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 businesses for the better.
Businesses that have existed for decades will take decades to come to an end. When their livelihoods are at stake, they tend to fight back. If they can’t win, they will evolve. Obviously, not all businesses will succeed. Uber was supposed to take over the taxi industry and has not done so. Airbnb was supposed to disrupt the hotel industry. Hotels are, in fact, doing better, as reflected by their stock performance. Amazon was supposed to kill malls and brick and mortar stores. Yes, some have died, but smart ones have consolidated, fought back, and are still doing OK.
Will Bitcoin and other cryptocurrencies kill banks anytime soon? No, but that is irrelevant. Cryptocurrencies will create a new customer base that didn’t need or have access to banks in the first place. Will blockchain remove notary publics? Yes, many of them. It doesn’t matter because most notary publics draw their income from alternate sources. It doesn’t matter to them that their stamps are suddenly useless. Will blockchain remove logistics brokers? Yes and no. A few smart brokers will adopt blockchain and provide customers better service at a lower price point.
It is convenient to believe that blockchain will increase business efficiency and disrupt many things for the better. However, I refuse to blindly accept the concept without evidence that must arrive in the coming years. For now, my everyday effort is to stay away from the hype and be upfront with the community that widespread adoption of blockchain is a long-term play.
Gartner surveyed 3,000 chief information officers and asked them, “What are your organization’s plans in terms of blockchain?” Only 1 percent said they had any kind of blockchain adoption within their organizations.9 To go from 1 percent to 99 percent adoption is a long-term game that will take a few generations. I don’t believe the technology will leapfrog in the next few years until we’ve all experienced and overcome the hurdles and then passed those experiences to the next generation.
There is no question that blockchain is currently in a bubble. Steve Wozniak, the cofounder of Apple, warned that “[e]arly adopters can burn themselves out by not being prepared to be stable in the long run.”10 If I’m correct in interpreting his comment, early adopters like us should be ready to face destabilizing market forces before blockchain is widely adopted. Market forces, in my opinion, will be pushed back by the status quo, culture, and a better user experience. I do not buy the argument that the technology is too immature for adoption; it is simply not 100 percent user friendly.
Anoop Nannra, head of CISCO’s blockchain initiative, made an interesting comment on CNBC, in May 2018, to the effect that widespread adoption of blockchain is anyone’s guess because it involves shifting business’ mindset and that to accomplish it will take generations.11 If we combine statements by Mr. Wozniak and Mr. Nannra together, getting over the status quo will require future generations to implement blockchain.
Maximalist from the Inside, “Whatever Works” from the Outside
I used to be an open blockchain maximalist. I argued with myself and others that private blockchain did not have any future. I still believe that is the case, but it will be at least a decade before we see a complete demise of private blockchain, the same way the intranet took years to vanish.
As I interacted more with companies and enterprises, I came to realize that there is nothing crazy about letting companies use enterprise blockchain to collaborate with other companies to solve common business problems. The main argument is one of control, because no one enjoys giving up their power. After decades of using centralized databases with fully controlled access and visibility, there is no way companies would suddenly shred their hesitation to send transactions through an open blockchain.
The more I helped companies ideate blockchain implementation, the more I saw them get cozy with the idea of hybrid designs. Hybrid designs are when some aspects of the transactions such as identity or account information are stored in centralized databases. Transaction finality such as asset transfer or milestones in critical workflow are added to open blockchains such as Ethereum and Bitcoin.
Another reason I stopped arguing against enterprise blockchain is all the marketing hype created by companies such as IBM, SAP, and Accenture. Promoting their blockchain platforms has helped startups like ours spend less time educating executives about the value propositions of blockchain. When we showcased dexFreight at an ICO Summit in California, we were well received by the crowd that stopped by our booth.
The companies we worked with had no clue how logistics and supply chain worked, but they had read the constant stream of news from IBM, Walmart, and Maersk pilot projects regarding the utilization of blockchain to create a highly visible supply chain. It was free publicity for little guys like us. IBM executives were pleasantly surprised when I told them to keep up the hype machine while attending a blockchain event in Dallas in 2018. Hype isn’t necessarily bad, but companies must make an additional effort to separate the hype from nonsense.
Early on, I was cautioned by my colleagues not to talk about cryptocurrencies at a blockchain panel during a logistics conference. They said that Bitcoin has a bad reputation and that there is no need to talk about the digital asset itself. Cryptocurrencies are bad; they have no purpose. Let’s only talk about blockchain, they suggested.
Over time, I made a point during these panels that talking about the history of blockchain is important and that Bitcoin was the first use case of blockchain technology. Not only that, but Bitcoin should not be viewed merely as an esoteric cryptocurrency. Bitcoin is a reference implementation that sets the foundation for people to build other platforms and applications, including the smart contracts blockchain, Ethereum. Without Bitcoin, Ethereum and its smart contract abilities may not exist today.
