Blockchain Needs a Killer Use Case

Moving on from hype to mainstream adoption

Looking back to the end of 2017, Bitcoin and blockchain were omnipresent. News of its meteoric gains made headlines in newspapers, on TV, and on radio daily. Everyone was talking about it. A true hype. In 2018, prices were declining, and so was public interest. Even enthusiasts started to be more skeptical in their view of Bitcoin’s and blockchain’s future.

Completing the Hype Cycle

What we experienced over the past years was a textbook example of the Gartner hype cycle. From initial enthusiasm of early adopters to mass media hype to fading interest after the hype was over.

Figure 1: Gartner hype cycle

The good news is that going through the hype cycle is sort of the natural order of things for new disruptive technologies before reaching their full potential. For blockchain having gone through the trough of disillusionment, reaching the plateau of productivity is the next step. However, to get there requires mainstream adoption, which can only be achieved through real-life use cases. Some are currently being developed in finance and beyond.

Payment, Investment, and Backend Solutions

Since the early years of Bitcoin and blockchain, key use cases have been developed in finance that enable new types of payment, investment models, and financial backend solutions:

  1. Payment: Enabling monetary transaction between individuals (C2C, B2C, or B2B), in- and outside the traditional financial services ecosystem
  2. Speculation: Investing in and trading of an asset class that has a different growth potential, volatility, and entry barriers
  3. Crowd Funding: On the flip side of speculation, companies can use it as a means to acquire investment capital similar through ICOs, STOs, or IEOs
  4. Decentralized finance (DeFi): Creating decentralized banking services that run more cost-efficient and without need for a trusted third party
  5. Asset tokenization: Creating tradable tokens that represent fractional ownership in real-life assets such as stock, real estate, fine art, etc.
  6. Borrowing / lending: Getting loans with cryptocurrency collateral put in escrow until the loan is paid back (or until liquidated)
  7. Micro-payments: Payment for goods or services on a frictionless pay-per-use basis

Collaborative Ecosystems

Primarily after the start of 2017, several non-finance use cases have been added. With few exceptions, they are focussing on creating new collaborative ecosystems for businesses and professionals:

  1. Web 3.0: Cloud services such as file or database storage, software-defined networking, or web proxies offered via decentralized networks
  2. Data ecosystem: Specialized services for data scientists and AI developers that offer better data provisioning, AI model training, and model reuse
  3. Identity management: Universal, unique, verifiable identity for people, organizations, or devices
  4. Supply chain management: Managing shipped items and interactions between organizations along the supply chain
  5. Data sharing: Easier sharing of data across organizations
  6. Decentralized autonomous organizations (DAO): Non-hierarchical organizations that are self-governed by pre-defined rules set in code
  7. Collectibles: Collaborative games with unique collectibles that can be created, shared, and traded

Reviewing Use Case Potential

I created an inventory of these 14 use cases in a Google Sheet (see link below) and reviewed each one along several dimensions. The inventory part contains the description, examples, and the target user group (consumer, professionals, businesses). The review part captures the use cases’ value proposition (what and how strong a benefit can be created), current market maturity, and barriers to adoption (e.g. usability, competition, availability of solutions).

Figure 2: Snippet from the Crypto Use Cases inventory

My key takeaways were the following:

  • Crowdfunding and speculation clearly have high potential that they showed as part of 2017’s bull run, but they are also already quite mature and it’s hard to imagine that they’ll drive another 10x on their own.
  • The general payment use case seems to have hit a plateau; it’s been around since the early days of Bitcoin, but hasn’t made any significant progress yet. Micro-payment has an exciting potential to enable new business models, those business models haven’t been identified yet though, so it remains mostly theory.
  • Use cases trying to create collaborative ecosystems seem to have potential, but each also has strong individual barriers to adoption to overcome. DeFi struggles with its value proposition, supply chain is dominated by corporate monoliths, and data lack the availability of mature solutions.
  • There might be some potential in the others; however, they have yet to make enough progress and/or develop a convincing value proposition.
Figure 3: Blockchain use cases by current maturity & value proposition

Still Looking for the Killer Use Case

There are many meaningful ways to use blockchain technology, but from all of the above, it’s hard to identify a killer use case that can drive mainstream adoption right away. Many use cases do have a clear value proposition, but only offer incremental rather than the 10x improvement a disruptive technology has to show to prove itself.

There are a few candidates such as collaborative ecosystems (DeFi, supply chain, data) or micro-payments, but none of them are yet mature enough and/or clear enough in their value proposition.

These circumstances are likely the reason why the fat protocol hypothesis still holds true. Investors favor base layer protocol investments (or technical layer 2 solutions) as a bet on the technology rather than its use. We’ll definitely need more real-life use cases beyond speculation and crowdfunding for those investments to eventually pay off.