The IT industry has an amazing knack for hyping the next big thing every year or two. In recent years we’ve progressed through Big Data, AI, and now — right on cue — it’s time for blockchain to change the world as we know it.
Sorry if that sounds a bit jaded, but it can be hard to sort out truly disruptive technologies and those that are simply being promoted by tech companies and their investors hoping for a big score.
On the subject of blockchain, however, I’m beginning to sense something big in the works. It will take quite a long time to play out, because blockchain attacks the centralized way that we manage, well, just about everything.
What is Blockchain, and Why Should Anyone Care?
What is blockchain? I don’t know about you, but saying it’s a distributed ledger that supports Bitcoin doesn’t get me very excited.
A blockchain … is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data. By design, a blockchain is inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.
So what? I’m looking for real business applications that will benefit consumers and enterprises.
Gartner cautions against irrational exuberance: “Most current uses of blockchain are not disruptive, because the majority of organizations that undertake blockchain projects find it hard to conceive of systems that are outside of their legacy, centralized models (both business models and technology platforms).”
Exactly. Why should large enterprises (think big brands like Amazon) or software makers (Oracle, SAP, Salesforce) support technology that undermines their business models? Amazon wants all of us to become customers and sell us more stuff. Oracle sells databases to big brands so they can centralize and control management of customers, suppliers, employees, etc.
That’s the way it’s been since the invention of the mainframe computer, despite the proliferation of servers and laptops. Sure, we have cloud-based systems now, but continue to use the same old paradigm of centralized control.
Blockchain could change that by providing what some say will be part of a “Web 3.0” infrastructure makeover. Essentially, computers will be treated more like peers or nodes that share power, without a master controller. Over time, it could give rise to new applications that empower consumers and disrupt the hegemony of big brands and big tech.
Blockchain Applications Are Coming
Okay, but I hear you asking: What exactly can blockchain do for me now? According to Al Burgio, founder of blockchain tech firm DigitalBits, cryptocurrencies like Bitcoin are a “primitive” use case. DigitalBits offers a more general-purpose blockchain technology that can be used to “tokenize” physical or digital assets.
Like loyalty points. Think about it. Points are a great example of something of value, offered by a brand via a loyalty program designed to generate customer data and increase retention. If you want to know how many points you have or spend some of them, you have to go back to that one trusted “source of truth.”
Caddle, a Canada-based rewards program, just announced that it will use DigitalBits technology to enable a “secure, decentralized approach to delivering digital assets such as points and rewards directly to consumers.”
Why? More control for users, and less dependency on a centralized system which is vulnerable to attacks. This is one of the key features of blockchain, says Burgio. Instead of one centralized trusted authority, trust is distributed throughout the network by design.
Essentially, the Caddle application can make points behave more like a currency that can be easily exchanged and used. A recent survey found good support for cryptocurrencies:
The survey, which polled 10,000 Canadians in January, found that approximately two-thirds of the respondents would like to see companies expand their customer loyalty programs by rewarding them with cryptocurrency for their purchases. As the alternative asset exchange system grows in popularity, it is evident that adaption and innovation from brands and retailer will follow as the concept becomes more accessible and mainstream.
Earlier this year, Singapore Airline launched the world’s first blockchain-based airline loyalty “digital wallet” capability to allow its KrisFlyer members to use digital miles for transactions at participating retailers.
What else could be done with blockchain? Get ready for a flood of blockchain-enabled applications over the next few years. Burgio says a massive amount of money is being invested in this space. According to a recent Research and Markets report, the global blockchain market will grow from about $411.5 million in 2017 to more than $7 billion by 2022.
“Increasing adoption of Blockchain-as-a-Service, rising cryptocurrency market cap and ICO, simplifying business processes, and creating transparency and immutability are expected to propel the growth of the blockchain market”
Watch This Space
So there you have it. Blockchain could have a huge impact on how businesses and consumers interact. Software makers in the supply chain space could adopt blockchain to improve speed and efficiency. Payment processes in retail could get a makeover. Fraud could be reduced in banking transactions.
And who knows? Blockchain could help spawn the next Amazon.com. Watch this space, this could get very interesting!
