Blockchain: tell me again which business problem is it solving…?

The hype and excitement surrounding Blockchain and now Ethereum is in full swing with lots of forums, conferences and high profile investments in all kinds of projects, tech plays and platforms…and yet few if any of actual Blockchain solutions are live and running.

But there is good and fundamental reasons for this!

There are a lot of parallels with the arrival of the Internet in 1993/94. A real event, and until now the event of 21st century, that also began with massive hype and excitement of a new age that promised to do so much… An advancement that will change our lives in so many ways… But then nothing happened. Early forecasts were seen as wild and pioneers went to the wall, until these forecasts ended up being a tenth or a hundredth of what happened a few years later. You may draw upon examples in  ‘Crossing the Chasm’ - Market Maturity models but what is clear the nature of impact of the new fundamentals around Blockchain will emerge quickly and the metrics will stun everyone. 

Lots of promise…

For many Blockchain is nothing more than a technology looking for a solution and it took a few years post the hype (deflation) for real solutions for real business problems to emerge. This is the irrational piece and where Blockchain is today. But then only a handful of people understood the concept behind Satoshi’s original vision which was more to do with control of ones money outside the banking system and beyond government intervention…

In many ways the VC community adds to this hype bubble to force up valuations as they play their destructive portfolio game, of backing 20, hoping 1 will deliver the golden egg. A strategy that is not helpful because throwing money at tech plays in this case Blockchain, that go nowhere, building things that often don’t solve a real problem and end up creating things people don’t need and wont use is creates the malaise that distracts the real and fundamental shift. Everyone dives in without fully understanding which is the case today...

As I venture closer and get immersed in Blockchain I am in search of real opportunities to solve real business challenges and I have not been able to find many and most I have found concentrate on versions of Smart Contracts...

I understand the game that is laid out before us, but have to ask who is making money right now from Blockchain? It all starts to feel suddenly very familiar as I look back I realise I have been here before. In 1981 with the arrival of the Personal Computer Age, 1993/94 the Internet Age, 2005 the Digital Age and now Blockchain encompassed in so much promise and where confusion is king. And yet the real fundamental and next era that will define us all will be AI (Artificial Intelligence Age) and the second coming of Robotics from 1.0 today closely aligned to AI. An impact that mankind has never experienced before.

With all new things that came before, each new age takes time to eventually find its feet and for the real disruption potential to enhance the lives of ordinary people (in a good way) to become transparent. In the case of banks lower transaction costs, deliver safer and fairer banking and guaranteed security, better propositions and products and access to our money, assets and information. But then one doesn't need Blockchain to do this... It takes time for the reality to sink in and for business people and technologists to collaborate to align thinking and deliver real outcomes to real business challenges.

A fundamental lack of understanding…

Blockchain is no different. Many who claim to understand its potential don’t, others claim to have built things that will change the world, disrupt industries and create competitive advantage. Is it smoke and mirrors or just ‘fog of war’…

I see announcements where banks have invested in huge Blockchain teams apparently developing stuff but don’t say what or cannot articulate why… But then if you don’t have a story or position on Blockchain what will investors and shareholders think..? So the feeding frenzy continues as everyone has to have a Blockchain story. Despite the reality being more lipstick on the pig and a work of fiction for most.

For me banks that go down the Blockchain road will expedite their own demise. When this new distributed technology (thinking) matures and is used in the ways my colleagues and I have in mind, once deployed properly it will totally destroy markets/industries and this will include the banks and most large financial institutions. But not all.

Banks have the misguided belief that if they do Blockchain, read: have our own version of distributed ledgers that only few have access to, [restricted blockchain] then they can protect their business and keep much of the opaqueness going. Add a little bit of costs savings and increased cycle time is no doubt the internal business case of 10% to 20% sounds good enough.

In the world I see we are talking reducing costs by 90% - 95%... Now that is disruptive. 

Another strategy involves banks creating a version of their own cryptocurrency (not sure why). In any event what tends to happen is banks create their own bastardisation of something that redirects the core principles of the underlying technology. The essence of Blockchain is openness, transparency and trust, yet one has to ask why banks are building closed private Blockchains... A dummed down version to lessen the impact not accelerate it, benefits that help the bank make more money and not those passed onto the customer.

The things that have kept banks going allowing them to make money to pay for their inefficiencies and bloated infrastructures is the continued ‘opaque’ world of transactions and connected parties where essentially money (backed products) passes back and forth and where each drinks from the commission, transaction fees and bonuses trough. It has been this way for a 100 years. Taking days and weeks to clear and settle transactions claiming that it is compliance and regulatory hurdles that cause the delay and extra costs is the smoke screen for excessive behaviours. A weak argument at best, nevertheless this is the one you will hear most. It is not our fault it is the world we live in… 

In this respect banks are either extremely smart and they get what is about to happen or extremely dumb… I will let you decide…

Banking hasn’t changed since 19th Century despite major advancements in tech that would allow them to do many great things and create helpful proposition for customers. Ask yourself why they the banks don’t, when there is all this great tech to deploy that would make our lives easier and better… The simple answer is - this would mean less profit for banks and in most cases no ability to mask excessive fees and charges (often hidden), therefore no bank.

Putting a mobile app on the front end, or offering Internet banking does fool anyone as nothing changes and all of these experiences are very poor at best. It takes days for changes in simple banking terms to show a simple transaction whilst my money is all of a sudden unavailable while the banks take their time. Behind the scenes banks don’t want to change, because they make their money and have always done it this way, adding complexity and extra steps all design to rape fees and create the mist. It is this behaviour and how slow they respond that makes them most vulnerable.

Ask a regulator, or a central bank and they will tell you they have limited or no visibility of what banks get up to and when they do get reports and access the data as information is neither timely nor useful. They are kept at arms length by a banking sector designed to create complexity. 

Regulators, Central Banks, Exchanges all embrace and can see the Blockchain’s potential. They get it. They are very supportive and can see the end game. Although Blockchain is meant to eliminate the central control and influence, Blockchain will enhanced it, as all of a sudden the mist will lift and they will be able to see what the banks have been up to. The day they have all been looking forward to is approaching - let the mega fines begin…

All banks have been fined or about to be at one time or another. All banks have dirty washing and this next phase of Blockchain evolution has the potential to expose their inner workings and open everything up. Is this why banks are building private Blockchains that has limited access...? Or simply they haven’t joined the dots and haven't worked it out yet.

Blockchain of course has implications for all industries and sectors not just banking. But is is banking that captures the headlines because it is the sector that generally makes (loses) more money than others and a sector that looks after our hard earned money.

Blockchain is a technology of immense potential that has massive implications for us all. There are real business challenges, opportunities and issues for this technology to solve and by doing so disrupt and deliver game changing options for those in control. The issue remains with those who want to design, build and deploy solutions that can demonstrably deliver the full potential of Blockchain technology on business issues and problems that really matter... 

Blockchain is ultimately about control, security, openness, trust and a unique architecture that distributes an immutable record of everything that is important to us. It should return our faith in and rebuild the confidence in the (any) system, but then…

? Digital BOOM 2016