You might have noticed some hype around the subject of blockchain. That is because it is a promising technology that has the potential to change the world.
The internet allowed the effortless, mostly unlimited transfer of information. Blockchain technology promises to do the same for value. That is a big deal! The issue is that like with the internet before it, no one knows how this will impact the way we do business and commerce. And even more importantly how to make money with it.
Recently I read this post stating that Blockchain is crap technology and a bad vision. You might have guessed that I disagree.
Hurdles to adoption
In my opinion there are 3 big hurdles for blockchain adoption:
- bandwidth — the number of transactions per second on public blockchains is still very limited
- interoperability — transactions are only possible between users of the same blockchain
- volatility — only rare coins exist today which hold their value long enough to label prices in them
That sounds familiar. The internet had similar issues early on. A lot of people doubted its impact on business and commerce. We can all agree that it has been a success. The internet’s success does not guarantee the success of any other technology, but I think it is a good analogy.
I can remember accessing the internet with a 14'400 Bauds modem which would take ages (and multiple attempts) to download a video file. My latest attempt at using Netflix made me think about that in nostalgia.
In the early days It was not possible to send data packets from AOL to Compuserve but that changed with time. Both these networks and their competitors have disappeared in favour of a generic data exchange platform.
There will not be a single blockchain technology just as there is no single standard for networking today. TCP/IP might be ubiquitous but the means of transport and storage of the packets vary widely.
You can read a lot about the problems the technology does not solve: It does not provide a credible alternative to bank transfers or credit-card payments, nor is it able to sustain the transaction throughput required by the likes of Fedex or Amazon.
Is the technology inept or is it just that we’re still to realise what blockchain is really about? I’m leaning towards the latter.
Open platforms of the future
When open source projects started to flourish in the late 90s and early 2000s a lot of people were sceptical about the model. I remember a lot of discussions around the topic of making money from open source and free software. It turned out that open source is not free it is just devoid of a licence cost. You still need a lot of service to keep your IT running.
My prediction is that blockchain’s big impact will be on IT platforms. Once this has happened, the platforms will start replacing services we know.
Smart-Contracts are the first form of software that can be shared without someone owning the infrastructure or paying for it. It is the first time that a platform can continue to exist even when its creator has closed shop.
Imagine the following scenario: a company creates a new service and goes to market. Customers start using the platform but the company does a poor job of responding to users complaints and does not make changes.
In the centralised model, you can either switch providers (at great migration costs) or not. It’s a binary choice. In the distributed world, a new company could step in and provide a better solution based on the same data and business logic. No migration, no hassle. The customers could even choose to use both solutions in parallel.
This is something unheard of and I have yet to come across a project which allows such a thing. This will come because customers will demand it. Just as many companies prefer open-source software, many people will prefer open-platforms.
“Data is the new oil” is something we heard a lot in the past years. This oil is about to become a lot more accessible.
The data will not be more widely available because it must remain private. The openness will come from the fact that the owners will be the users. This has the biggest impact when companies are concerned.
Switching from GMail to Microsoft Live is difficult enough. But there is a migration path and it’s not too hard. Switching from Xero to Freshbooks or Quickbooks is more complex. Mainly because the data is held in closed containers to which only the provider has access.
Imagine a world where the user can give access to all their data and the provider has no way of stopping them. That’s transformative.
Making cheating more difficult
One of the big criticism about unalterable data is: It is not because data can not be modified that it is more trustworthy.
I beg to differ. Cheating in advance is much more cumbersome and difficult than cheating in hindsight. You have to have a plan and you can not change that plan even if you notice it has a flaw.
More importantly it levels the playing field. The rich and powerful are just as unable to change the data as the rest of us. It would make me feel a lot better if the data I shared with Nestlé was not held on a server controlled by Nestlé. The day this happens is some time off, but it will come.
Just like open-source software has ended up dominating the software world without directly impacting the end-user, open platforms will emerge and allow for more competition and more choice and lower prices. People will not care that it’s blockchain or schmockchain, they will just see the benefits.
To the critics who claim that the technology is crap (slow, does not scale, etc) and that nobody cares. I retort: Fedex or Novartis will not become blockchain businesses in the near future, but SMEs will because it will allow them to increase the efficiency with which they conduct business.
Open platforms with provably correct code is the transformative part of blockchains. The token economy is just a bonus.