Do your customers trust you? And do you trust them? The emerging trust economy depends on each transacting party’s reputation and digital identity—and that’s where blockchain comes in. The technology behind digital contracts transforms reputation into a useful, manageable attribute.
Part 5 of a 5-part series. Read Part 1, Part 2, Part 3, and Part 4
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The hype surrounding blockchain is reaching a fever pitch. While this technology’s long-term impact may indeed be formidable, its immediate adoption path will most likely be defined by focused experimentation and a collection of moderately interesting incremental advances. As with any transformative technology, expertise will have to be earned, experience will be invaluable, and the more ambitious deployment scenarios will likely emerge over time. The good news? It’s still early in the game, and numerous opportunities await.
Here are some suggestions for getting started on your blockchain journey:
1. Come all ye faithful
The financial services industry is currently at the vanguard of blockchain experimentation, and the eventual impact of its pioneering efforts will likely be far-reaching. Yet blockchain’s disruptive potential extends far beyond financial services: Every sector in every geography should be developing a blockchain strategy, complete with immediate tactical opportunities for efficiency gains and cost savings within the organization. Strategies should include more ambitious scenarios for pushing trust zones to customers, business partners, and other third parties. Finally, sectors should envision ways blockchain could eventually be deployed to challenge core business models and industry dynamics. While it often pays to think big, with blockchain you should probably start small given that the technology’s maturity—like that of the regulations governing blockchain’s use—is still relatively low.
Startups and established players are aggressively pushing product into every level of the blockchain stack. Part of your adoption journey should be understanding the fundamental mechanics of blockchain, what pieces are absolutely necessary for your initial exploration, and the maturity of the offerings needed for the specific scope being considered.
3. The nays have it
Ask your blockchain gurus to define scenarios and applications that are not a good fit for blockchain. This is not reverse psychology: It’s simply asking advocates to keep a balanced perspective, and thoughtfully casting a light on this emerging technology’s current limitations and implications. Sure, expect challenges and prescribed roadblocks to yield to future advances in the field. But until then, challenge your most enthusiastic blockchain apostles to remain objective about the technology’s potential upside and downside.
4. You gotta have friends
Blockchain offers little value to individual users. To maximize its potential—particularly for applications and use cases involving digital identity—explore opportunities to develop a consortium or utility for blockchain use.
5. Stay on target
Far-reaching potential can lead to distracting rhetoric and perpetual prognostication. As you explore blockchain, focus your brainstorming and your efforts on actionable, bounded scenarios with realistic scope that can lead to concrete results and—hopefully—better value. Wild-eyed aspirations are not necessarily bad. But they are best served by grounded progress that leads to hands-on proof and an earned understanding of what is needed to realize the stuff of dreams.
What you should know: Insight from Matthew Roszak, co-founder of Bloq
I’ve been in the venture capital business for over 20 years, co-founding six enterprise software companies along the way. I began hearing about Bitcoin in 2011, while serving as chairman of one of the largest social gaming companies in Southeast Asia. In that business, cross-border payments and payment processing quickly becomes a core competency. As the buzz around Bitcoin grew, I initially discounted this technology as “silly Internet money,” but by 2012, a number of people I trusted told me to take a harder look. So I did what I still tell people to do today: lock your door, turn off your phone, and study this new technology frontier for a day. I realized that this ecosystem will likely have incredibly profound effects on enterprise, government, and society—and is a generational opportunity for entrepreneurs and investors.
I began investing in a wide range of companies across the blockchain ecosystem, including digital wallets, payment processors, exchanges, and miners. This helped me develop a heat-map of the ecosystem, and more importantly, a network of technologists and entrepreneurs who were building the scaffolding for this new industry. It also led to my friendship and, later, partnership with Jeff Garzik, with whom I co-founded Bloq.
Enterprise demand for blockchain is real, but there are many questions to be answered. What type of software infrastructure do you need? What can we learn from enterprise adoption patterns of other transformative technology?
To the first question, the emergence of an open source, enterprise-grade blockchain software suite is developing quickly, and we’re investing an enormous amount of time and energy helping companies develop an infrastructure that, in many ways, defines the basic anatomy of a blockchain:
• Blockchain platform as the base communication and management layer of the network
• Nodes to connect to a blockchain network, which behave much like routers
• Wallets to securely manage and store digital assets
• Smart contracts to automate and streamline business processes
• Analytics to drive better decisions and detect network anomalies
The second question revolves around adoption curves. I see a story unfolding that is similar to those of the Internet and cloud computing. Right now, organizations are implementing blockchain technology internally to reduce costs by moving value and data in a more secure, more efficient manner. We are also beginning to see some activity in core operations and business processes that utilize blockchain’s encrypted workflow features. These are important stepstones helping drive an architectural step change in blockchain adoption.
Next, companies deploying blockchain networks should consider extending those platforms to their customers, suppliers, and partners. This is where network effects should start to blossom, and will likely lay the foundation for pursuing new economic opportunities—measured in trillions of dollars—think central banks issuing digital currencies, land title registries, a secure digital identity, and more. Yet organizations don’t strive just to be better—they want to operate at a different level. With blockchain, moving money should be as easy as email. In 10 years, banks may look more like Apple, Amazon, and Tencent, coupled with access to tons of products and services within those ecosystems. The discussion won’t be about whether to use blockchain—it will be about the economics of the platform and how to develop strong network effects.
The blockchain genie is out of the bottle, although the adoption curve remains unclear—will it be three to seven years? A decade, or longer? These networks for money’s new railroad will take time to adopt.
In the late 1990s, CEOs wondered if they should risk their careers by investing in and innovating with the Internet; today CEOs are in the same boat evaluating blockchain. Like any great technology evolution, the blockchain transformation requires passion and investment, dynamics that drive innovation. Right now, neither appears to be in short supply.
In a historic break from the past, the foundational concept of trust is being tailored to meet the demands of the digital age, with blockchain cast in the role of gatekeeper of reputation and identity. While the broader implications of this trend may not be fully understood for years to come, business and government are beginning to explore opportunities to selectively share composite digital identities with others not only to help establish trust but to exchange assets safely and efficiently, and—perhaps most promisingly—to proffer digital contracts.
Copyright © 2017 Deloitte Development LLC. All rights reserved. Reprinted by permission.
Read Part 1, Part 2, Part 3, and Part 4, or read the full article or download a copy at Deloitte University Press.