Blockchain: Building the Internet of Trust
As we look back at last week’s Boston Blockchain Week, we wanted to reflect on how blockchain rose to prominence in the first place and explore its potential for disruption. It’s inarguable that the world has become more digital over the past two decades, leading us to the point today where a technology like blockchain is increasingly becoming necessary.
The internet in the mid-1990s connected the world to information. Web 2.0 in the 2000s began the process of democratizing the internet by allowing users to interact with each other and with content online. Then mobile and the cloud came along, which let users access and manipulate information anywhere, anytime. The Internet of Things added, well, things into the mix and let us control our world using our ubiquitous mobile devices. All the while, the amount of information that our devices have to process grew and grew until we needed something to keep track of it and keep it safe.
Blockchain was first introduced to the general public in Bitcoin, the much-hyped cryptocurrency, but its uses go far beyond that. Blockchain is the enabling technology behind Bitcoin and other cryptocurrencies that ensures that transactions are secure.
It acts as a distributed ledger that links together encrypted batches of data (called “blocks”) and each time a transaction is recorded, the ledger updates automatically, spreading through peer-to-peer connections until consensus is achieved. The blockchain assures that no unauthorized changes make their way into the system.
Because blockchain is built with transparency, includes encryption as a core component and has no single point of failure, there is built-in protection from data tampering, which is especially important in an age where data breaches have become far too common.
The financial services industry is already being disrupted by blockchain. Goldman Sachs estimates that it could yield global savings of up to $6 billion per year for financial transaction processing through blockchain. But, there are a number of other ways that the blockchain may transform business, government and society.
Transactions, reputation systems and protecting intellectual property are a few use cases that can be valuable for various industries. Consider that the city of Dubai plans to leverage blockchain to make its government paperless by 2020 and it’s clear that, beyond grandiose ideas, there are practical problems that it solves, too.
The smart contracts that are enabled by it will lower the costs of creating and enforcing contracts, which has broad implications. Take the media industry, as one example, which already has innovative companies offering intelligent songs with built-in blockchain-enabled smart contracts that skip intermediaries and pay artists royalties immediately whenever a song is bought or played. In a similar way, it may enable sharing economy providers to sidestep platforms like Airbnb and Uber to band together in loose associations to meet the needs of consumers while keeping revenues to themselves.
The smart money is pouring in, with Amazon becoming the most recent player to enter the space, joining major technology companies like IBM, Microsoft and Oracle in fostering blockchain’s development.
Where we go from here
It’s an exciting time to be in tech, as the blockchain has the potential to foster a decentralized and democratized internet where concerns about privacy, security and net neutrality become a relic of the past.
But, with that potential, comes an equal amount of hype – and not all of it deserved. That means that there are a lot of companies taking advantage of blockchain in their marketing by positioning themselves around it without offering any true value. In one of the most egregious examples, Long Island Iced Tea changed its name to Long Blockchain late last year and saw its stock subsequently soar.
In this still-early stage, blockchain companies will need to articulate what makes them different from the vast swathes of irreputable companies in order to build trust. And, with conversations about whether blockchain itself is meaningful, they will also have to contend with confusion in the market to establish a clear definition of its usefulness and a concrete value proposition.
Over time, like all of the hyped transformative technologies that came before it, the charlatans will be weeded out and winners will emerge. In the not too distant future, it won’t be enough to say that you’re a blockchain company to garner interest. You will have to show that a blockchain-powered solution has clear value for customers, users and other stakeholders.