How to Explore Blockchain
Written by Arno Laeven (@alaeven) for Coindesk. Arno Laeven is a strategy and innovation consultant at Laeven Consult, and the former blockchain lead for global healthcare giant Philips.
In this CoinDesk opinion piece, Laeven offers his advice for organisations setting out to explore blockchain with a view to adoption, arguing that expectations need to be managed at this early stage of the tech.
Even though motivational speaker and author Simon Sinek has over 300,000 followers on Twitter, 80,000 on LinkedIn and his Ted Talk was viewed 30 million times and counting, most people still don’t do what he advises and start with 'Why?'.
So, when looking at blockchain tech for your organisation, why would you want to get involved in a technology which is immature, where the legal framework is unclear and where business models are still hard to come by?
To start with the technology, sure bitcoin has been around for eight years now, and works extremely well for what it was intended: managing electronic cash without a central administrator. Yet, demanding anything beyond that on the bitcoin blockchain is complex, if not impossible, due to limitations such as scalability, throughput and privacy.
So along comes ethereum which aims to be a decentralised virtual machine or a 'world computer' in the words of Gavin Wood, one of the project's founders. The absence of a central authority is the essence of a blockchain, but also a challenge when you want to ensure users that the machine is working properly.
Vlad Zamfir, one of ethereum's core developers, wrote a great post about the state of ethereum and why he thinks that we all should talk care when handling such a powerful but immature technology.
I believe that blockchain exploration projects should keep as much 'off-chain' as possible, and only use a blockchain for whatever core functionality it may provide for your use case.
From a technology point of view, what you are going to explore will likely: a) be obsolete by the time you've built it (given the speed of development of the technology), and b) not have the full functionality of a blockchain, since you want to keep as much off-chain as possible.
Unclear legal framework
Legal concerns are twofold.
First of all, current law and legislation does not fit the technology, as such.
Take, for example, the concept of controller and processor: who is what with regard to data on a blockchain?
The second issue concerns blockchains replacing and/or altering the concept of law – a subject about which Alan Cunningham of the University of Manchester School of Law wrote an interesting piece. In the article, Cunningham singles out for criticism the concept of absence of governance, which has proven not to hold up in crisis situations (as with failed ethereum project The DAO).
He argues further that the roots of blockchain are to be found in anarchistic and libertarian movements. My take is that one cannot embrace blockchains without embracing these world views too.
So, then the question becomes broader than law, it is a question of world view. Is a world without government and without central governance one in which you see your organisation functioning?
In other words, a choice for blockchain is implicitly also a choice for new forms of governance.
New strategy required
That brings me to the third point, that of strategy. Blockchains will alter the value chain and even the organisation itself. This has all to do with the organisation of trust which will shift when introducing a trustless system like blockchain as a foundational layer.
Take a look at your own organisation and identify the positions and departments created just to make sure that transactions can be trusted. Auditors, compliance professionals, in-house lawyers and managers are in most cases ‘just’ there for the reason of trust. What if they are no longer needed and what if the cost of transacting goes down and the ease of collaboration goes up?
Before addressing those fundamental questions, it's rather silly to be asking, 'What's the business model of the blockchain?', or 'What's its killer app?'.
So why, for crying out loud, would you be interested in blockchain?
One reason – and it’s not the worst reason – is that your competitors are investigating the tech. FOMO, or fear of missing out, is very real, and the basis for many innovation projects and blockchain consortia.
A more intelligent answer, though, is that blockchain could be a technology, legal construct and strategy that profoundly impacts your industry and your company in the mid to long term.
So, why should you start exploring now? Because have the chance to influence the course the technology is taking, rather than being confronted by it in a couple of years' time.
Further, blockchain could possibly enable new revenue streams and lower operational costs. A blockchain exploration project therefore should be aimed at moving to deeply understand the consequences of blockchain on a technical, legal and strategic level.
Yet, carefully choosing the right use cases for blockchain will be paramount to the success of the project.
Navigating maze image via Shutterstock
Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.