I come out in full force to talk about why cryptocurrencies exist, not simply from an economic standpoint, but also touching upon securitization, rewards, and payment proxies to sustain the public blockchain. Without an underlying cryptocurrency, there is no economic incentive to keep the public blockchain secured.
Real Potential of Blockchain: Reduce Information Asymmetry?
This book has numerous examples of blockchain’s value propositions and business potentials. These value propositions are being proven every day and will continue. However, I kept struggling to answer why and what is blockchain’s potential at its core. Until I stumbled upon an article written by Lauri Auronen on the theory of asymmetric information.12 This concept was introduced in the 1970s, and George Akerlof, Michael Spence, and Joseph Stiglitz received the Nobel Prize in Economic Sciences for the topic. The premise is simple. Between the two parties involved in a transaction, one always has more information than the other, or one party has better information than the other.
That is why we use real-estate brokers to reduce the information asymmetry while buying a house. The seller knows almost everything about the house. The seller has incentives to hide certain facts about the property and sell it quickly. The buyer, on the other hand, doesn’t know much beyond visible attributes. Real-estate agents acting on behalf of the buyer will extract as much information about the property, including disputes, comparable market price, past liens, and so forth to reduce the information asymmetry in favor of the buyer.
Brokerages and marketplaces exist to reduce the asymmetry, for which they charge fees either from one or both parties. The same concept applies to money transfer between the two parties. Bitcoin showed that blockchain can, in fact, be used to reduce the intermediary fee by showing that both transacting parties have equal levels of information or full transparency that the transaction has been added to a ledger and both parties can see changes in balances. Both parties have equal access to the underlying ledger. It is not the case that the receiver has better access to the ledger than the sender or vice versa.
Smart contracts took that potential to the next level. They allowed parties to exchange tokens of different value without an intermediary because it was not required since both parties have near perfect symmetric information about the rate of exchange. This book largely follows the idea that smart contracts (and blockchain) will have a profound impact on commerce, considering their potential to reduce the asymmetry because both parties in a transaction can see the parameters coded in the contract and that the contract will execute without bias to either party.
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1 G. Kawasaki. April 29, 2014. “Art of Evangelism,” Guykawasaki.com. https://guykawasaki.com/the-art-of-evangelism/.
2 K. Rogoff. 2017. The Curse of Cash: How Large-Denomination Bills Aid Crime and Tax Evasion and Constrain Monetary Policy (Princeton, NJ: Princeton University Press).
3 A. Negrusz, J. Perry, and C. Moore. 1998. “Detection of Cocaine on Various Denominations of United States Currency,” Journal of Forensic Science 43, no. 3, pp. 626-29.
4 M. Lansiti and K. Lakhani. 2018. “The Truth about Blockchain,” Harvard Business Review. https://hbr.org/2017/01/the-truth-about-blockchain.
5 I. Wladawsky-Berger. January 20, 2017. “The Internet, Blockchain, and the Evolution of Foundational Innovations,” The Wall Street Journal. https://blogs.wsj.com/cio/2017/01/20/the-internet-blockchain-and-the-evolution-of-foundational-/.
6 T. Elliott. July 20, 2013. “How to Become a Technology Evangelist,” Digital Business and Business Analytics. https://timoelliott.com/blog/2013/07/how-to-become-a-technology-evangelist.html.
7 S. Bakker and B. Budde. 2012. “Technological Hype and Disappointment: Lessons from the Hydrogen and Fuel Cell Case,” Technology Analysis & Strategic Management 24, no. 6, pp. 549-63.
8 Garter. July, 2017. “Gartner Hype Cycle for Emerging Technologies 2017,” Gartner. https://blogs.gartner.com/smarterwithgartner/files/2017/08/Emerging-Technology-Hype-Cycle-for-2017_Infographic_R6A.jpg.
9 A. Loten. May 4, 2018. “Amid Blockchain Hype, Few Deployments, Limited Interest, Survey Finds.” The Wall Street Journal. https://blogs.wsj.com/cio/2018/05/04/amid-blockchain-hype-few-deployments-limited-interest-survey-finds/.
10 “Blockchain Hype Overstates Reality, Says Steve Wozniak,” Bitcoin Magazine. https://bitcoinmagazine.com/articles/blockchain-hype-overstates-reality-says-steve-wozniak/, (accessed August 4, 2018).
11 E. Cheng. June 4, 2018. “For all the Hype, Blockchain Applications are Still Years, Even Decades Away,” CNBC. https://www.cnbc.com/2018/06/04/for-all-the-hype-blockchain-applications-are-still-years-even-decades-away.html.
12 L. Auronen. May 21, 2003. “Asymmetric Information: Theory and Applications,” Seminar in Strategy and International Business. https://pdfs.semanticscholar.org/cdc1/10d48cfa54659f3a09620d51240f09cf1acc.pdf.