One of the many things I love about working in supply chain is the exposure to new technologies. I/T companies and consultants evaluate a range of solutions, such as IoT, AI, 3D printing, robotics and blockchain. We try to identify where value can be added to the supply chain, and ideally, we leverage these technologies to drive customer value. Typically, my family and friends who are not in supply chain don’t ask me much about the industry; I’ve seen eyes glaze over the moment I mention those two words. But it’s been different with blockchain.
With all of the hype around Bitcoin and blockchain, I continue to receive questions about this concept. What is it? Will it matter? And, of course, where should I invest? (Sorry, I won’t be answering the latter question today.) Not only have I educated work colleagues on blockchain; I’ve sent my mother-in-law a link to an explanatory video, taught my kids the basic approach and shared content with my neighbors.
And while I’m no expert on blockchain – I’ll leave that to my colleagues in higher education, research labs, and high tech – I wanted to comment on a few of the concepts about what blockchain is and is not.
It’s not just a new technology.
Blockchain is not just a new widget, app or database. “It is a mechanism by which society can deal with how it arrives at truth,” explains Michael Casey, Senior Advisor of the MIT Digital Currency Initiative.
Most technology is based around institutions, such as governments and banks. Blockchain – a decentralized, distributed ledger – is complicated because it needs human beings to come together to optimize it. It requires trust.
Just ask Yuval Noah Harari, author of Sapiens: A Brief History of Humankind, why humans control the world: “Money is probably the most successful story ever told.” Cybercurrencies like Bitcoin further this story by agreeing on digital value. Harari’s position that money “is the most pluralistic system of mutual trust ever devised” is furthered by the decentralized trust mechanism of the blockchain.
It’s not just hype.
I’m not talking about crazy stock market behavior, which we’ve seen lately. Yes, cryptocurrencies are pervading Wall Street, and Bitcoin futures contracts are real – but don’t discount blockchain technology because of instability in the Bitcoin world. The concept and the impacts are substantive.
Cryptocurrencies are assets. They cannot be double spent. The currencies are “permission-less”, trusting a nebulous arbiter of truth; an open consensus mechanism. And while there isn’t currently an overarching methodology across all technologies, enough companies – and banks – are developing their own cryptocurrencies to take this seriously.
It is truly disruptive.
The global financial system is the most obvious example of disruption by digital currencies, from disintermediation of stock exchanges and trading houses to the institutionalization of ledgers. Consider, as Antony Jenkins has suggested, the friction and cost that the world would remove with a single global digital currency (although of course this still has risk and comes with complexity).
The significance and the range of use of blockchain should not be underestimated. It will stabilize currencies, eradicate corruption, provide visibility to voting and decentralize energy. And I didn’t even mention supply chain!! With added visibility and efficiency come provenance, smart contracts, unique identification, and registry of assets and transactions. This liquidates the supply chain, freeing up assets and enabling businesses to better respond to their customer needs.
It will take time.
While Bitcoin was created almost a decade ago, awareness of blockchain has skyrocketed over the past year. Opinions will vacillate as understanding improves and the hype reduces. But we still need to overcome a number of hurdles before we truly leverage the profound benefits of blockchain.
Scalability and cost are obvious issues, though these are exaggerated by critics. Issues with trust will continue to permeate. Legal and regulatory obstacles will interfere. The definition of quality standards for devices and processes will be essential for long-term success. But great strides are already being made on all of these fronts, and will continue to progress.
What does this mean to you?
Blockchain and its underlying fundamental concepts are the real deal. Some companies in this space will accelerate while others will collapse. I/T firms will grasp at how to derive real value in the short term. My advice? Don’t worry about abrupt ups and downs and anecdotes. It’s time to embrace blockchain and the fundamental transformation it will bring.