Blockchain – the distributed ledger system meant to handle financial and other transactions without the need for banks or other central authorities – will be huge.
Those is, if dozens of players with competing agendas can solve multiple complex technical problems, and convince regulators to overturn centuries of rules in everything from finance to utilities.
That was my takeaway from this week’s “Business of Blockchain” event, organized by MIT Technology Review and the MIT Media Lab. (Videos of the event here.) (Blockchain is a network (or chain) of encrypted ledgers, in which the node hosting each copy of the ledger automatically and continually assures the accuracy of all the data and transactions on the entire chain without the need for a central authority.)
Speakers at the conference speculated that blockchain could today be where the internet was in 1990, 1985 or even 1969 –- a seemingly arcane technology poised to fundamentally change economies and societies.
But getting there is by no means certain and will require a lot of work. This post is about where blockchain is today, based on buzz at the conference and my blockchain work with clients. Follow-up posts will describe 1) tactical themes for your blockchain marketing content, and 2) more strategic questions to tackle for blockchain thought leadership.
Blockchain is Real…
Among the proof points for blockchain are:
- UK-based Everledger uses IBM’s blockchain to prove the authenticity of 1.2 million diamonds worldwide, assuring customers they’re getting the gems they paid for and reducing counterfeiting. “Smart contracts” on the blockchain check each diamond for compliance far more quickly than previous methods.
- Global derivatives trader CME Group is testing a blockchain-based “digital record of ownership” for ownership of gold stored in the vaults of the Royal Mint in England. This will give buyers and sellers better visibility into pricing and availability in a market that’s “screaming for disruption,” said Sandra Ro, digitization lead at CME Group. (Video of her presentation here.)
- The Moog Aircraft Group is combining blockchain with additive printing to transmit designs for parts (and the paperwork proving the part is up to spec) to 3D printers at, say, a local airport or aircraft carrier at sea. James Regenor, business unit director for Additive Manufacturing and Innovation at Moog, told the conference this will reduce not only inventory and shipping costs, but the time required to send the documentation without which parts cannot be used. (Watch his presentation here.)
Both Ro and Amber Baldet, executive director and blockchain program lead at J.P. Morgan, pointed out the potential of blockchain to reduce transaction costs in an industry under intense cost pressure in the wake of the 2007-2008 financial crisis. IBM, a co-sponsor with Deloitte, referenced a survey showing 14 percent of its global financial services customers expect to deploy production blockchain applications this year, and said more than 400 customers are using its own IBM Blockchain.
…But Still Very Young
But even those who believe blockchain could be as revolutionary as the Internet stressed how much work is yet to be done. One described blockchain, for example, as nowhere near the “tipping point” the Web reached when HTTP (the Hypertext Transfer Protocol) put a pretty graphical interface (in the form of Web pages) on the underlying technology in the mid-1990s.
Baldet noted that while there are more than $18 billion in bitcoins (a “cryptocurrency” and payment method based on blockchain) in circulation, this is dwarfed by the $97.4 in conventional currency in circulation globally. Although bitcoin is the most widely known use of blockchain, some speakers argued over whether such cryptocurrencies are even a necessary part of blockchains. (Ro can be seen on YouTube asking whether bitcoin is a currency, a commodity, or something else altogether.)
Even on the technical level, there are serious questions over whether blockchain can deliver. Associate professor Emin Gün Sirer of Cornell University listed the three essential promises of blockchain. They are 1) that every transaction must be valid, 2) the history of each transaction must be immutable (impossible to change) and 3) all nodes must reach a consensus on which transactions are valid.) Production blockchains have failed all three tests, he said, with software bugs allowing the creation of fraudulent bitcoins and forcing the roll back of fraudulent transactions.
One vulnerability, he told the conference, is the consensus model by which blockchain nodes continually check the validity of entries in the distributed ledger. If a hacker can take over enough nodes to force a consensus, they can block a valid transaction, or commit a fraudulent transaction. This threat is heightened, he said, because in many blockchains, the same code is used to run all the nodes, making them vulnerable to the same hack.
Yet another challenge is proving that a participant in a blockchain (whether a person or an organization) are who they claim. This was a major sticking point for conference speakers, who had trouble agreeing how to define “identity,” much less how much identity a participant might need in various cases or how to assure it.
Non-technical governance, regulatory and legal questions loomed as large, if not larger. If hackers steal a digital currency but don’t cash it in for “official” currency, has a crime been committed? Would regulators, or customers, accept a financial system where 51% of blockchain nodes could “vote” to roll back a transaction? What will it take to convince regulators that blockchains are safe replacements for today’s “middlemen” such as banks and electric utilities?
Marketing Blockchain? First Steps
All this makes an unusual challenge if you want to play in the blockchain space, but don’t have a finished product, service or business model to talk about in your marketing content.
To start, be sure you have answers to (or at least a feasible approach for) dealing with the security and other limits of blockchain, and the regulatory or governance hurdles it faces in your specific industry.
Second, as several speakers warned, don’t just use “blockchain” as a way to sell your current offerings. One example that surfaced repeatedly was database vendors disguising their wares as distributed ledgers, whether they meet the unique needs of blockchain or not. The blockchain community prides itself on being “disruptive” of existing technologies and businesses, and the true believers will be all too happy to trash tacky marketing ploys.
Finally, broaden your content marketing mindset – as many of my clients are — beyond getting leads to generating interest and involvement from potential partners, investors, regulators and governments. Getting blockchain right will take a lot of bright minds, and content that attracts them may be just what you need at this point.
How does this square with your view of blockchain acceptance in the marketplace? Are you or your clients even thinking of marketing your blockchain chops or still trying to get your mind around the concept?