Hi Bob, you are right in saying that the something big (and thanks for linking my article!) is still under the horizon. None of the the applications that I currently see are anywhere near the disruptive field, I would consider most of them iterations, not even innovations. Emirates jumping onto the Bandwagon is an eye catcher, but what does the use of Blockchain REALLY give that wasn’t possible for their customers before? Air NZ has a similar loyalty currency (Airpoint Dollars) that works fine since its inception and still works fine without Blockchain.
To everyone else who reads this: I am currently doing some research for my upcoming column article that shall deal with the intersection of Blockchain, AI and Martech. Any opinions and pointers are valuable 🙂
Cheers
Thomas
@twieberneit
Thomas, yes it appears the first wave of blockchain-enabled applications will be used to make existing applications like loyalty points management cheaper and more secure. Or improve supply chain applications.
All good, but hardly disruptive. For that we’ll have to wait and see what comes from the investments in blockchain startups. I think payments is one area that could get very interesting, which could disrupt Paypal, credit card firms, and big brands that hold consumer payment info.
Let’s imagine a world where we didn’t have to give our credit card information to Amazon, Uber, or any brand. Instead, we authorize a payment via a blockchain application that transfers the funds (including cryptocurrency) securely.
This removes one of the barriers to e-commerce for smaller brands, and reduces the advantages of Amazon and others that use our stored payment details to reduce “friction.”
Recent statements of such famous people in IT-industry like Pavel Durov demonstrate that blockchain has only started its involvement in huge companies all around the world
Bob, agreed, hardly disruptive, what happens now. I would even venture to say that the loyalty points example and some more that you mention are what we call in German ‘new wine in an old bladder’. I am not even convinced that it is more secure – but maybe more trustworthy. And that is a key difference.
Being in contact with a utility company here,I am not even convinced that it is cheaper. As a utility they need to be innovative to avoid oblivion … and they are. But what they found is that they actually only replace one intermediary with another when going for blockchain scenarios. Taking that at face value and generalizing, the only way that could make a blockchain scenario cheaper than existing ones, is increased competition. And for that to succeed, a widely successful blockchain based solution that retains the inherent trust element, needs to be highly distributed, means inefficient and expensive.
In the imagined world we will still give some credit card like information to some company, maybe only one, admittedly. More realistically, there will be several/a lot of blockchain applications, and we, as consumers, are back to square one.
I am explicitly taking a very (exaggerated) negative stance here to make my point: I do think that we still need to see the REALLY valuable blockchain application. This application might need a 180 degree shift in mindsets from walled gardens to open ecosystems. Maybe it causes it. But it is an uphill battle.
The technology itself offers exciting prospects, though, just as you indicate.
Remember the early days of cloud computing. It was called “Application Service Provider” or ASP. Ugh.
Some of the early offerings were ports of existing apps that were “web enabled.” They didn’t perform very well and didn’t save any money. But it was a start. It took a few years to see native design apps to emerge.
With blockchain, there must be some reason to redo an existing app on blockchain. Why did that utility do so? Just to be trendy?
What I’m hearing is that blockchain-based apps are less likely to be hacked. If true, that’s one very good reason to give it a go.
For payments, I can’t really see a scenario where there aren’t intermediaries, but fewer/better/cheaper would be nice. Credit cards are expensive, so what if a new service emerged that could be used anywhere, but the merchant and banks (and crooks) couldn’t get their hands on the credit card info. I’m sure someone is working on this, probably packaged in a “smart wallet” of some kind.
True, ASP didn’t start as a revolution. But then it wasn’t hyped as much, too. Although increasing hype amplitudes might be just a sign of times …
The utility doesn’t want to be trendy. They are looking for business models that keep them relevant in future. Just producing electricity doesn’t cut the mustard anymore. But, being a business, it must pay.
Security is a key point. Blockchain has the potential of being more secure than other approaches. This potential is driven by the power of numbers (of independent nodes). Independenent is the keyword here as there is a majority rule that defines what truth is. In brief, the fewer independent nodes the lower the added security.
For most relevant scenarios there will be an intermediary, blockchain or no. Blockchain will be part of the ongoing platform war. I also see blockchains of blockchains.
The key challenges to overcome are finding a really valuable use case, which could emerge with the possible success of C2B and, on the tech side, solving the issue that with increasing success a blockchain becomes more and more inefficient.