Blockchain- No Need To Look For A Killer-App
Updated from my original article at Bitnews Today
“…the dominant note of our time is unreality.”
Mister Johnson
The tide of blockchain “Killer-App” ebbs and rises. Back in 2017–18, ICO (Initial Coin Offering ) was the name of game. It’s shifted towards DeFi (Decentralized finance). Billions of dollar is ushering in another era of crypto maze.
The Quest in Mind
For some, the relentless naming and chasing of “killer-app” is a need of money game. For others, even amongst serious blockchain technocrats and adoption-ers, it hints a question on confidence -where is blockchain going to be useful at scale? How soon?
It’s natural to meet this skepticism: a decade past its initial launch, bitcoin is still the only proven application widely adopted on the public blockchain. Some always question if blockchain is pre-mature or over-hyped, others say it’s a hammer looking for nails. While there are proofs-of-concept and pilots floating around, few, if any, production-ready blockchain software systems succeed yet in large use.
A runaway success of some use-case would be a perfect infusion of confidence, a clear market approval, a game changer, to bring everyone aligned, and accelerate the tremendous adoption curve that blockchain need to ride. Just like the Super Mario from Nintendo, a sweeping love across all store shelves at Christmas said it all. Or the AlphaGo. When the human’s world Go Champion Ke Jie removed his glasses and wiped tears with the back of his hand, the entire world was shocked to the power of some super-intelligence. The world plunged into an AI fever overnight.
When is that moment for blockchain?
The Path of Blockchain Adoption
Have you ever watched how kids learn painting? It’s fascinating how quickly amateurs learn to put pencils to paper with lines, even though in real life there are no lines with objects. Lines intuitively just reflect how we perceive the value changes — how shapes relate and how lights contrast.
When we check on the innovation, we tend do the same thing, mentally dividing the space between new and old by “drawing lines”, the disruptive technologies need to be distinguished from the status quo.
But we know in any professional art crafts lines don’t exist. They are either absorbed, erased, or blended in the process of working. This process calls in artists’ tremendous amount of skills, creativity, and sometimes courage.
This is how we could see eventually future blockchains may take its roles in digital age. Yes, they will stand out unmistakably as a neutralized ledger system, with such digital information and value can move securely with traceability, immutability, transparency, and many other unique features bestowed by blockchains. But more likely blockchains could work in a blended, integrated way with other digital technologies, for example ERP system for supply chain, so that the users may interact with blockchains without even knowing they are. To be vastly beneficiary for the society blockchains need not necessarily to claim a stand-alone victory or named as a disruptive killer app.
This doesn’t mean the blockchain adoption process to be smooth and pleasant for many. According to recent 2020 global Blockchain Survey, although the initial skepticism is fading, implementation is quoted as top barrier to adoption. How innovation like blockchain goes by existing legacy system. Replacing? Adapting?
This blockchain adoption in my view will take the shape of the hockey-stick curve. Be patient with a relatively long blade.
There are 3 reasons for this:
1) Steep learning curve
Blockchains are not a technology. They are a collection of many innovative technologies from the last half century in mathematics, cryptographies, and engineering. It’s also the economics, an intricate interplay of technology, incentives, and the rules of the eco-system. It needs to wave complex game theory into new architectural design thinking .
Blockchain is useful exactly for its fluidity. Furthermore, being decentralized and often “permissionless”, new blockchain knowledges are seen advancing constantly in all disciplines and peripheries. It can take a significant lead time for the knowledge to enter the “core” from such distributed crowd base.
2) Dreadful regulation (un)clarity
Complying innovations with the complex systems of regulations, or the lack of them in some circumstances, represents an on-going risk, especially in highly regulated industries like finance or healthcare.
Take a snap shot of a use case in loan securitization in US - if ever thinking of a mortgage Defi , we’ have Dodd-Frank establishing a requirement for Risk Retention; or BASLE III in managing Capital and Liquidity Regulation; or SEC requiring Regulation AB II, institute loan-level disclosure requirements.
It can be daunting to navigate a roadmap for an emerging technology through such complicated system to stay compliant. In addition, domestic and international regulations also need to collaborate and cooperate to reshape the rules and standards to foster innovation in the regulated services. The regulatory clarities are key to the speed into future.
3) A new commercial rule-book
Blockchains are technologies with pre-coded incentive mechanisms and represent a decentralized governance model. A business use-case running on top of blockchain needs to consist of the standards and rules for every node to agree and apply, including how to share information, who verifies the data integrity, and who gets rewarded for how much worth on what can be considered “honest” behaviors. This could be a massive, complex, and sometimes messy and ugly consensus-building exercise, in a decentralized setting.
As we have seen in recent development in enterprise consortia, building a “proof of concept” can turn out to be relatively straightforward. But the “proof of concept” wouldn’t necessarily suggest what pieces of it would get buy-in from which partners or customers, and how easy or difficult to scale. It’ll take significant efforts to align counterparties’ interests, and often demand superior business and negotiation skills that can go well beyond the developers’ expertise in technical domain. It’s not a simple, quick process nor a task to take lightly. That’s partially why the majority of “proofs of concept” have struggled.
Then What?
So, what does it mean for any company that is looking for an “blockchain strategy”?
1. Appreciate change management is a process, not an event. It takes time as an organization to move from the age of discovery to the age of implementation, and eventually to the age of expertise. If you only start when you have to, the chances, as an organization, you are already late for the game.
Stop waiting to be a “fast follower” and start looking from inside now.
2. Ask “what will technology do to us?” rather “what do we want to do with technology?”
Blockchain is fundamentally a coordination mechanism. Businesses that deal with slow, costly, or unreliable transactions, in theory have good reasons to consider blockchain technology.
The decentralized, internet-native blockchain technologies may lead to the breakthroughs in organization’s operation on a basis of peer relationships rather than hierarchy. Then where we can do best is to implement the business practice on top, in the end, not necessarily trying to reinvent the wheel, but trying to re-apply a process of best practices in setting new architecture principles.
This could involve much higher level of self-management, wholeness, and evolutionary purpose. As promising or challenging this may sound, action is NOW.
As Joseph Schumpeter’s “Creative destruction” nicely illustrated:
“The process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroys the old one, incessantly creates a new one.”
Joseph Schumpeter, Capitalism, Socialism and Democracy, 1942
