In this opinion piece, Malikkhan Kotadia, co-founder and CEO of Finnovation Labs, proffers advice on dealing with the hype surrounding blockchain. He also shares his thoughts on Blockchain’s impact on society at large.
There is an ancient Indian fable about a group of blind men that met an elephant for the very first time. Having several spiritual and metaphorical connotations in Vedic, Buddhist and Sufi teachings, and made famous by the 19th century poem by John Godfrey Saxe, it goes something like this:
Having heard so much about a majestic beast – the elephant – from various travellers and explorers, a group of blind men set out in search of it, as they wanted to experience the hype for themselves. However, when they finally met the elephant, the men were unable to observe the animal with their sense of sight. Hence, they decided to make their observations by touching it. The results were interesting.
The first blind man touches the trunk and proclaims: ‘The elephant is like a giant snake!’
The other feels the beast’s body and exclaims: ‘Oh my, the elephant is like a robust wall!’
The third manages to latch swing onto the tail, and joyfully cries: ‘The elephant is like a rope!’
So too the fourth, fifth and sixth, who saw it as a spear (touching the tusk), a fan (the ear) and tree trunk (the legs).
Like any good fable, this story has a message – that our perceptions are often based on our limited understanding of things. Then, we get so attached to that perspective that we refuse to even acknowledge that there could be another side to the coin.
Likewise, something similar is happening with Blockchain. In fact, it has been happening for the past three years or so – ever since it found its way into common parlance, in ‘mass consciousness’.
To some, Blockchain is all about the original libertarian vision of releasing ‘money’ from the grip of central bankers and democratizing it. To this group of idealists (or anarchists, depending on your POV) anchored in ideological moorings, Blockchain is merely the next step in the evolution of democracy, and even human society itself.
Just as humans have evolved from monarchies to democracy, where each individual can voice their opinion via a vote, the time has also come to liberate money from the central treasury by giving individuals participation and a voice in the ‘system’. This is the crux of Satoshi’s original whitepaper.
To others, it’s simply about ‘going back to the basics’. A few thousand years ago, two entities could trade directly with each other, without the need for a middleman. But as global trade grew with time, so did the power and authority of the middleman, who became a ‘trusted third party’ – be it the bank, the central treasury, the settlement and clearing house and so on.
This trusted middleman started controlling the flow of money, and became its fundamental custodian. Now, with distributed ledger technology and cryptography, P2P trustless trade is possible once more. P2P is the real premise and promise of blockchain – be it for the transfer of money or goods and services via smart contracts.
Then there is the incumbent group. They see Blockchain as an efficient and powerful tool for frictionless and cheaper global flow of trade, goods, services and money. However, to them, Blockchain is but a tool. These ‘realists’ are not enamoured by the ideology of this technology nor its libertarian premise. They are only attracted by its promise: to make global trade more efficient through transparency and immutability. Rather than yanking out existing systems, Blockchain enables them to become more efficient.
In this category, you have players like SWIFT as the incumbent, trying to pilot DLT for faster settlement flows and better liquidity management, while Ripple is the disrupter. And yet both operate within the existing banking system. They are happy to partner with banks, not replace them.
This is where most of the corporate action is, and where the IBMs and R3s of the world have pitched their tent, allowing a new model for consortiums to work together more effectively. This is also the group where the challenges of the existing ‘system’ come face to face with a new model of consensus: getting multiple counterparties on a common platform and data model.
And finally, there is the group of academics, innovators and developers, who see Blockchain as nothing short of the internet of value. To them, it is as powerful a technology as the internet itself. They thus see significant parallels between Blockchain and the internet of the early 90s. And it’s not just about monetary transactions.
Through smart contracts (in its relatively early stages, and trying to navigate through various speed, scalability and privacy challenges) and oracles, anything of ‘value’ can be transacted in a ‘trustless manner’. In this utopic universe, human errors and follies are made redundant, as ‘code becomes the law’.
This brings us to the fable I shared at the beginning of the article: Just what is the elephant? What exactly is Blockchain? A simple answer would be: It is all of these, yet more… They say the best things are the ones that are greater than the sum of its parts. The same can be said for Blockchain.
As a primer, it’s worth understanding that Blockchain isn’t ONE thing. It’s an ecosystem, with many layers and components.
At its most fundamental, there is the architecture layer, which is the domain of the geeks and the visionaries. The nodes, the consensus algorithms, the role of cryptography, permissioned vs open nodes, state channels, on-chain vs off-chain; these are all components of this layer. And the miners are the custodians.
