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In the 1960s hit musical How to Succeed in Business Without Really Trying, the hero J. Pierrepont Finch makes a dizzying ascent from window washer to chairman of the World Wide Wicket Company. His remarkable rise requires no great talent; he needs only a single tool: a self-help book.
Now in 2018, blockchain technology is the equivalent of How to Succeed’s wondrous self-help book. Take an ordinary business, add blockchain and – presto! – tout success in a breathless press release.
Case in point: In December 2017 the company formerly known as Long Island Iced Tea changed its name to Long Blockchain. This single shift caused its stock price to rocket upward, almost doubling its market cap.
Minor detail: The sugary drink company had no actual involvement with blockchain. It was merely “in the preliminary stages” of evaluating blockchain opportunities, it stated. Alas, the company’s blockchain gambit ran aground and its stock price slumped. In late February, Nasdaq announced it will delist the firm. The company will appeal the ruling.
Eastman Kodak, which has fallen on hard times in the selfie era, in early January launched a blockchain-based platform for digital rights management. Even hipper, the platform will have its own cryptocurrency, KodakCoin. The company’s stock price enjoyed a “Kodak moment,” spiraling upward.
Yet skeptics raised myriad questions. Is blockchain truly necessary for rights management? Currently the answer is no. Do photographers want to be paid in crypto-tokens? Seems doubtful. Kodak maintains that its blockchain initiative will come into sharper focus. Yet by early March its stock lost much of its blockchain-induced bounce.
Long Blockchain and Kodak aren’t alone in riding the blockchain hype wave; examples are numerous. My personal favorite is Chanticleer Holdings, which announced it was putting its restaurant loyalty program on blockchain. ““Eating a burger is now a way to mine for cryptocoins!” the company enthused, which is likely the Best Tech Hype of the Year, 2018.
If blockchain isn’t quite magical, it does have a unique claim to fame. It’s the geekiest technology ever embraced by a mainstream audience. It even tops “algorithm,” which entered the vernacular in about 2012 or so.
The public embrace of deep-geek blockchain flows from its link with bitcoin. Mysterious cryptocurrency pioneer Satoshi Nakamoto (who may be a person or a group of people) developed blockchain as a distributed ledger technology to enable bitcoin.
You’ve surely noticed that bitcoin inspires a frenzy of speculative investing. It’s minted fortunes for lucky early investors, and fueled anger at uncles and brothers-in-laws who talked people into it at peaks.
But the very sexy bitcoin is a completely separate idea from the very non-sexy blockchain. That stock prices leap at the first whiff of “blockchain” suggests people don’t fully understand this. Or perhaps it shows that investors aren't rational, which isn’t news.
Blockchain’s distributed ledger technology is famously secure. Each block is protected by the entire decentralized network.
The Irony of Blockchain
As this year’s soaring-slumping stock prices demonstrates, the hype around blockchain is like some shadowy voodoo that proves false in the light of day.
The irony is that, despite the apparent false promises of blockchain, in fact this emerging technology holds vast potential.
The core magic is blockchain’s ability to create decentralized consensus. Its distributed ledger technology enables one single, authoritative version of the facts, with no need for a central authority like a large bank or government agency.
Traditionally we’ve always needed a central authority – and perhaps we still do. Blockchain’s shift from the old single monarchy-manager to decentralized consensus will surely upset business and culture significantly.
Blockchain’s most visible advocate inside the old guard is Abigail Johnson, Chief Executive of Fidelity Investments. As the leader of a staid repository of mutual funds, Johnson’s embrace of disruptive technology is unexpected.
She told The Wall Street Journal: “Blockchain technology isn’t just a more efficient way to settle transactions, it can fundamentally change market structures and perhaps even the architecture of the Internet itself.”
Johnson herself owns a computer that has mined cryptocurrency. And in reference to bitcoin creator Satoshi Nakamoto, she’s been known to wear a red, white and blue button that proclaims: “Vote Nakamoto President.”
Blockchain, or How to Disrupt Business Without Really Trying
The full extent of how blockchain will disrupt business is unclear because the technology is nascent. While blockchain debuted in 2009, the Ethereum blockchain, with its pioneering use of smart contracts, didn’t launch until 2015.
A smart contract on blockchain is an automated, self-enforcing digital contract that executes without human assistance. A smart contract's ability to transact autonomously enables myriad business capabilities.
The downside: blockchain’s smart contracts are astoundingly buggy. One study found that at least 34,000 Ethereum smart contracts contain security vulnerabilities. Alas, blockchain hasn't yet learned to fly.
Smart contracts are just the dawn of the technology that will extend blockchain. The big one: artificial intelligence. AI will be married to blockchain, creating a decentralized network that adapts by itself. A “live” network whose capabilities grow without human help.
For now, real world deployments of blockchain live in a gray area between revolution and evolution. Not tearing down existing business-tech norms yet clearly suggesting tectonic shifts. For instance:
Corda: Enterprise software company R3 has worked with financial companies and tech firms to develop Corda, launched in 2015. The Corda blockchain project enables businesses to build interoperable networks that transact in full privacy, using smart contracts. Corda facilitates asset exchanges without an intermediary. As R3 explains: “participants can transact without the need for central authorities.”
Hmmm…if businesses don’t need “central authorities,” what happens to classic middlemen like large financial institutions?
Arcade City: Uber famously disrupted the ancient taxi business using a central algorithm that controls pricing and services. Austin-based Arcade City uses blockchain to connect drivers to riders with no middleman at all.
Powered by the Ethereum blockchain, Arcade City’s “ridesharing for the people” model is the ultimate free-market platform. Drivers set their own rates and negotiate directly with riders. Drivers also verify their own identity, which raises questions: is everyone who they claim to be? But that’s the brave new world of blockchain. Its “decentralized consensus,” pushes out the stuffy governing authority. It’s a Wild West where the larger group is (theoretically) the sheriff.
ADEPT: The combination of blockchain and the Internet of Things feels almost sci-fi. One imagines a vast, far-flung empire of blinking devices executing smart contracts with no human input. IBM in partnership with Samsung created a blockchain-IoT mash-up called ADEPT, which they dub “cognitive IoT.”
ADEPT enables an IoT network to respond autonomously to changing market conditions. A washing machine autonomously reorders detergent; a video display system autonomously shows advertising. Who needs humans?
OpenBazaar: The retail sector may offer blockchain’s greatest potential. OpenBazaar uses blockchain as the foundation of a decentralized online market, a “permissionless marketplace.” Built by startup OB1, the platform has attracted $4.2 million from blue chip venture groups like Andreessen Horowitz and Union Square Ventures.
OpenBazaar’s buyers and sellers use bitcoin and can transact anonymously if they choose the Tor option. The marketplace’s welcome page offers users “no data collection, and no censorship.”
This unregulated commerce raises questions about who is selling what to whom. OpenBazaar disputes that it’s a darknet market, as was the now-defunct Silk Road. Yet it does concede, in its own words, “no one is able to directly stop illicit activity on the network.”
“OpenBazaar is a protocol and network for trade,” OB1 explains, opining that “the OpenBazaar network tends to reflect society in general: a few people engage in illicit activity, but the vast majority don’t.”
Previous platforms and systems required a single governing authority; some entity had to accept responsibility. After it became clear that Facebook was used by foreign agents to influence the 2016 election, Mark Zuckerberg endeavored to make amends.
In contrast, Blockchain’s decentralized consensus means the system itself is in charge – kind of. In reality, there may be no one in charge. That freedom may be frightening or liberating, but either way, blockchain promises a radical departure from the old way of doing things.