Thierry Rayna, PhD, a professor of innovation management at École Polytechnique, explains why blockchain is still likely to bring future disruption for businesses.
What is blockchain?
Blockchain is an online distributed ledger. Everyone holds a copy, which is divided into cryptographically linked blocks of entries. Blockchain is decentralised, secure, doesn’t require trust between participants or an intermediary and – crucially – must be infinitely costly to forge. This is a blessing and a curse though; the mechanism at the core of the Bitcoin blockchain, for example, is so ‘costly’ that the total electricity expenditure of Bitcoin for 2018 was the same as that of Denmark!
Why can’t I avoid hearing about it?
Bitcoin (a cryptocurrency based on blockchain) attracted attention in 2017 after its value increased by more than 18,000%. Unsettled by digital disruptions and afraid of ‘uberisation’, businesses spent vast amounts researching commercial uses beyond crypto currencies. We heard about ‘smart’ contracts, digital identity, supply-chain tracking, drug authenticity checks, micro-grids, not to mention voting and e-government. But the cryptocurrency market crashed, partly after various raids (including by the FBI) and hacking of crypto exchanges revealed vulnerabilities.
Is that the end for blockchain?
No. The demise of Bitcoin doesn’t mean much for blockchain itself. A bigger issue is that many of the companies exploring how to use blockchain were underwhelmed. In cases where using it was feasible, the costs of doing so were almost equally high. In most cases, it’s just as efficient and secure to use a centralised platform (like a bank). This is why, in cases where blockchain could be used, such as smart contracts, digital identity and supply-chain tracking, using it doesn’t make practical sense.
Does blockchain have disruptive potential for businesses?
For some businesses, the hype around blockchain is a symptom of an underlying condition – that more digitisation is needed, perhaps, or that processes could be made more efficient by reducing intermediaries. But big businesses should watch out for ‘prosumers’ on the fringes (individual content creators, manufacturers and distributors in the sharing economy). The evolution of prosumption – ie, the fact that we, as consumers, carry out productive activities during our leisure – has itself been highly disruptive, but for it to work, centralised platforms such as Airbnb, Facebook or the Apple Store had to emerge. However, blockchain enables individuals to take matters into their own hands, not with content, products or services on one platform but with platforms themselves. That means companies could find themselves blindsided far more rapidly in the future.