Beneath the headlines, there’s arguably been the early stirrings of a sea change in the blockchain industry. There’s a new trough of disillusionment, but this time its those working with blockchain applications, not bitcoin, who are being affected.

Described as the period in a hype cycle where interest wanes as experiments fail to deliver, the term was first used in the industry as bitcoin’s price declined in 2014 amid overinflated expectations about its use in e-commerce. Now, the innovators in the ecosystem seeking to apply blockchain technology for use by financial incumbents are showing the first signs of a similar frustrations.

The spinning of the tires on such attempts perhaps hasn’t been audible given that, while bitcoin’s problems were and still are largely public, the institutions experimenting with blockchain have done their best not publicize those struggles.

Still, there has been a noticeable change in tone among those working close to such efforts.

For all the investment, it remains increasingly unclear exactly how banks will use blockchain technology or distributed ledgers, or if the areas where it seems most effective will be lucrative or interesting enough for incumbent financial firms to pursue.

As noted by Coin Sciences CEO Gideon Greenspan in a recent CoinDesk opinion piece, shared ledger efforts have hit a roadblock when it comes to confidentiality, as every institution operating in such environments today sees every transaction.

"This turns out to be a huge issue, both in terms of regulation and the commercial realities of inter-bank competition," Greenspan writes. "While various strategies are available or in-development for mitigating this problem, none can match the simplicity and efficiency of a centralized database managed by a trusted intermediary."

Elsewhere, Matthew Spoke, one of the leaders of Deloitte’s Rubix project, an effort aimed at advancing the use of distributed protocols, wrote an opinion piece in which he hinted at the inherent ironies of how blockchain is being positioned as a complementary, cost-cutting technology for financial institutions.

Spoke went so far as to question whether the blockchain industry’s softening of the comparably more alarmist rhetoric of bitcoin innovators properly represents the technology and its potential impact.

"If it is still the case that the technology could pose an existential risk to some companies (which I would argue it is), then how can these same companies justify the focus and investment they are likely already putting into blockchain technology?" Spoke asked.

Such public musings come at a time when rumors persist that some major financial institutions are cutting back on investments in blockchain tech, while members of R3CEV’s blockchain consortium allegedly publicly voice issues with the proposed funding the startup is requesting in order to move forward on its work.

The idea that permissioned blockchain startups are now up against substantial challenges can be seen in the shifting strategies at startups R3 and Digital Asset Holdings.

Greenspan noted that both are working less on distributed ledgers, and more on "contract description languages". The public language for Digital Asset’s new "digital asset modeling language" (DAML) backs up this assessment, with wording specifying that not all nodes on the network will process all updates to the ledger.

R3 is taking similar action with its latest distributed ledger, Corda. But R3’s positioning of its platform may be the most notable, given the manner with which R3 chief architect Richard Gendal Brown took in its official announcement.

Far from a victory lap, Brown’s statements can be read more aptly as an admission of how little ground has been made by big banks in applying blockchain to existing business problems. Brown went to great lengths in the post to laud bitcoin’s architecture in statements that color recent permissioned blockchain efforts as still striving to solve a "business problem" in the way that he argues the bitcoin blockchain already does.

In so many words, Brown positioned Corda on the basis that major financial institutions perhaps don’t need to use blockchains to exchange assets. Corda’s chief insight can be seen as the thesis that financial institutions today exchange contracts, and that a unique distributed ledger environment is needed to meet this need.

Overall, Brown’s words imply that he believes that blockchain innovations have yet to be fully applied to a traditional finance context, and that this challenge has yet to be overcome.

On the opposite end of the spectrum, there seems to be the growing sentiment that bitcoin’s darkest and most contentious days may be behind it.

It’s no secret that the industry has taken its fair share of hits – major media mentions of bitcoin have declined amidst interest in permissioned blockchains and distributed ledger efforts at big banks. But, this time out of the spotlight may ultimately benefit bitcoin’s community.

With Segregated Witness, a plan to scale the bitcoin blockchain, moving forward and big bank blockchain projects hitting the aforementioned existential roadblocks, the path ahead for this community of innovators seems comparably brighter.

As shown by CoinDesk’s latest quarterly report, months of infighting among network developers seems to have done little to cause bitcoin’s price to decline or its rate of new wallet or ATM growth to decrease. Further, Bitcoin Core, its main development group, seems more coordinated than ever, even if they're operating more as the kind of unified entity they perhaps sought to avoid.

Granted, the bitcoin community still needs to determine the best path forward on how development is governed.

However, these issues appear more manageable in the face of issues at even established payments efforts like the W3C, where members are disillusioned by the outsized impact and influence of powerful stakeholders on the process of standardizing web payments.

In colloquial terms, the big bad wolves that have been howling outside of the house of bitcoin seem to be backing into the woods.

Rather than seen as a replacement for public blockchains, there’s a broader recognition that such technologies are best compared to “the Internet”, while permissioned efforts should be considered “Intranets”.

While not yet widely embraced – prominent startup execs like Chain CEO Adam Ludwin have fought against the idea that the Internet analogy is relevant – it’s inarguable that the public Internet was more impactful than any closed system.

The proliferation of this argument could go a long way toward increasing understanding of the value of systems such as bitcoin and Ethereum, and create more public awareness of the benefits of a permissionless innovation platform for the delivery of financial services outside traditional mediums.

What all this means for the path ahead is less clear.

But in pondering the question, I continue to go back to questioning the idea that technology is even capable of bringing about "solutions" to "problems". Based on the evidence, it would seem to be a somewhat misguided way to describe technology and what it achieves.

I recently purchased a run of mid-1990s Wired magazines, the headlines of which could be just as relevant today. Of note was one cover that heralded how the Internet could come to challenge cable television, published in 1998. Nearly 20 years later, this process is only just starting to occur.

Overall, the malaise on both sides of the industry can be seen as a symptom of the long tail of change the technology and underlying ideological movement are seeking.

If today really is 1993 in the lifespan of the second Internet, then banks might be best cast in the role of traditional media companies. In this light, it’s hard exactly to understand what major media companies could have gained from efforts to establish a consortium or even launching their own competitor to the Internet in a bid to deliver television.

Rather, as audiences migrated to a new platform, media companies simply adapted their services in a bid to extend their reach out of the idea that user preferences were simply changing with a new generation.

In turn, users of Internet platforms are simply leveraging this tech to obtain the same service at a lower cost, and with more convenient updates and delivery than entertainment outlets, which were central clearinghouses of such information, could ever have achieved.

What we gain from this variety is less clear.

One would be hard-pressed to call Netflix, for example, a solution to anything. While it may have replaced going to the video rental store, as those who have spent time aimlessly flipping its offerings will attest, it’s hardly a "solution" to quality viewing.

Rather, it simply altered the reality and the experience, providing some benefits along with some new hassles. It’s hard to imagine bitcoin and blockchain won’t deliver similar results.

Big bad wolf image via Shutterstock