BLOCKCHAIN & BITCOIN: WHY ALL THE HYPE?
If your news feed is anything like mine, you’ve seen a lot of buzz about blockchain and the cryptocurrencies it supports over the last few months.
I am fascinated by this technology, and the predictions that it could transform life, as we know it. For a provocative glimpse of the blockchain-supported future, I recommend Taylor Pearson’s Ribbonfarm piece. In it, Pearson explores how blockchain technology could disrupt not only the internet, but just about every facet of life as we know it, changing: the capacity of nation-states to govern, how and why we choose to pay attention to things, the concept of a career, how we are compensated, and even how we get where we need to go.
Taking a more practical view, it is interesting to think about how blockchain is poised to revolutionize the nature of transactions in industries like finance, healthcare, and shipping – making them faster, cheaper, and more secure.
And of course, I am following the currently exploding investor interest in cryptocurrency. Revolutionary idea or bubble bound to burst? Financial leaders around the world say it’s too early to tell.
Yet, all the emphasis on these faceless transactions has me wondering – what about the people? What will the rapid expansion of blockchain technology mean in the life of the average consumer over the next few years?
THE TRUTH ABOUT BLOCKCHAIN: POWER TO THE PEOPLE
At it’s heart, blockchain technology has the power to transfer information from the hands of large organizations back to average people, and that is what I find most interesting about it.
For purposes of tracking with my thinking, it is helpful to conceptualize blockchain in its simplest terms, as a decentralized database that keeps a ledger of digital exchanges. Transactions are lumped into time-stamped “blocks,” locked into a chain of complex algorithms and then verified by a global network of independent ‘miners’ (working for digital payments, of course).
Once a block is added to the chain, it is almost impossible to change. As one expert describes, “meddling with a blockchain would be like trying to tamper with a fraction of a tapestry – “for the full picture to remain plausible you’d have to rewrite the whole thing.”
Thus, what “happens on the blockchain stays on the blockchain,” prompting The Economist to deem it a “trust machine.”
It’s not a stretch to see why someone in an industry like finance might wax poetic about this tech-enabled transparency. It has the potential to revolutionize currently time- and cost-consuming transactions like buying a home, notarizing a document, crowd-funding a company, or maintaining medical records. Banks, for example, could save $20B a year by 2022, simply by using blockchain technology to reduce the need for expensive and time-consuming audits and record-keeping processes.
Further afield, the blockchain will bring transaction costs down an “order of magnitude” to enable business models (particularly outside of large corporations) that haven’t even been imagined yet.
But, there are non-financial applications too, and this is where the technologist and marketer in me get most excited.
Consider the fact that the internet, despite all its democratic promise, has actually become a tool to consolidate control. As Pearson notes, “instead of a decentralized, open network, the Internet today is made up of a handful of applications that have leveraged their network effects to re-centralize information through the creation of walled gardens. Facebook, Google, and Amazon lead the pack.” Power, in the form of “data” and “information” is increasingly consolidated in the hands of a few, which become more omnipotent everyday. This is not lost on everyday people, who have growing concerns about protection of their personal information as well as the transparency of the tech giants, but few avenues for recourse.
The simple human truth about blockchain is that it could rebalance the scales, by transferring the control of information from companies back to consumers.
(An interesting side note here: Bitcoin’s anonymous creator, Satoshi Nakamoto, was purportedly inspired by a 1997 book called The Sovereign Individual, which forecast that a new technology of money would decentralize and dis-intermediate society in the way many originally hoped the internet would.)
SOUNDS GOOD, BUT HOW WOULD THAT WORK?
Because blockchain enables the rapid transfer of verifiable, incorruptible information, it has the potential to give everyday people greater control over information – their own data as well as what they receive from the companies with which they do business.
In the future, blockchain could be a valuable “trust machine” – or way for companies to deliver the accountability and responsibility that consumers increasingly demand.
To illustrate, here are three examples of companies experimenting with the transparency-enabling power of blockchain.
#1: London-based startup Provenance designed a tool to track a product through every part of its journey, including where it starts, where it goes, who has it, and for how long. Their current applications focus on food and clothing. For example, tracking tuna fish from hook to grocery store shelf. Ultimately, the company offers a “mind-boggling” amount of provenance information all tied together in one package that can be universally accessed via smart phone. It differs from the dozens of existing applications because the information is transparently recorded in the immutable blockchain. Founder and CEO Jessi Baker told Wired it is a “much-needed mechanism to broker brand trust,” and I have to agree.
#2: Everledger offers a product similar to that of Provenance, but one that creates a global ledger for diamonds and other high-value assets. The application tracks diamonds to confirm their authenticity and also ensure they are not conflict diamonds. It is unique because origins and shipping information belongs not to a certification house that consumers need to “trust” but is encrypted onto the immutable blockchain.
#3: Entrepreneur Mark Cuban recently unveiled a new project called Mercury Protocol, which seeks to create a next-generation social networking site, built atop the Ethereum blockchain. The team hopes that messaging apps like Facebook and WhatsApp will adopt the software, which showcases two innovations: 1) users can sign in without turning over any of their personal information, and 2) the platform generates tokens for constructive behavior, hopefully deterring the behavior of fake-news creators and trolls.
#4: Furthest afield but perhaps most interesting is Lotus, a global Buddhist community employing blockchain technology to ensure temples around the world use funds transparently. A ledger, visible to a global community of members, records and displays how funds are allocated and then spent. It is not hard to imagine how a for-profit company could apply this same technology to add a similar layer of transparency to their philanthropic giving or sustainability efforts.
Each of these ventures is leaning into the budding promise of blockchain technology to be a tool with which to offer transparent information. I can imagine a future where marketers of all shapes and sizes employ blockchain to help their customers know more about the things they buy.
Want to claim your product is handcrafted? From a unique or single source? Made of only sustainable or recycled materials? In the blockchain future, marketers will not just claim these attributes but be able to offer buyers verifiable proof.
Consumers are hungry for transparency, and the blockchain will help companies provide information it in its most unadulterated form. This makes it an incredibly powerful tool for brokering brand trust. That – cryptocurrency trading boom aside – will be blockchain’s true promise for marketers in the years ahead.