”; and blockchain technology being used to protect Indonesia’s rainforests.

Verhulst concluded by presenting a set of conditions that organisations “should use to determine whether blockchain is the appropriate technology” to help achieve the desired outcome. Questions to ask include whether the problem relates to ‘information asymmetries’ and whether the organisation has sufficient digital data. He said: “If you don’t have data that is digital, then don’t even start thinking about blockchain.”

In respect of his cautious overall tone on the potential of blockchain, Verhulst said: “If I was giving this talk last year, everyone would have [gone away thinking] that blockchain was the solution to everything. What I am trying to say is that we have to become more sophisticated in understanding the value of blockchain.

“While the hype cycle may be down, the maturity cycle is still to be developed. I think there are a few use-cases when blockchain is superior but other data-disclosure technologies might be better, cheaper and more mature – that’s what we really need to understand: when is [blockchain] appropriate?”

Unhealthy outlook

The other members of the ‘Technologies’ panel at Global Government Forum’s conference were Gartner’s Medhat Amer; Talal AlBakr of STC Solutions (Saudi Arabia); Prof Dr Obi of the Institute of e-Government at Japan’s Waseda University; and Abdulaziz Alsoliman of BTC Networks (Saudi Arabia).

The first audience question during the session asked the panel for their views on blockchain’s application in sectors beyond financial services – in particular healthcare – with the comment: “We hear a lot about blockchain’s use in [the] financial [sector], but not in other sectors.”

Gartner’s Medhat Amer responded: “We have calculated around 105 use-cases in different sectors, and healthcare does not have any good use-cases so far.”

Verhulst described “a lot of effort to develop self-sovereign identity in the healthcare sector”, saying one challenge was to create “an eco-system that trusts the validation” of data. “This is the challenge in most ID systems,” he added.

Over the coming weeks, Global Government Forum will be publishing a series of articles on Putting Citizens First – including a more detailed report on the Technologies panel session

About Ian Hall

Ian is editor of Global Government Fintech a sister publication to Global Government Forum. Ian also writes for media including City AM and #DisruptionBanking. He is former UK director for the pan-European media network Euractiv (2011-2018), editor of Public Affairs News (2007-2011) and news editor of PR Week (2000-2007). He was shortlisted for ‘Editor of the Year’ at the British Society of Magazine Editors (BSME) Awards in 2010. He began his career in Bulgaria at English-language weekly the Sofia Echo. Ian has an MA in Urban and Regional Change in Europe and a BA in Economics, both from Durham University.

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