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Blockchain and finance in 2019
Blockchain Spending to Surpass $12 Billion by 2022
Report by market intelligence and advisory firm IDC predicts significant growth and spending increase over five years, with 2019 being the year of “mainstream adoption”
In 2019, global blockchain spending is set to reach US$2.9 billion (£2.2bn): an increase of 88.7 per cent from the previous year’s spending of $1.5bn (£1.15bn). The Worldwide Semiannual Blockchain Spending Guide report, published by the advisory firm International Data Corporation (IDC), forecasts investment in blockchain technology from 2018 to 2022. By the end of the period, spending is predicted to meet the $12.4bn (£9.5bn) mark – a significant sum with a compound annual growth rate (CAGR) of 76 per cent.
In compiling the report, IDC neglected to include data regarding cryptocurrencies with the primary objective of the study being to assist decision makers with future direction and scope of blockchain innovation and technological development.
They assessed the emergent blockchain market including spending across 10 technologies in 19 industries, with 15 use cases spread over nine geographical areas. The report adds that the finance sector will experience the most significant investment and spending growth with a volume of over $1.1bn (£840 million).
Blockchain technology has seen a significant increase in investment and research in numerous industries of late. New ideas for blockchain applications are steadily moving towards proof of concept (PoC), with eventual rollout not far beyond that.
“Data on the actual spend on the technology is vital: it provides the context in which blockchain is evolving,” says James Webster, IDC’s Research Director. “Understanding how and where enterprises are investing their money gives vendors a better sense of where they need to deliver products and services … It provides a snapshot of where we can expect to see [blockchain] disrupt the way enterprise software is delivered.”
Blockchain is the distributed ledger technology made famous by its use in cryptoassets, of which bitcoin – the original mainstream cryptocurrency launched in January 2009 – is the best-known. The revolutionary aspect of the technology is that it is decentralised and lacks a central hub or storage site with its data distributed across the peer-to-peer (P2P) network. Furthermore, data entered on a blockchain network is exceptionally secure through the use of cryptographic signatures and, once entered, information cannot be permanently erased. Rather, data can be added to and modified, but there always remains a transparent and traceable log of activity and entries.
Since its development over a decade ago, blockchain has shown significant potential to upend and transform processes in business, finance, politics, entertainment, and media – through enhanced security, transparency, democratisation, decentralisation, and streamlining of procedures.
“Inspiring” innovation: blockchain’s growth by sector
As mentioned above, the finance industry is expected to invest over $1.1bn (£840m) in blockchain technology in 2019 according to IDC. This figure primarily includes spending in banking, securities, and investments. The use cases that will experience the largest single investments are cross-border payments and settlements with $453m (£346m), followed by a $285m (£218m) spend on trade finance, including post-trade and transaction settlements. The banking industry itself will contribute the majority of funds to these use cases.
Regarding the report’s use case findings, Customer Insights and Analysis program vice president Jessica Goepfert says: “The use cases that comprise the blockchain opportunity are developing as swiftly as the technologies enabling it … Spending for developed use cases in the financial sector like trade finance and cross-border payments is healthy and growing strong.” She adds: “We are inspired by the various forms of innovation blockchain delivers.”
In other industries, the report predicts healthy growth in manufacturing and resources, followed by distribution and services with $653m (£499m) and $642m (£491m) invested respectively. Overall, manufacturing and resources are predicted to experience the greatest growth during the period 2018 to 2022 with a CAGR of 77.6 per cent, primarily by developing blockchain platforms to enhance existing processes.
Elsewhere, IT and business are forecast to receive significant blockchain investments in 2019. Blockchain-based software development is on course to receive substantial funding as one of the fastest-growing use cases during the five-year period, the report covers.
The report also explores blockchain spending and growth by region. The United States is expected to spend the highest on blockchain development, at $1.1bn (£840m) during the period covered. Western Europe is predicted to invest $674m (£515m), which is closely followed by China with $319m (£244m).
“All nine regions covered in the guide will see phenomenal spending growth over the 2018 to 2022 forecast period led by Japan and Canada with five-year CAGRs of 110 per cent and 90 per cent respectively,” states the report.
Latest blockchain investments and developments
The report has been published at a time when there is high activity in blockchain investment together with significant steps forward in its development, widespread uptake, and real-world application.
“Blockchain has proven to remove a layer of uncertainty from a multifaceted ecosystem built on trust,” posits Stacy Soohoo, IDC’s Customer Insights and Analysis Research Manager. “With a number of breakthroughs in 2018, ranging from mainstream acceptance to regulators recognising their governance role, 2019 will be a year of mainstream adoption.”
The list of examples of breakthrough blockchain applications is growing every week. For instance, in the first week of March 2019, SIX Group, the Swiss stock exchange operator, selected R3’s Corda Enterprise blockchain platform for their service. SDX is developing a regulated exchange platform for assets exchange, including items ranging from traditional banking equities, bonds and funds, to tokenised fine art. “The thing that’s important is that a mainstream influential financial market infrastructure player has decided to launch an exchange for digital assets and do it on blockchain technology,” says Charley Cooper, Managing Director at R3.
In the same week, also in Switzerland, the world’s first-ever real-estate transaction using blockchain technology took place. A restaurant and 18 flats in Baar, coming in just shy of $3m (£2.3m) were tokenised and are live on the Blockimmo platform.
Elsewhere in Europe, and again in early March, Amsterdam blockchain ticketing service GUTS broke their own record for the largest number of tickets sold. Some 50,000 tickets to see Dutch comedian Jochem Myjer in Amsterdam’s Royal Theatre Carre were sold in only two hours – an improvement on their 2018 record of three hours to see the same comedian.