Is the hype over?
Right now, there’s an entirely new industry growing on open public Blockchains with finance leading the way. Products and services deployed as lightweight smart contracts utilizing the benefits of vast open networks, bypassing the hurdles of traditional infrastructures and business models. Meanwhile enterprises are trying to build their own Blockchains, showing a fundamental misunderstanding in the nature of this new technology. My aim with this article is to emphasis the shift in mindset that needs to take place in order to understand, why there’s value in Blockchain space and how to participate in this new industry.
Exclusive company structures
Companies as we know them have been of an exclusive nature as long as we can think. Creating and locking value behind legal constructs then monetizing that value by making it accessible to customers. Protecting value created within company structures and avoiding others to take advantage of that value has been a key element of companies revenue models for ages. Developments like the open source software movement have set a different trend foreshadowing a shift to more inclusive structures in the tech space. We’re shifting away from an age of big exclusive tech companies exploiting their customers for their sole benefit, to a new age of inclusive networks sharing value amongst participants.
The inclusive nature of Blockchain
In order to understand Blockchain we need to understand the inclusive nature of that technology. It doesn’t make sense to talk about Blockchain as a separate thing and deny the crucial element of its underlying cryptocurrency such as Bitcoin. Bitcoin’s value is created as a consequence of its inclusive, borderless and permissionless nature. I won’t go into technical details since that’s not the aim of this article. But getting rid of the underlying cryptocurrency of a Blockchain, breaks the complex economic, social, and technological structure of the technology entirely. Thus losing its benefits of immutability, censorship resistance and so on.
Right now many enterprises are trying to extract value from an inclusive technology by making it exclusive. Not understanding, that after squeezing an inclusive technology into an exclusive corset, there’s nothing left of value anymore. That’s exactly what’s currently happening with enterprise Blockchains and companies trying to use the benefits of the Blockchain technology in their traditional exclusive environment.
How to be inclusive
In order to embrace technological inclusion companies need to give up traditional business models and products locked from the public behind paywalls. There’s already happening a shift to open networks and services offering modular functionality implemented as smart contracts as parts of vast open networks. Traditional companies won’t be able to compete with the rapid growth and innovation of these open networks. Building upon these networks provides an extremely connected and growing infrastructure for free. You don’t build your own Blockchain. Modern companies participate in networks build upon open Blockchains. That means an instant exposure of your service to the preexisting ecosystem of the public Blockchain. The value of a service is tightly coupled to the amount of users utilizing that service. As an example a business model can be based on percentages of fees and transactions.
Code is law
Open public Blockchains are immutable. That means whatever happens in your transactions and gets written to the Blockchain is permanent. Therefore code is law because even if you’d declare any rules other than the rules baked into your smart contracts there’s no way enforcing them whatsoever. Providing decentralized services requires secure smart contract code, reliable as well as distributed data sources or data providers. This is critical and due to the high risk of financial loss coupled to the quality of smart contract code, specialized auditing firms evolved out of necessity.
I’m not saying there’s no money to make and no value to create as an enterprise in Blockchain space. There’s simply no value to extract from Blockchain technology. In order to participate in Blockchain space companies have to embrace this inclusive nature which requires a radical shift in mindset as well as totally new business models. Let’s not fall for empty buzzwords while others are working with the real thing.