May 6, 2016

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Evaluating BlockChain as an Ecosystem

BlockChain Implementation Penetration – Part 2

In our previous post we have identified 2 modes of evaluating BlockChain; as a Use Case (typically a database capability) or as an Ecosystem. We have suggested that evaluating BlockChain as a use case is a flawed approach which misses the impact BlockChain will have as an ecosystem.

Once one considers BlockChain as a disruptive network platform rather than a technology implementation, understanding its impact becomes more approachable.

The primary change BlockChain platform brings in understanding the impact onto an industry is in understanding substitutes.

The barrier for competitors to utilise BlockChain is the same as one’s own organisation. The global transaction part of a large institution still has significant internal hurdles to implement their own BlockChain or even integrating into one. They simply don’t have the understanding or orientation for digital assets and digital currency.

What does this mean? The obvious answer to that is the concern for competition should come from new, flexible companies rather than incumbents.

For example, the need to move money from one country to another may simply disappear. Money on a BlockChain exists everywhere, simultaneously. The foreign exchange of currency may also disappear – automated routing with market liquidity may come from a million people's holiday currency rather than a traditional market maker.

If this is considered today, then it looks like a ridiculous proposition. It is obvious that no organisation will be displaced immediately by a global public BlockChain. It would already have happened with Bitcoin for a start.

However, when considering BlockChain as a platform we can use a direct example. Consider what has already happened with a similar disruption over the last 20 years; the Internet.

The Internet didn’t just appear – it matured, step by step as use cases at each stage of maturity enabled more information management capability and ultimately a transformation of user’s expectations of what facilities should be available to them.

The challenges to institutions will come in several phases then, similar to what happened with the introduction of the Internet.

We provide a number of levels of penetration that the Internet went through to enable a view on how the BlockChain will mature.

Level 1: Direct Solutions

Bulletin Board Systems (BBSs) were extremely popular when data-based telecommunication systems were used to connect computers. Users would dial in to a telephone through a modem connected to a voice line and use analogue audio signals to control the data they sent and received.

The user would post a message to other users or maybe they would download a piece of software to run locally on their computer.

This is analogous to where the BlockChain is right now. Experimenters are setting up BlockChains on private networks. We dial into them and interact, then dial out.

Most recommendations coming from consultancies are along these lines: set up a BlockChain between two private organisations.

Level 2: Walled Gardens

CompuServe, Fido Net and America-On-Line (AOL) were networks that both provided telecom access to a BBS and also limited access to the new ‘public Internet’. What we now know as websites were hosted on CompuServe and all users of CompuServe could access them. However, users of the ‘public Internet’ could not get access to CompuServe. The walled gardens allowed access to the Internet, but it was often restricted and felt like a wild place that one shouldn’t venture out into unless necessary.

In the level 2 maturity for a BlockChain, it may be feasible that BlockChains start giving access to other BlockChains. This potentially could be a large, single shared BlockChain such as Bitcoin or to individually managed BlockChains run by asset-controlling institutions.

Level 3: Public Availability

Once users realised that the public Internet was not as ‘wild west’ as initially thought it seemed unproductive to put more information into walled gardens as only users on those gardens could access it.

Once the value of using walled gardens like AOL disappeared because information migrated away from them, smaller service providers appeared and gave direct access to the Internet.

Finding information then became hard to find as there were no directories like there was in the walled gardens. Companies such as Yahoo appeared to give telephone-style book access to listed websites and eventually free-form search tools appeared like AltaVista and Google.

Level 4: Open Gardens

The next maturity of the public Internet was actually another move back into walled gardens. Curated content appeared first in the forums where like-minded people congregated to discuss topics – not unlike the BBS systems of old.

The second disruption happened when social networks appeared and joined BBS-style collaboration capabilities with a free-form membership based on who you selected to be in your connections.

Nothing like this exists today in the BlockChain world. No single institution has the required clout to push their solution as the best solution. Microsoft are attempting the delivery of a BlockChain as a service with their Azure platform, but without the necessary financial credentials it is likely to be simply one more way of deploying the technology.