What is the state of the UK blockchain industry?
Wed 21 Nov 2018
A new report from Digital Catapult has shed some desperately-needed light on the scale and success of the UK blockchain industry
Gauging the success of the UK blockchain industry has been fiendishly difficult amid the bluff and bluster of technologists and the seemingly inexorable capitulation of its cryptocurrency poster boy Bitcoin.
But on the basis of Digital Catapult’s new “Blockchain in Action” report (most) of the blockchain hype is justified. The report found almost three-quarters of UK DLT companies to be generating revenue: almost half have raised a traditional seed round of investment, and one-in-four aren’t seeking further finances.
Wait, blockchain or DLT?
Although the report is named “Blockchain In Action”, it actually focused on mapping the UK distributed ledger technologies (DLT) landscape, a subtle but significant distinction when you get into the nitty-gritty.
On the surface, DLTs (not the duck version of that sandwich) don’t seem all that different from blockchain, in that they imply databases absent of a central entity recording or confirming entries.
However, the difference with DLTs is that the implementer has a lot more sovereignty over the structure, purpose and functioning of the network.
Heard of Ethereum’s infamous forks? Well a DLT approach eschews the need for such stultifying geek-bureaucracy, meaning a firm can have more confidence in their roadmap.
Because of this increased control, DLT is considered a far more reliable proposition as far as businesses are concerned and 2018 saw a raft of big-name firms getting serious with DLT projects, including Google and Volkswagen.
Although we’ll admit it: with its vaguely brutalist-sounding name it is never going to sell as many conference tickets as slick and sexy blockchain – so you can’t really blame Digital Catapult for slapping the latter on the front page of its report. In all likelihood, The Stack would have overlooked it if they hadn’t.
State of UK blockchain (or DLT) Industry
With all the hype that has surrounded distributed ledgers in recent years it’s easy to forget there has been very little in the way of UK market research as to which firms are doing what and how well they are progressing.
The report canvassed 260 UK DLT companies to fully ascertain the breadth of the market and put some substance behind the hype.
To further complicate the conceptual labyrinth Digital Catapult divides the UK DLT ecosystem into four categories: distributed ledger developers, dApp developers, service providers, and centralised systems, representing 13, 35, 37, and 15 percent of the market, respectively.
Many believe they have received counterproductive legal advice around ICOs and intellectual property protection as a result
Digital Catapult released the report in association with its new initiative DLT field labs. It says there are many opportunities to be had in adopting blockchain and other DLTs but that several challenges must be addressed if the UK is to fully leverage their potential.
Perhaps most importantly the report shows (most) of the blockchain hype is justified, finding almost three-quarters of DLT companies to be generating revenue: almost half have raised a traditional seed round of investment, and one-in-four aren’t seeking further finances.
Although commonly spoken in the same breath as fintech, the report says there are large opportunities to be had outside of the financial services sector.
DLT is considered a far more reliable proposition as far as businesses are concerned
38 percent of the companies Digital Catapult interviewed felt their technology could be applied to all vertical markets, not just fintech.
Many companies are active across a wide range of sectors from manufacturing to creative industries. The report cites FilmChain – a blockchain-powered platform for collecting, tracking and settlement of revenues generated by film, TV and digital video content – as a notable success story.
But many companies also expressed frustration over regulatory uncertainty, particularly regarding permissionless – a type of DLT that allows anybody to add or access records on a database. It goes without saying that it is hard to see how this “public blockchain” format can be reconciled with GDPR.
On top of that companies are still unclear about ICO regulation. No more certain are UK banks, resulting in difficulties for DLT companies looking to open accounts in the country.
Over half of the companies interviewed say they have struggled to get the green light from UK financial institutions, and many have resorted to the less-than-desirable route of opening multiple accounts around the world.
Due to prevailing legal uncertainty, 45 percent have consulted specialist legal advice – but question the so-called expertise they have received, concerned that lawyers are failing to grasp the intricacies of the technology.
Many believe they have received counterproductive legal advice around ICOs and intellectual property protection as a result.
“Digital Catapult is taking an active step to improve understanding of DLT in multiple sectors for the wider benefit of the UK economy,” said Jeremy Silver, CEO of Digital Catapult.
“To do that, and encourage further adoption of this technology, we must dispel the myths, cut through the hype, and educate organisations outside of the financial services sector to the varied applications of DLT and how we can help them to de-risk innovation.”