Blockchain and the Race Towards Irrelevance

Matthew Spoke
May 15, 2016 at 03:08 UTC
Updated May 19, 2016 at 13:37 UTC
opinion

Matthew Spoke is a bitcoin and Ethereum enthusiast who has been working towards advancing the use of smart distributed protocols through Rubix, a team at Deloitte dedicated to this vision.

In this opinion piece, Spoke argues it remains to be seen whether blockchain can be a disruptive or complementary technology, even while many incumbents are investing on the belief it’s the latter.

unravel

If 2013 and 2014 were the years of the bitcoin exchange, then surely 2016 is the year of the enterprise blockchain. In other words, there seems to be a common understanding in the community that somehow, someone, somewhere needs to make blockchain technology more familiar and consumable for large companies looking to leverage it.

Whether they are building using the bitcoin protocol, the Ethereum protocol or something else entirely, there now exist a number of startups for which this is their purpose. Of course, within that group, different companies have chosen different strategies and different areas of focus.

These companies may be differentiated by underlying protocols, or by industry and use case, but they all share a common goal.

On a daily basis, when I talk to large companies about blockchain solutions, I often find myself questioning the underlying message of what I’m promoting. On the one hand, I recognize the enormous importance of corporate innovation, and the need for large established companies to challenge their status quo.

I firmly believe that there is a role for today’s “intermediaries” and “third parties” (as they’ve collectively been bucketed in the context of blockchain technology) to drive the shift towards a more efficient and less centralized future.

But on the other hand, I also see the irony of this suggestion.

As was the common rhetoric in the earlier days of bitcoin, blockchains open the potential for the disintermediation of not only these established businesses, but entire industries. Since this message seemed to shut more corporate doors than it opened, the “blockchain industry” slowly but noticeably adjusted its messaging to take a less hostile tone; where corporations were no longer necessarily the targets of the coming disruption, but instead, the forward-thinking ones could become the vessels of change.

Conflicted promises

But beyond the messaging, has anything fundamentally changed in the promise of this technology? Are many of these large companies not still facing an uphill battle to remain relevant?

Take for example the growing list of companies in capital markets around the world who are turning to blockchains as an empowering tool to redefine their businesses.

A cynic could point to the fact that these same centralized intermediaries could be the logical entities to be disintermediated. I won’t conclude on this particular question, because I honestly don’t know the answer.

At a high level though, 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?

Two states

Without getting specific on use cases or particular types of companies, generally speaking I think there are two ‘states’ to consider when looking at this tech trend:

  1. Blockchains as a complementary technology
  2. Blockchains as an alternative technology.

Although time will be the true test, my prediction is that, depending on the industry and use case, we’ll see 3 different scenarios of how blockchain adoption plays out among enterprise companies, considering these two states:

  1. Current, valuable, yet inefficient systems and applications will be reimagined, leveraging blockchain technology to remove unnecessary pain and friction – ie state (1)
  2. Systems and applications that currently exist only because of technological shortcomings and inefficiencies, rather than because of a value-add, will look to leverage blockchain technology to avoid irrelevance, but will eventually become redundant – ie state (1) initially, but state (2) as a final outcome
  3. New, previously unimagined applications and possibilities will emerge as a result of blockchain technology – ie state (2).

Future gains

The good news is that all three of these scenarios result in a more efficient future, where blockchains are unlocking new potential for value and efficiency.

The bad news, however, is that many existing companies will eventually come to the objective realization that their current business models and value propositions are built around scenario (1) above.

Without wanting to come across as the “doomsdayer” of established intermediary organizations, I think it’s important to have these difficult conversations rather than push blockchain technology as a cure to outdated business models.

Instead, blockchains need to become an available tool when planning longer term corporate strategies, with the primary focus being around redefining value propositions and establishing customer-centric solutions for the future.

Disclaimer: The opinions expressed here represent my own and not those of my employer

Unraveling image via Shutterstock

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