As I wrote last December, I believe 2017 will be the year that blockchain gets real. On a recent trip to New York, I saw increasing evidence that this is so.
I was in Manhattan to visit clients and attend Consensus 2017, the world’s largest blockchain conference. There was an incredible amount of excitement in the air, much of it due to the recent ICO and cryptocurrency bull market, but there was plenty of substance too. From announcements such as the record R3 funding, the Enterprise Ethereum Alliance tripling its membership, and JP Morgan’s partnership with ZCash, to the demo of Blockstack’s new decentralised internet browser, or Toyota’s pioneering work in blockchains for mobility, you could see how this technology was making its way out of the lab and gaining toeholds in the real world.
This wasn’t lost on my clients, of course. One of the questions I’m asked most frequently these days is where does it go from here?
The six levers
While we do seem to be nearing some inflection point in blockchain, much remains uncertain and hard to predict. To try and find some clarity, I’ve taken to analysing near-term developments in blockchain technology in terms of six key levers I believe are needed to catalyse a full-scale breakthrough. These are:
- First mover use cases. As only makes sense, first movers in this space have been focusing on the lowest-hanging fruit. We’re seeing particular interest in areas such as global payments, trade finance, automated compliance and post-trade processing. With potential savings from efficiency gains of between 80 and 110 billion US dollars, we can expect some dramatic wins. It pays to keep track of how early successes are faring.
- Business networks and consortia. I believe the ‘end game’ for blockchain will be as the backbone of large-scale, open, decentralised business platforms. A first step along this road is for companies to organise themselves into blockchain-based business networks and consortia. I don’t mean technology-oriented consortia such as R3 or Hyperledger, but rather platforms around actual use cases. Ripple, for example, has built a blockchain-based direct settlement network with some 30 banks. Seven banks recently got together to form Digital Trade Chain, a project to build a blockchain-powered cross-border trade finance platform for small and medium-sized companies in Europe. Others can profit by observing how such early networks and consortia function.
- Technology convergence. Blockchain, of course, is only part of this picture. Tomorrow’s business platforms will be powered by a convergence of a number of key technologies, from big data and machine learning to edge computing and robotic process automation. A result will be a blurring of the lines between industries. It’s important to understand how this blurring will transform the way we all do business.
- Decentralised business models. New, decentralised business platforms mean new, decentralised business models. While we have long talked about business model disruption, we’re now starting to see it. Storj, for instance, has built the world’s largest decentralised digital storage platform on blockchain. Lykke is building a global, decentralised financial marketplace. Chronobank is doing the same with recruiting talent. Anyone looking at new models for their business should be aware of the approaches used by these pioneers.
- Tipping point. Success is often a question of timing, and it will be no different in this space. When can we expect large-scale breakthroughs? The tipping point for a new technology is generally when it approaches 15% of the market. To be a first mover, you will want to be in position latest by then.
- Blockchain ecosystem. Finally, a main driver of blockchain breakthrough will be successful collaboration within the blockchain ecosystem. Here’s where the technology oriented consortia such as R3, the Enterprise Ethereum Alliance or Hyperledger play a big role, as well as industry specific consortia, associations, regulators and even central banks. Companies should be aware and actively manage their ecosystem landscape.
The time is now
I think these levers can be a good lens through which to try to make sense of what’s going on in blockchain. They can also be used as bellwethers: paying attention to developments in these areas can provide indications of where and when significant breakthroughs could appear.
The important thing (at least in my opinion) is to keep your eyes open and start to get active. If there’s one thing I tell my clients who are looking at blockchain for their businesses, it’s that the time is now.
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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by FullRix, Shutterstock.com