A Book About Blockchain

How Companies Can Adopt Public Blockchain to Leap into the Future

Rajat Rajbhandari

• Publisher: Business Expert Press
• Year: 2020
• ISBN:
  9781953349392
• Topic: Negocios y empresa
• Subtopic: Industria informática

This book describes methods to transform existing business by using digitized trust that is industrialized at scale.

Executives, consultants, and strategists are wondering how to participate in the blockchain economy. They are wondering whether new business models that will emerge because of this novel technology will disrupt theirs or whether they will ignore their businesses and create completely different models. In this book I answer all those questions. By the time you finish, you will understand what blockchain economy is, how to participate in it, and avoid being disrupted or, even worse, ignored. Drawing from my own experiences as research scientist and entrepreneur, the book describes methods to transform existing business by using digitized trust that is industrialized at scale.

CHAPTER 1

Introduction

Foundational technologies like blockchain take decades to make a massive impact on society and economy. However, if you had read the news, you would not have believed it. The hype machine was real, and the message was that the technology would not go through a natural cycle of development. Instead, it will rapidly disrupt everything. This continuous news cycle declared that blockchain will solve problems in finance, supply chain, election, insurance, and more. The blockchain will soon drive the global economy, and the disruption was well underway.

In 2017 and 2018, blockchain startups raised billions from crypto millionaires, venture capitalists, and other institutional investors via initial coin offerings. The market valued 1-year-old blockchain protocols of several billion dollars, without a single practical use case. Executives were ready to pay thousands of dollars to attend conferences to understand what this new technology was about. Conferences charged accordingly to listen to “so-called” investors because they had a few million dollars in their crypto wallets. These conferences featured blockchain experts, who cannot explain with a straight face what a smart contract was. However, hype is not all that bad because reality always sets in thereafter. In 2019, when projects failed, the market pushed scammers out in the open. Investors who poured billions on protocols began pushing for implementation of real-world use cases. The new paradigm steered the blockchain technology to a proper course of true innovation and scaling.

In 2020 people started talking about scaling blockchain applications. Use cases that could scale widely became important for startups and investors. The paradigm of blockchain as being a trustless machine changed to a trust machine. It is a trust at industrial scale. The true potential of blockchain is to reduce information asymmetry between parties using immutable ledgers anchored on an open network that operates globally using an open protocol.

Blockchain is a revolutionary technology, and, like other revolutionary technologies, it will not disrupt existing business models but ignore them and create innovative ones we have not seen before. I describe these innovative business models later in the book. These innovative business models will challenge the existing ones and even become a viable alternative, the same way cryptocurrency is challenging traditional finance.

In due course, existing businesses, especially the smart ones, will grow and start adopting blockchain (along with other nascent technologies) because they will want to stay relevant and transform. This book provides you with three key ingredients to implement blockchain and take part in the new economy by helping understand the fundamental components of blockchain, risks, and challenges of innovative business models, and ways to take part in the blockchain world. After reading the book, you’ll be able to evangelize the use of blockchain within your organization and with your customers, design breakthrough and innovative business models, and analyze risks and opportunities—legal, administrative, and technical.

CHAPTER 2

Evangelizing Blockchain

In November 2017 I stood in front of over 500 executives from logistics and supply chain companies who had gathered to hear about blockchain during the inaugural event of Blockchain in Transportation Alliance. This was my first stint as a blockchain evangelical. I didn’t know a lot about it as I do now. But it was enough to put me on stage. After 20 minutes of blockchain 101, a flurry of questions came at me. What do you mean by public as in public blockchain? What is a consensus? When should I buy Bitcoin? It’s not going to work in logistics until we standardize data, correct?

I could tell there was a lot of curiosity in the room, although 90 percent of attendees didn’t fully understand the meaning of consensus, mining, hash, and so forth. Otherwise, they wouldn’t have made the trip. They were there to find out what this new thing is that everyone is talking about. I also made a point toward the end by saying there are massive potentials for disruption in the industry. All it will require is that you understand the fundamentals of blockchain and evangelize within your company, community, and peer group.

How Should One Evangelize Blockchain?

What I mean by evangelizing is being ready to go to a conference room full of strangers, bosses, colleagues, or customers and convince them why implementing blockchain is a smart idea. First off, you need to believe in the technology. Guy Kawasaki, in a recent blog post, stated, “If you don’t love it, don’t evangelize it.”1 Blockchain evangelists must do three things now when the technology is in its infancy—educate, inspire, and defend.

Educate—Even though the technology has been around for almost 10 years and parts of it even older (e.g., cryptography, distributed systems), many in noncrypto industries are just now beginning to understand what it means and how it operates. When I organize blockchain 101, I still get asked questions such as “what is mining and is there somebody (a human) sitting in front of a computer validating all of the transactions?” And I end up spending a good chunk of time answering trivial questions.

