We are all excited about Blockchain and Decentralisation. We can’t wait to see it taking over the world. How far are we though from making things that could be fully implemented or substitute current tools?
Where are we now
This technology is currently leading a boom in innovations across different sectors. Inevitably some projects and solutions are more suitable for Blockchain than others. There are times that a good, old fashion database will do the trick in a more cost-effective manner. The topic is new and its buzz hasn’t lost momentum. Will implementation will come faster in some sectors than others?
The challenges posed
The more skeptical have zeroed in on the challenges. Don’t believe the hype! Challenges include problems with scalability, storage, wasting resources, unmapped regulation. Some say it’s too complicated for its own good. Not to mention the possibility that the existing financial system could potentially want Blockchain to fall flat.
The history of the Internet gives you an idea of how things could evolve. This point of view is explored in an article from the Harvard Business Review, (pp.118–127) Iansiti, M. and Lakhani, R. K, The Truth About Blockchain.
The authors describe more specifically:
“Ultimately, it took more than 30 years for TCP/IP to move through all the phases—single use, localized use, substitution, and transformation—and reshape the economy. Today more than half the world’s most valuable public companies have internet-driven, platform-based business models. The very foundations of our economy have changed.”
Private Blockchains as means to an end
From the same article, the authors believe that private Blockchains could serve as step ladders to adoption. Just like the Intranet was used before the Internet in big organizations. Private Blockchains? Sure why not? Yes, well they are not so desirable because they veer away from Decentralisation. To minimize risk, isn’t it more sensible for a business to start implementation in a secure environment? Rather than the deep dive into a public distributed ledger? Private Blockchain projects can be seen now in Finance more than in any other sector but it’s only a matter of time. Other industries already started building private Blockchains, to address and simplify specific needs.
The HBR article continues explaining the path of adoption. Moving to “Substitution”, which is nothing else but the use of Digital Currencies as a new unit of account. That’s where the problem of scalability, interoperability and unmapped regulation comes into play. To achieve a high degree of substitution, we need all sides involved to agree on adoption. All sovereign States and financial institutions have been the major parties in overseeing monetary policies for centuries. The kind of power they hold is a threat to our decentralized yearnings. They need to change their attitudes before the average consumer does.
Third Generation Blockchains
Currently, new projects are trying to address scalability and interoperability issues. Referred to as “Third Generation” Blockchains. We need to be able to do thousands of transactions per second and at a cheap price. Then we will be able to talk about substitution in a more realistic way. Back to the article, the last stage of adoption is named “Transformation”. The authors explain that Smart Contracts are the real base for Transformation.
What hinders their wider adoption is the missing regulation. Smart contracts need clarity on design in order to be trusted. Then comes implementation by the big institutions. Wider adoption of smart contracts will bring a complete change of scenery. Whole job roles could vanish or change their nature completely. The article estimates that it could take years before organizations are ready. Security implications and technology challenges will be a steep mountain to climb.
In spite the skepticism, we cannot ignore the amount of work currently undertaken. The Blockchain community is constantly developing new ideas and keeps a strong momentum on innovation. Beyond any doubt, some projects will fail to catch on. A few others will change our lives forever and pave the way for more innovation.
The true potential will be appreciated much further ahead, beyond the Cryptocurrency sphere. The speed that new projects spring up and develop is much faster than when the Internet appeared. The establishment is changing attitudes too. Most recently shown in a blog post by Christisne Langarde from IMF:
“Just as a few technologies that emerged from the dot-com era have transformed our lives, the crypto-assets that survive could have a significant impact on how we save, invest and pay our bills. That is why policymakers should keep an open mind and work toward an even-handed regulatory framework that minimizes risks while allowing the creative process to bear fruit.”
We must acknowledge that this time around, we have the Internet and other technologies joining forces with these new tools. Soon AI will be developing alongside. I have to say it, no matter how shallow this might sound: Bring on the fridge that can do my shopping.
1. Iansiti M. and Lakhani R. K., January–February 2017 issue (pp.118–127) Harvard Business Review. Retrieved from https://hbr.org/2017/01/the-truth-about-blockchain
2. Silverstein, S. and Cadigan, T. N. Put simply, blockchain technology is ‘a security and transparency innovation’. Retrieved from https://www.businessinsider.com/what-the-blockchain-hype-is-really-about-cryptocurrencies-tech-2018-2
3. Khatwani, S. 2/01/2018 Different Types Of Blockchains In The Market and Why We Need Them. Retrieved from https://coinsutra.com/different-types-blockchains/
4. Chan, M. 24 January 2018, Why use the blockchain instead of a database? What gives tokens value? Retrieved from https://hackernoon.com/why-use-the-blockchain-instead-of-a-database-what-gives-tokens-value-263449681153
5. Shin, L. 14 February 2018, Executive’s guide to implementing blockchain technology. Retrieved from https://www.zdnet.com/article/executives-guide-to-blockchain/
6. Froelings, L. 13 June 2017 How Soon Blockchain Technology Will Change Currency As We Know It. Retrieved from https://cointelegraph.com/news/how-soon-blockchain-technology-will-change-currency-as-we-know-it
7. Are you ready for Blockchain? (thomsonreuters.com). Retrieved from https://www.thomsonreuters.com/en/reports/blockchain.html
8. Blockchain Scalability: When, Where, How? (blockgeegs.com) Retrieved from https://blockgeeks.com/guides/blockchain-scalability/
9. Hillebrecht, R. 14 March 2018, 8 Keys To Success For CIOs Leading Digital Transformation
Retrieved from https://www.forbes.com/sites/riverbed/2018/03/14/8-keys-to-success-for-cios-leading-digital-transformation/#1d22c5539a1f
10. Barisser, A. 11 December 2017, Wrestling With Blockchain Scalability. Retrieved from https://hackernoon.com/wrestling-with-blockchain-scalability-a1295e47962f
11. Allison, I. 19 April 2018, Ideas Abound for Business Blockchains, But Who’s Going to Pay? Retrieved from https://www.coindesk.com/ideas-abound-business-blockchains-whos-going-pay/
12. Malviya, H. 25 January 2018, Blockchain 3.0 – top 4 next generation projects. Retrieved from https://itsblockchain.com/blockchain-3-0-next-generation/
13. Lagarde, C. 16 April 2018, An Even-handed Approach to Crypto-Assets. Retrieved from https://blogs.imf.org/2018/04/16/an-even-handed-approach-to-crypto-assets/