The Whats’ About Blockchain Value
Dominant players who can establish their blockchains as the market solutions are making big bets now
With all the talk and chatter about blockchain, it is easy to miss the facts about this new technology.
Simply put, Blockchain is a distributed ledger, or database, shared across a public or private computing network.
Each computer node in the network holds a copy of the ledger, so there is no single point of failure. Every piece of information is mathematically encrypted and added as a new “block” to the chain of historical records.
Various consensus protocols are used to validate a new block with other participants before it can be added to the chain. This prevents fraud or 2X spending without requiring a central authority.
The ledger can also be programmed with smart contracts, a set of conditions recorded on the blockchain, so that transactions automatically trigger when the conditions are met.
Blockchain’s core advantages are decentralization, cryptographic security, transparency, and immutability.
The ledger allows information to be verified and value to be exchanged without having to rely on a 3rd-party authority. Rather than there being a singular form of blockchain, the technology can be configured in multiple ways to meet the objectives and commercial requirements of a particular use case.
To bring some clarity to the variety of blockchain applications, we structured blockchain use cases into 6 categories across its 2 fundamental functions, they are’
- Record keeping and
Some industries have applications across many categories, while others are concentrated on only 1 or 2.
This framework, along with further industry and use-case level analysis leads to Key insights on the nature and accessibility of the strategic value of blockchain.
Companies can determine whether they should invest in blockchain by focusing on specific use cases and their market position.
Speculation on the value of blockchain is rife, with Bitcoin (BTC) the 1st major application of blockchain.
That the focus of blockchain is wrapped up with Bitcoin is not surprising given that its market value surged from less than $20 to more than $200-B over the course of Y 2017.
Bitcoin is the 1 st application of blockchain technology that has captured the attention of government and industry.
Blockchain was a Key topic at Davos, and a survey there suggested that 10% of global GDP will be stored on blockchain by Y 2027.
Multiple governments have published reports on the potential implications of blockchain, and the past 2 years have produced more than 500-K new publications.
And notably, large investments in blockchain are being made.
Venture-capital funding for blockchain start-ups consistently grew and were up to $1-B in 2017.
The blockchain-specific investment model of ICOs (initial coin offerings), the sale of cryptocurrency tokens in a new venture, has risen to $5-B.
Leading technology players are also heavily investing in blockchain: IBM (NYSE:IBM) has more than 1,000 staff and $200-M invested in the blockchain-powered Internet of Things (IoT).
Blockchain is an immature technology, with a market that is young, and a clear path success that has not yet been drawn.
The Big Q: How can companies learn if there is strategic value in blockchain that justifies major investments?
The Big A: The major research seeks to answer this question by evaluating not only the strategic importance of blockchain to major industries but also who can capture what type of value through what type of approach.
In-depth, industry-by-industry analysis is necessary by the experts.
The experts analysis suggests the following 3 Key insights on the strategic value of blockchain:
- Blockchain does not have to be a disintermediator to generate value, a fact that encourages permissioned commercial applications.
- Blockchain’s short-term value will be in reducing cost before creating transformative business models.
- Blockchain is still about 5 years away from feasibility at scale, primarily because of the difficulty in establishing standards.
Companies will be wise to take the following structured approach in their blockchain strategies:
- Identify value by pragmatically and skeptically assessing impact and feasibility at a granular level and focusing on addressing true pain points with specific use cases within select industries.
- Capture value by tailoring strategic approaches to blockchain to their market position, with consideration of measures such as ability to shape the ecosystem, establish standards, and address regulatory barriers.
With the right strategic approach, companies can start extracting value in the short term.
Dominant players who can establish their blockchains as the market solutions are making big bets now.