The Blockchain is here.
This is the message that rang out clearly from the monthly NetForum meeting hosted by LeumiTech on October 27, 2015. Our featured guest was Ron Quaranta, Founder and Chairman of the Wall Street Blockchain Alliance and CEO of the Digital Currency Labs. This NetForum was one of the most intriguing events in our nearly 3 years of activity. Why? The NetForum again gathered some of the leaders in the subject matter we were discussing who shared what is really happening on the front lines. For me it was particularly interesting because I got that stirring in my gut that told me “we are at a tipping point moment.”
Imagine telling people 20 years ago “the Internet is here and it will change everything.” How do you explain that? The nearly 30 NetForum attendees were divided into those who have never heard of Blockchain and those who are knee deep in it. I was subsequently invited to a Blockchain event by ConSensys that was filled with that visionary zeal that permeated the early Web meetings that I attended in 1992 in the East Village… Except that this event was being held in a modern incubator funded by one of the largest financial services companies in the world (the Barclays Accelerator at Rise).
I am not saying that some are enlightened and the others are backward. What is startling to me is the speed and aggressiveness with which big old companies are embracing the Blockchain. Consensys itself just partnered with Microsoft to help bring Microsoft’s Cloud activities into the Blockchain era. That’s Bill Gates company, the most prominent of the early Web deniers, a strategic mistake that is still dogging the company today…
What’s my point? Just that you should pay attention. That’s why we organized this NetForum in the first place. Don’t quit your job, or change your life. Get involved and see if you can get a competitive advantage for your business by carefully being first to the party.
With the large size of the NetForum mailing list, and it’s high concentration of decision makers, we can get a pretty good sense of what is resonating in this high powered group. The interest in this event was off the charts. Still, we got a lot of “what’s that, why are you doing an event on this topic?” So, the NetForum will do its part to keep you in the loop with more targeted discussions on the Blockchain — stay tuned for more soon — while continuing with our regular NetForum events on all the key issues that people who run Web businesses need to be informed about.
So what’s the Blockchain and why should you care? Bitcoin, the controversial crypto-currency, is built on a Blockchain foundation but the two are not synonymous — there is nothing controversial about Blockchain. It is a version of a distributed database — more precisely, a distributed ledger. It can be used to record any transaction (including an exchange of value). The entire ledger with all its transactions is distributed across a network of computers. The transactions recorded on the ledger are verified by a crowd that has earned the right to verify the transactions — this is called distributed consensus. It is mathematically impossible for errors to escape the scrutiny of distributed consensus.
The result is an absolutely true and correct ledger, a single version of the truth. Users can then write applications, called distributed applications, that perform transactions on the distributed ledger. Economic transactions can be codified into smart contracts that programmatically execute transactions on the ledger between parties who have access to the ledger. That’s it.
Now, if this can be made to work, the value chains of many commercial transactions will be re-invented — e-commerce, marketplaces, stock exchanges, payments, and more. All parties to any type of transaction will be working on the same ledger. No need for IT infrastructure to store your version of the truth and to reconcile transactions among different data stores. There is also no need for information about transactions and transacting parties to travel across an insecure and untrusted Internet. Transaction costs are dramatically reduced. Intermediaries that add no value will disappear.
Think of the Blockchain movement as a new wave of disintermediation to enable peer-to-peer transactions on a scale never seen before.
Have people implemented Blockchain technology to prove it can work? That’s where Bitcoin comes in. Bitcoin proved that an alternative currency built on a Blockchain could exist on a global scale. The controversy surrounds how a cryptocurrency is used or misused. But the insiders know that the underlying Blockchain tech “works.”
Armies of programmers backed by hundreds of millions of dollars from top VCs and Corporates are now working on enhancements to the Blockchain technology underlying Bitcoin — essentially alternative Blockchains. A number of companies are developing the foundational components of a complete Blockchain ecosystem, including identity systems, payment systems, and ultra-fast algorithms to reach distributed consensus. Others have started to apply Blockchain technology to specific application areas. For example, Nasdaq very recently announced Nasdaq Linq, “a digital ledger technology that leverages a blockchain to facilitate the issuance, cataloging and recording of transfers of shares of privately-held companies on The NASDAQ Private Market.” (Here’s a map of Blockchain use cases and companies pursuing them.)
I asked the NetForum attendees if there were obstacles to making Blockchain mainstream. Yes. The theory is solid but elements of the ecosystem need to be strengthened. One important issue is Trust and Identity verification. Who has access and who can do what on a public Blockchain is something that needs to be well managed. Financial institutions have rolled out “private Blockchains” where the counter-parties are all known financial institutions — essentially importing into the Blockchain the institution’s off-line reputation and reliability. This allowed them to roll out Blockchain applications quickly and to start their learning process.
I also asked those NetForum attendees with a pulse on the strategic investment tempo into Blockchain technology if they were investing now or will they invest in the future. Investment is pouring now. Will they take a passive role or work to help the startups implement real world solutions? Help, actively.
I can thus sum up Blockchain as a technology platform with a proven use case (bitcoin), with well funded startups helped by strategics pushing to expand into new application areas in the financial services and outside it in the expectation of massive improvements in efficiency in financial and business transaction globally.
Not a bad story.