If blockchain is so important, why is nobody using it?
It’s very interesting. As at early 2018, despite all of the hype and excitement, there isn’t a single business that is successfully using Blockchain technology apart from those that buy and sell crypto currencies.
This is the remarkably claim made by Nathaniel Popper, author of Digital Gold, the untold story of bitcoin. He’s a journalist that has been following the bitcoin story for longer than most and I for one am prepared to believe it.
Perhaps this claim should be qualified a little. There are some proofs of concepts and there are some consultants who could argue that they are generating revenue from blockchain but in terms of using blockchain technology at the core of a successful business that is employing people and making profit – nothing. Is this a reason to be sceptical? Not at all – because history tells us that within 5 years or so, the world will be (or at least could be) very different all because of blockchain.
Look back 30 years. In the mid 1980s, the internet was born. Unless you were an academic or already speacialising in this field, you wouldn’t have known of it. Within a few years a couple of applications emerged that made the internet visible – email and the World Wide Web. But even by the early 1990s, if you weren’t a geek you still wouldn’t have heard of the internet. But the hype began and by the mid 1990s, the internet was being predicted, correctly, to be the next big thing. But in 1995 there wasn’t a single business making money or employing people that used the internet as a central part of its business model that wasn’t involved in building the internet infrastructure itself. ISPs were popping up all over the place and as they grew, they were being snapped up by bigger competitors. Companies like Cisco made hay while the sun shone developing the hardware that would carry the predicted internet traffic. Within 5 years, everything had changed.
It may be forgotten how much change happened in that short period of time. Amazon, that had been trading form 1994 but had yet to make money in 1995, upended the retail business model by changing the way we bought books and CDs and now almost anything. Jeff Bezos is now one of the most powerful individuals in the world.
The Dell story is no less profound and again is somewhat taken for granted. Before Dell, the IT supply chain was complex with retailers and distributers sitting between the manufacturer and the customer. Despite the numerous intermediaries, margins were quite high compared to today. They needed to be. The flow of cash from consumer to manufacturer could take months. Not so for Dell. They not only took out all of the middlemen by dealing direct with the customer, they took the money before they even manufactured the hardware. Again, a whole supply chain model both physical and financial, disrupted beyond recognition.
The comparison with today’s excitement about blockchain is fairly obvious. As far as blockchain is concerned we’re at 1995. Blockchain was first developed in 2008 but it was virtually unknown outside of a small closed community. It got the attention of many in 2013 as the Chinese miners began investing heavily and bitcoin experienced it’s first surge in valuation. That got the attention of many and was the point at which most of today’s big player first took an interest. In 5 years from now, if the hype and excitement turns out to be justified and if the game continues to play out like the internet game did, there will be many industries that will have been turned upside down and inside out. There will be some very big winners and many more big losers.
Which industries? Who knows? But if the internet experience is anything to go by, few will be unaffected. If I were to make a prediction I would say that supply chain – both financial and physical – is the place to look. Industries that rely on embedded traditional transactional ways of working with many players invested in maintaining old ways of working – they will be the targets for change. Why do I say that? Because blockchain opens up entirely new ways of working and new ways of thinking about how to transact and who to trust. Things that weren’t possible or practical in the past now are. Look at Uber as an example of how this can work. When it comes down to it Uber was a result of the coincidental convergence of internet, mobile telephony and satellite navigation. It transformed a business model wedded to ways of working that have changed little in decades. The genie is out of the bottle and the world won’t go back to where it was. It is the same with blockchain.
Think of any business process that we take for granted. The kinds of things we do because – we just do – it’s done that way – like paying cash for goods or sending invoices or agreeing credit terms or signing contracts or sending purchase orders and recording receipts. If when you ask yourself, why do we do that, your answer is “because that’s the way it has always been done” think again and this time try to think of how it could be done in a world of irrefutable records, a world where you don’t need to trust a trading partner or a world when trusted third parties like banks are an irrelevancy.
There are numerous examples of businesses that clung onto the old model despite the emergence of new technology. (Remember Kodak and paper photography?) Blockchain is one of those technologies that cannot be ignored. You can’t wait to see what happens. If you do, you either play a very expensive game of catch up later or you are simply out of the race.
Pete Loughlin can be found on twitter @peteloughlin