I always make a point that however trivial those questions might be, they ought to be answered because understanding the fundamentals is critical to the technology’s adoption. If people have too many lingering questions and are stuck in fundamentals, they will feel like they’ve reached a dead end, which may kill their enthusiasm to move forward.

That’s one of the reasons I have not done and refuse to do YouTube videos or video tutorials. Instead, I prefer classroom and conference settings where participants are open and ask trivial questions.

Another reason education is important for adoption is that people can then cut through the hype and clearly separate strengths and weaknesses of blockchain. It is obvious that when people have a better understanding of something, they can make more informed decisions around it. Decisions about implementing blockchain inside a boardroom are not going to happen by simply saying, “Everybody is doing it; we should do it too.”

Inspire—Empowering an individual or an organization is another critical factor in blockchain’s adoption. However, empowerment comes only after education and awareness of the technology’s strengths and weaknesses as well as its core capabilities or usefulness. Each individual or organization should be able to see clearly whether they possess an opportunity or a threat.

Defend—When a technology is in its early stages, it comes under attack from all sides. Are you prepared to defend its position? Do you have enough willpower and firepower to do so, considering that it needs defenders and caretakers? Electricity, cars, telecommunication, and the Internet all came under tremendous attack from the status quo when those technologies were in their early stages. Add in a bit of history and incidents to colorize the point.

People who like the status quo will attack it by associating Bitcoin with pornography, terrorists, hackers, and drug dealers. If you perform a Google search, there are many articles in the mainstream media about blockchain being nothing but a fad that allows child pornographers to store porn along with Bitcoin. They will argue that it allows terrorists to buy weapons and hackers to blackmail their victims. The media will say, “Haven’t you heard of Silk Road?”

How do you defend against those blatant attacks? It’s easy. Give them the truth that they can’t swallow. Kenneth Rogoff, a Harvard professor, argued in his book, The Curse of Cash, that 80 percent of domestically held cash is used for criminal activities and tax evasion.2 A whopping 93 percent of the U.S. dollar notes are tainted with cocaine.3 Each bill didn’t necessarily change hands with drug dealers and users, because some of them got tainted via teller machines.

Ask the media to find a corner drug dealer that accepts Bitcoin. Ask them for evidence that a known terrorist group bought weapons using cryptocurrency or uses blockchain to organize their operation. They don’t exist yet. Even if they do exist, so what? Technology, governments, traditional institutions all take part (knowingly and unknowingly) in criminal activities. Criminals are always the first to exploit the technology and the government.

The reasons are obvious. They operate in a highly competitive and risky environment. They will always be on the lookout for bleeding edge technology to beat their competition and law enforcement. Believe it or not, porn made the Internet what it is today. They were the early adopters of image and video compression technologies and created the best-performing websites before big corporations did.

In “The Truth about Blockchain,” published in Harvard Business Review, authors Lansiti and Lakhani declared blockchain as a foundational technology,4 and described it as having the potential to create new foundations for our economic and social systems. Instead of disrupting traditional business models, foundational technologies create innovative business opportunities that did not exist before. Transmission control protocol/Internet protocol (TCP/IP) sparked the creation of the World Wide Web, leading to the commercial Internet boom introducing e-commerce, music, and video streaming that utilizes large networks of users spanning regions and continents. Applications based on a foundational technology often take a long time to emerge and become mainstream.

The adoption process of foundational technologies such as blockchain is gradual, incremental, and steady, unlike the classic hockey stick adoption we typically associate with disruptive innovations.5 Foundational innovations must overcome technological, organizational, governance, and political barriers. Although the impact of blockchain could be enormous, its transformational impact is decades away.

Your blockchain company’s success, or your success as a consultant, depends not only on how amazing your offering is, but also on how quickly your customers understand and accept this new technology. How do you approach them to say that the technology works and will work to solve their problem? Good evangelists not only believe in the technology and defend it, but also have experience doing it. To be credible, you first need to have spent significant time with people, wrestling with their real-world problems.6

One Person’s Hype Is Another Person’s Headache

Hypes about technologies can be powerful and can trigger an innovation race attracting funding and favorable regulations.7 Technological hypes are an extreme manifestation of expectations. We often refer to Gartner’s hype cycle to know which technology is going through which phase of the hype cycle.

If you are curious, blockchain is falling into the “trough of disillusionment” as of 2017, according to Gartner.8 Blockchain first appeared in the Gartner hype cycle in 2016 in his piece “Peak of Inflated Expectation.” Even Gartner didn’t see it coming in years prior to that.

Fueling the blockchain hype, there are at least a dozen books for sale on Amazon, as well as hundreds of news articles and blogs, about how blockchain will disrupt every business and change the world on a large scale. I’ve read a lot of these publications, and they helped me become a blockchain believer. Yet, because of my strong academic background, I found myself looking for evidence. No one, just yet, has put the pieces of that evidence together. In that regard, I’m a skeptic and like to question the hype at every opportunity I get. I do strongly believe that blockchain will cause significant disruption and change many busine...