The business world is buzzing about the potential of blockchain to transform our lives. The political world is similarly singing the praises of the blockchain. Some zealous politicians believe that in a few years’ time public services like health will be vastly improved as red tape will be reduced, banks will become redundant, cryptocurrencies will become accessible to all, and lawyers and notaries will no longer be so necessary as drawing up contracts manually will become a thing of the past.

Blockchain, which is a system of electronically distributed ledgers that enable and record secure online transactions, often made front-page news in the popular media in the last two years. To the average person, blockchain is associated with the almost mystical powers of get-rich-quick schemes that could make working to earn a living a redundant human activity.

Politicians have ridden on the blockchain hype bandwagon and with evangelical fervour are implying that by adopting blockchain now they will soon solve the income inequality, make all data secure forever, improve dramatically the efficiency of public services and make everybody that much richer. Estonia is establishing itself as a ‘Blockchain Nation’ by making an all-in commitment to blockchain digitalisation of just about everything.

However, when hype meets reality, reality wins.

A coldblooded analysis of this new technology enables us to see beyond the hype and eliminate the massive noise that surrounds this new technology. The good news is that blockchain has the potential of revolutionising business and redefine companies and economies. I share this enthusiasm as the present system of record keeping has not kept up with the immense technological progress of the last three decades.

It took 30 years for the internet to establish itself as a tool that has affected most people’s lives

Contracts, financial transactions, asset transfers and the records of them are fundamentally crucial to our economic, social, legal and political systems. The bureaucratic tools that manage them are inefficient. Blockchain promises to resolve these problems. However, the blockchain revolution has to overcome many barriers before it can deliver the transformational benefits to business and government. Technological, governance, organisational, and even societal barriers will have to fall before this new technology can bring about change in people’s lives.

Some have described blockchain as disruptive technology that will attack traditional business models with a lower-cost solution. However, the reality is that blockchain is a foundation technology that has the potential to create new foundations for our economic and social systems. It will take decades before blockchain applications permeate in the economic and social infrastructure of countries.

John Cassar White

Various studies, including those made by technology consultants Gartner and the Harvard Business Review, compare the evolvement of blockchain to that of the TCP/IP (transmission control protocol/internet protocol) that underpins the foundation of the internet. The first use of TCP/IP was in 1972. It took 30 years for the internet to establish itself as a tool that has affected most people’s lives.

Transformative applications of blockchain are still far away. It makes sense, however, to evaluate the possibilities of investing now in this developing technology. Many businesses especially those dealing in finance will do well to see how their business model will need to change when blockchain applications become a reality. We all know how eBay changed online retail through auctions, Napster changed the music industry, Skype changed telecommunications and Google and Yahoo changed web research.

Localised applications of blockchain technology are the safest first step in the adoption of this technology. Such applications are likely to give real short-term benefits. Manufacturing, for instance, is experimenting with tackling specific problems in transactions across boundaries with localised applications. Some companies are already using localised blockchain systems to track items through complex supply chains.

For blockchain applications to get the traction they need to deliver functionality as good as traditional solutions, they must be easy for interested parties to absorb and adopt. Traditional law firms, for instance, will have to change their work processes to make smart contracts viable. This change will involve retraining of staff to acquire new expertise in software and blockchain programming.

The tracking of developments in blockchain technology should be on the agenda of every CEO. Business executives will have to decide where to start building their organisational capabilities for blockchain. This will entail the training of staff about blockchain to develop company-specific applications as well as investment in blockchain infrastructure.

Starting small is a good way to develop the know-how needed before making significant strategic changes in an organisation’s business model. As Steve Wozniak, the co-founder of Apple Inc., argued: “Early adopters can burn themselves out by not being prepared to be stable in the long run.”

johncassarwhite@yahoo.com