Blockchain is used by a number of companies that do not have clearly defined problems they claim to have solved with the novel technology, according to a recent report. It concluded that nearly half of the examined companies showed no evidence of a problem solved.
The Centre for Evidence-Based Blockchain (CEBB), operating under the auspices of the British Blockchain Association (BBA), a non-profit established in 2017, published a peer-reviewed paper with a focus on "evidence-based blockchain" (EBB), and presenting "findings from a global study of blockchain projects and startup companies." The BBA’s goal, the website says, is promoting "evidence-based adoption of Blockchain and Distributed Ledger Technologies (DLT) across the public and private sectors." CEBB is described as "a neutral, decentralized, global initiative by the world’s leading research universities and academic institutions advising policymakers, governments and BBA member organizations," the aim of which is to advance evidence-based blockchain.
The CEBB analyzed 517 blockchain projects and start-up companies launched between December 2016 and June 2020, said the paper, using a random sample of projects from Angel.co database.
Per their results, 160 companies had no evidence of a clearly defined problem; 297 had unfiltered evidence (such as non-peer reviewed essays and research papers, blog post, opinions, etc.); and 27 had filtered (peer-reviewed) evidence.
The authors said:
"Our study concluded that almost half of the blockchain firms show no explicit evidence of the problem to be solved. Approximately one-third fail to cite a comparison and intervention analysis, and less than 2 per cent demonstrate evidence of outcomes backed by filtered (critically appraised, peer reviewed) information."
The CEBB also argued that an US Agency for International Development (USAID) study looked at 43 blockchain projects and companies that claimed to have solved a number of issues via distributed ledgers, finding that "almost no company" wanted to share their results or MERL (monitoring, evaluation, research and learning) processes. "Other observational data revealed that 80–90% of blockchain-based token offering projects failed to deliver on their promises," the paper said.
The authors define EBB as "conscientious, explicit and judicious decision making based on professional expertise and evidence from organisations, stakeholders and scientific research," and it attempts to solve five major problems in the blockchain space:
- inability to clearly define the problem to be solved, as sometimes blockchain is applied to a problem that does not exist or is not significant enough to require a decentralized solution;
- not examining different sources of evidence and not always starting by searching for the best available scientific evidence;
- inadequate evaluation of the quality of evidence;
- the lack of application of evidence to improve processes;
- inadequately report the outcomes and results of our experiments, especially when the results are unfavourable.
The paper also argued that in blockchain, "research showed that cognitive biases and behavioural heuristics can influence the decision support systems of professionals."
Among the recommendations, the BBA included that: "For every £100 [USD 129] spent on blockchain and distributed ledgers, we propose that at least £2 should be dedicated to making sure the other £98 actually works."
Meanwhile, according to Bloomberg, investors who "threw their money behind a basket of companies with exposure to blockchain technologies would have returned 54% over the past year, even after the recent rout that’s hit global tech stocks the hardest." This is based on the collective return of the top 10 performers among the 45 gathered in Elwood Asset Management LLP’s Blockchain Global Equity Index. However, "the solid returns among most of the index’s members may be only obliquely connected to their exposure to the blockchain ecosystem," as these companies benefited from their other endeavours, the COVID-19 pandemic, as well as specific socio-historical and geo-political circumstances.
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