There’s a huge buzz around blockchain and the ways it’s set to disrupt finance, supply chain and how, for instance, government departments store, verify and share information. But what is it? How much is hype? And how should business leaders and professionals prepare for the changes – big and small – that blockchain potentially heralds?
What is blockchain?
A blockchain, Vinay explains, “is essentially a jumped-up database.
“It resides between, instead of within organisations – a data store in the connective glue that binds processes together. This has the advantage that you can operate big complicated systems without one party having all the power because they control the database. The power is equally distributed because everybody has access to the data.”
Each block in a blockchain comprises “all the transactions that are processed together in a specific period of time. You could call it a batch”.
Because records are stored in multiple locations, and each time there’s a new transaction, it must be verified by processes run on a large majority of the computers where the records are stored, a blockchain is incredibly difficult – if not impossible – to hack. “What makes it one of the most exciting technologies around,” wrote Subramanian Iyer in Oracle’s online Profit Magazine, “is its ability to reduce the possibility of security breaches by even its own operators.”
But these descriptions – including the tendency to refer to “the blockchain” (singular), rather than “blockchains” (plural) – create the illusion of a stable, mature technology, ready and waiting for mainstream implementation. So while there are many exciting potential life and society-changing applications, as Vinay points out, we’re not there yet. Blockchain is, he says “a vector of technological progress.”
Blockchain is slow. Its change cycle isn’t
“Probably the most important thing that I can tell people about blockchain is that it’s a moving target,” he says . “Its cycle time to go through a transformative change is less than a year. So, if you look at it today, you’ll have to relearn it in a year.”
At present, Vinay explains, blockchain is slow. Typical performance is around 20-30 transactions a second: the speeds databases were managing 30 years ago. By comparison, Visa can process up to 56,000 transactions per second.
Within the next five years?
Despite this, he reckons it’s probable that we’ll see widespread implementation of blockchain-based technologies within the next five years. But for many of us, the changes will be to how we do things, rather than what we do. So, for instance, we’ll probably be able to check into a hotel room without encountering a human receptionist, having to use a physical credit card or remembering an entry code. “You’ll walk in, it’ll look at your face and your phone, it’ll unlock the doors for you when you approach them. If something goes wrong someone will turn up and say hi – did you order a concierge? It’ll be like ordering a taxi service.”
“All of that – along with the hotel security camera footage – will probably be recorded, monitored, logged on the blockchain, or something like the blockchain. It may be some highly-evolved version, we may not even call it the blockchain. But that basic framework of digital signatures and secure logging will be there, because those technologies work.”
The Dubai Blockchain Strategy
Vinay did the initial conceptual work for the Dubai Blockchain Strategy. “I said ‘Why don’t you issue all government documents on a blockchain, so that when somebody brings one of these documents back to another government department, you can immediately authenticate it?’ If I need to prove my address to the Department of Motor Vehicles, I ought to be able to show my tax records. Very simple. Governments ought to be able to recognise their own documents.”
“Not very much will change in Dubai as a direct result of this,” he adds. “While the shape of their society won’t shift, they will save an astonishing amount of money on paperwork and the indirect impacts will be absolutely enormous.”
What should business people and other professionals do about blockchain?
“The short answer,” says Vinay, “is to ignore it. Pretend it isn’t happening and wait for somebody to come up with something like the Microsoft Office of blockchain, or the Oracle of blockchain, or another totally standard blockchain product.”
“Right now, it’s still research technology. It’s like the internet was in about 1996. It’s a bunch of junk in which people are burning huge amounts of money for not very much return. And then you get Amazon, Google, and the rest of those guys.”
“Yes, all the banks in the world have a prototype of one thing or another. They’ve all got five or ten people poking around with it because it sounds important. The gap between this and actual deployed product is probably five to ten years. Because they’re going to have to go through regulation before they can offer any product to their customers.”
Ignore blockchain …
“Unless you are in a position where you are tasked with watching the future, ignore blockchain. It’s just noise. It’s the kind of crunching that happens as a society attempts to create a new technology platform.”
“But there is a but. And that is, one day it’ll go from being nowhere to being everywhere, and you’ll think you’ve missed the boat. One day there will be a Facebook-style, WhatsApp-style, Snapchat-style explosion, where some killer app based on the blockchain will be literally everywhere, and society will begin to change in some strange, weird, unforeseen way. How much? Maybe a bit, maybe a lot. Maybe more than we can currently imagine.”
… but watch the space
“So, watch the blockchain space. Because it will suddenly take the form that allows it to be everywhere at once, in the same way that ecommerce went from kind of being not there, kind of not there, kind of not there… Boom! You don’t want to miss that as it happens.”
In other words, don’t focus on blockchain, but stay aware so you can detect when the signal:noise ratio improves.
“Wait for your teenagers to tell you about it. Because it’s young people that change their mind about what technology they’re going to use. They will suddenly declare ‘Hey! Have you seen this amazing thing?’ And that is the point at which things begin to get moving. So, if you have kids in that age bracket, and they’re suddenly going ‘Hey! Have you seen this amazing thing?’ that’s probably when the thing has arrived.”
Keep an eye on the big guys
“And you’ve got to keep an eye on Oracle, Google, Microsoft and the big guys. When they start offering B2B blockchain products directly to customers, that is another strong indicator that it has arrived.”
“The other player is SAP. You could put a blockchain in as a way of smoothing out some of the supply chain integration that SAP does. So, I think you could see a SAP smart contract product that might be one form the blockchain takes to get spread everywhere.”
“If it was easy and predictable…”
“It’s those big players that are going to be the kind of people that take it everywhere, or maybe a small player that suddenly has an explosive breakout like Snapchat.”
Through his venture capital project, Vinay and his team are making extensive analysis of where and when the first mainstream manifestations of blockchain are likely to emerge, so they can figure out where to target investment. “But,” he points out, “if it was easy and predictable, it wouldn’t be venture capital. We’d just buy it.”
And, the imminent disruptor is…
So, if we’re not focusing on blockchain, where should our attention be? “Self-driving cars,” says Vinay. “Because they’re going to land like a meteorite thrown onto the side of a continent. An incredible shift is coming and it’s coming really quickly.”
Vinay Gupta is Founder of Hexayurt Capital Partners. He was project manager for the launch of Ethereum – “a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference”. Vinay’s background is in disaster relief and he’s the inventor of the Hexayurt Shelter System – a simplified disaster relief shelter design.
Coming soon from Westminster Business School, a new two-day course: Strategies to Win in a Digitised World. Please email Dr Paul Langley to express interest.