Blockchain adoption in German ventures in dire state: study

The Hanseatic Blockchain Institute has published a comprehensive study on blockchain as a technology in the German economy. The Federal Ministry for Economic Affairs and Climate Protection funded the research and, therefore, has a policy-oriented view.

The study provides a comprehensive overview of the current level of adoption, opportunities and advantages, and obstacles that make adoption difficult. However, it has a major blind spot, which arises from the fact that companies that do not use blockchain or are planning or discussing its use were not surveyed in more detail, so the study mainly captures the perspective of the proponents and actors of blockchain technology, as the study organizers state themselves. Thus, the study misses key insights from failed attempts or discussions resulting in not implementing blockchain.

Economic survey

The study states that the majority of German companies do not consider blockchain relevant. The representative part of the 2024 survey finds that only 3.2% of the German economy will use blockchain in some form, another 3.7% are planning to use it, and 18.7% have at least discussed it. The technology is used significantly less than comparable emerging technologies such as artificial intelligence (AI), which is deployed by 27%, or cloud computing, utilized by 46.5% of companies.

The study notes that blockchain is only slowly gaining ground in Germany, with the vast majority of its states saying it is “not an issue” for them. Meanwhile, the percentage of local companies that shared the same sentiments in 2023 has increased slightly from 72.6% to 74.4%. Unfortunately, the study does not delve any deeper into this.

How is blockchain used: Potential and challenge

The next part of the study is a quantitative expert survey that asked 204 experts how they use blockchain in their companies. These most frequently come from the IT & telecommunications industry (31%), the financial services sector (21%), and 15% from consulting. Other fields are media & entertainment (6%), education (5%), arts & culture 4%, and marketing & sales. Other industries only reached 1% or are not represented.

The respondents also stated in which area they use blockchain, with financial services 54%, digital identities (31%), and marketing (28%) being the most frequently mentioned fields.

The respondents gave their opinion on the potential they see in blockchain. The highest hits were promoting innovation (84%), information security (82%), trust in cooperation with other organizations (81%), security in cross-company processes (78%), and improving products (66%).

The biggest challenges were regulation (36%), poor user experience (33%), lack of skilled workers (32%) and critical reporting (31%).

What technologies are used

With the insight into the technologies used, the study becomes a little more concrete and sheds light on how Bitcoin, smart contracts, non-fungible tokens (NFTs), and tokenization are used and for what reasons.

BTC

BTC is used by 32% of the companies surveyed, primarily in the financial sector, where 50% of respondents use it. The main use case is self-investment (57%), followed by means of payment for customers (49%), trading (41%), means of payment to contractual partners (41%), lightning for payment purposes (32%), pseudo-anonymous transactions (16%) and mining (5%).

That may sound very positive for a BTC Maxi, but the base n for the types of use is only 37. This means only a small fraction of the minority in the German economy reportedly uses BTC, although the word “use” should also be put in quotation marks. Most enterprises use it as an investment, and the mere offer as a means of payment says nothing about how much BTC is actually used by customers, contractual partners, etc. The actual innovation comes anyway from other technologies.

Smart contracts

The most commonly used blockchain technology is smart contracts, which 94% of companies use. In the IT/telecommunications sector, the figure is 98%, and in financial services, it is 86%.

NFTs (61%), tokenization (56%), and rollups (optimistic, Zero-Knowledge) (27%) are the most common areas of application.

NFTs and tokenization

The main areas of application for NFTs are marketing (64%), certification (56%), and the art market (45%), with the advantages being highlighted as proof of ownership (91%), linking to digital content (83%) and digital access (71%).

When it comes to tokenization, the main areas of application are bonds (46%), collectibles (39%), and real estate (33%), followed by CO₂ certificates (23%), with the advantages being seen in fast processing (85%), transparency and traceability (82%) and access to institutional investors (74%).

While NFTs and tokenization are certainly future technologies, it is well known that many current areas of application are nothing more than gimmicks or short-lived trends, as shown by the application in the art market or collectibles. The true value of these technologies will only become clear when scaling is achieved, which popular blockchains have yet to attain.

Public permissionless, public permissioned, private permissioned

Public permissionless blockchains are mainly used in the financial sector (76%), for digital identities (70%), and for copyright and license management (63%), with transparency (76%), decentralization (77%), and immutability (68%) being seen as key advantages. Trust (61%), openness (61%), and inclusivity (43%) also play an important role.

Public permissioned blockchains are used primarily in supply chain management (56%) by 49%, with governance (60%), access control (58%), and legal regulations (34%) being cited as the main reasons for their use.

Private permissioned blockchains are used by 34%, particularly due to their advantages in confidentiality (59%), data protection (56%) and compliance (47%). The reasons for transaction speed (29%) and scalability (26%) also appear here to a somewhat lesser extent.

The section on blockchain networks likely illustrates more than any other part of the study that blockchain technology is still in its infancy. However, the presence of numerous blockchains indicates that many participants are actively seeking alternative solutions to the problems that Bitcoin in its original version has actually already solved.

Conclusion

The study offers a comprehensive overview of blockchain technology’s status among its proponents and participants. However, important insights from critics, attempted and failed implementations are missing.

This is particularly critical because the study still provides recommendations for policymakers (demands such as subsidies, regulation and the establishment of consortia and forums). The study discusses what politics can do for blockchain, not vice versa, specifically what blockchain can offer to society, including businesses, institutions, citizens, and customers.

It is assumed that obstacles are external factors, such as regulation, negative press, and a lack of skilled workers. However, issues like regulation evasion, poor scalability, and the uncertainty of layer 2 solutions are problems inherent to blockchains, which are not only unattractive for many companies, but which they simply reject.

The study expresses clear enthusiasm for blockchain technology but presents a biased and overly positive perspective. However, there is a lack of self-reflection here, as the study makes recommendations for action toward subsidization, regulation, and the creation of knowledge exchange platforms, for example. As a result, the study looks for ways in which politics can support blockchain. However, it fails to take a critical look at how blockchain itself must be structured in order to offer real value for the economy and society.

The study also lacks a clear distinction between digital currencies such as BTC and enterprise blockchains. Although some tokens support regulation, digital currencies often elude legislation. A study aimed at policymakers should first identify which blockchains are not adhering to regulatory standards, facing scalability issues, undergoing protocol changes, and which ones offer genuine utility.

This discourse has been debated in the BSV community and has led to the creation of Teranode, ARC, LiteClient (scalability), Digital Asset Recovery (regulation), and the Network Access Rules (set-in-stone protocol), which make the BSV blockchain the leading enterprise blockchain.

Watch: Is your company ready to ride the wave of blockchain adoption?