Blockchain: Read Past The Hype & Become The Devil
Recently, an international report by CNBC on the hype around Blockchain opened with a startling recollection of an overheard conversation between two start-up founders. One of the founders was overheard telling the other, without knowing how seriously it was said, “Let’s just call it Blockchain anyways, and we’ll get funded!” This is a scary recollection for the entire industry, which is still trying to grapple the real value of the new buzzword. Don’t get me wrong, I don’t think Blockchain is over-hyped and can provide real, measurable value in the long term. But, it is necessary to get into the nuts and bolts of the concept to understand its true use cases and applications.
As young, mindless companies try and cash in on the hype by using the technology as a way to attract funding, they could end up ruining it for the rest of us, who truly understand its functionality. This is not only my opinion but also a frequent water cooler conversation topic amongst the investor and venture capitalist community globally. Instances such as these have created a resistance and hesitance by the market, every time the over-hyped word is uttered.
Essentially, Blockchain is nothing but a distributed ledger or database, where each node in the ‘chain’ captures the data of the ledger to ensure there is no single point of failure. The ledger can also be programmed with rules and conditions to trigger actions based on the data input into the ledger. It is not necessarily true that Blockchain is of better value than traditional databases, but it is specifically useful in low trust environments, where participants cannot trade directly with each other.
This technology needs to be, first, fully understood, and then, evaluated to understand its true value to the particular use case or requirement. It is important to identify the result/outcome of using the technology against the investment needed to implement the concept. A recent detailed report by McKinsey observed that there were specific sectors that provided a better impact to cost ratio to embrace Blockchain than others. For example, the report showcased that public sector companies, technology/media & financial services have a better impact measurement than sectors such as manufacturing, mining and agriculture. Apart from these sectors, healthcare can make a strong case for the utility of using Blockchain for a centralized registry of health records. Essentially each sector and requirement needs to be assessed against the two key buckets of needs the technology fulfils: Record Keeping & Transaction Databases.
Each requirement needs to be studied and evaluated with deep knowledge of Blockchain and an assessment of the impact to cost. Additionally, the type of network used has to be considered. Blockchain, theoretically, is a better bet for permissioned closed/private cloud networks than open ones. Unfortunately, the most famous use case of the technology is Bitcoin, a public Blockchain with no central authority; again, further fueling the incorrect understanding of the concept. The blockchain is a great advancement, which can deliver great cost advantages in the short term and revenue generation & capital reliefs in the mid to long-term, but as an industry, we need to dive deep and stop riding the hype. The devil is in the details, and with Blockchain, we may need to be the devil to taste the technology’s true value.