Then there is the protocol layer, which aims to bridge the gap between various Blockchains. Which brings us to another philosophical, even fundamental debate within the community: Should Blockchains, by their very nature, continue to evolve as multiple entities, each with their role in the larger ecosystem (much like the various LANs before a consolidated ‘internet’)? Are forks essential, even good, if we have to be true to Blockchain’s founding democratic principles)? Or like TCP/IP, is it time to create common protocol to bring the various chains ‘together’? Exchanges (ironically centralized!) emerged in this layer to fulfil this very gap. But with atomic swaps and decentralized exchanges, apart from OTC, there are various initiatives endeavouring to solve the cross chain interoperability conundrum.
And finally there is the app layer – something that we most intuitively understand and commonly relate to. After all, most don’t really care about or understand the underlying protocols of the internet, but are engaged with various apps that touch our lives – from email to E-commerce to messaging apps to endless hours spent on social media! The internet of information as we see it today is a giant web of apps that touches our lives in myriad ways.
Similarly, various distributed Apps (or DApps) are being developed on Ethereum – from tracking provenance of goods to supply chain to trade finance to alternative P2P power distribution/exchange solutions to media streaming and micro payments.
Below are some examples of applications across industries:
- P2P payments, especially micro-payments: Cheap, fast, secure. It can potentially cut out middlemen. Last mile still a challenge.
- Remittances: One of the most widely adopted use cases (and logically so). It can potentially cut down cost, time and complexity. Volatility is a big challenge.
- Smart contracts: more efficient, secure, ‘code driven’ contract flow and execution. From company formation to ‘micro-shares’.
- Precious metal trading: ‘trust-less’ trading and exchange via tokens.
- Property title management: increased efficiency, lower costs, common ‘source of truth’ for all counterparties involved.
- Trade transactions and exchanges: From agriculture to livestock, via tokenization Exchanges and settlements: from Forex and stock markets.
- Co-operative marketplaces: the next steps in marketplaces where counterparties can directly trade in trustless transactions, powered by smart contracts.
- Education transcripts and records: a common repository across grade school, high school, college, university and certification courses etc.
- Voting: more transparent elections; secure and immutable.
- Real time live streaming (video/audio) and ‘value exchange
- Gaming: one of the first ecosystems where ‘indigenous’ currency existed. With the Blockchain, this ‘native currency’ (pins, stars etc.) is easily tradeable vs each other, as well as other tokens.
- IP and trademarks/copyright management
It is worth highlighting that this is just a snapshot. At last count, there are nearly 1500 such apps being built on Ethereum or other emerging blockchains. Of course, most of these apps won’t see the light of the day. And even fewer will ever make it to the era of Blockchain 3.0 in 3-5 years (remember the internet giants of the Dotcom era? WebVan, Lycos, Alta Vista, AOL? Vs the giants of today…).
Thus, it is fair to say that five years from now, this picture may be totally different.
And in a decade, we may have totally different architectures (the buzz around hashgraph is a good example, where there may not be chains of blocks). Blockchain applications may be so ‘embedded’ in businesses that terms like ‘crypto economy’ or ‘DLT enabled’ may become redundant. As per a WEF survey, 10% of the global GDP could be on the Blockchain within a decade…
It would therefore be objective to say that Blockchain is more hope than hype at its most fundamental level. Currently, however, hype seems to be dominating the narrative, scaring the ‘fundamentally oriented’ folks away.
My humble suggestion would be to neither get carried away by the crypto hype (that will subside in due course, like every hype cycle), nor be dismissive of it. Rather than speculating about its future and asking this question every year, we should look to the internet for answers.
Similar questions were asked in its early years (early to mid ‘90s), but look at its fundamental and all-encompassing impact, when seen over a two-decade horizon. So too with Blockchain… The true impact of Blockchain (or its subsequent versions/avatars) should be seen in the context of at least 10-15 years.
Thus, I conclude this paper and rest my case by quoting Amara’s law – my guiding light when trying to separate hype from fundamentally disruptive trends:
Keen to hear more from Malikkhan Kotadia? Join him at ConnecTechAsia Summit’s EmergingTech Track on 27 June 2018 at Marina Bay Sands! He will be moderating the following fireside chat: “10 Key Challenges Impeding Adoption of Blockchain, and Emerging Solutions”. View the summit programme here.