How Will Blockchain Change Business

Blockchain
A number of articles have discussed the potential use of blockchain technology outside of the financial realm. Within the financial realm, blockchain is used for cryptocurrencies. The technology is based using peer-to-peer networks to store ledgers of transactions. Proponents of the technology argue that it can be used for other transactions, and that business should be excited about exploring such potential uses (Church, 2017).
There are a couple of interesting things about the claims surrounding blockchain technology. The first is the claim that blockchain technology is incorruptible. The idea is that because each transaction is verified by multiple different parties, there are multiple records of the transaction, so it is difficult to dispute. Now, the problem that will occur is when one of the members of the blockchain doesn't agree – that there are different sets of data and they are in conflict with one another. Just because blockchain hasn't been corrupted does not mean that it is incorruptible. The reality is that blockchain is essentially lawless, and a source of wealth, which makes it ripe for exploitation. Attempts to commit fraud via blockchain systems will occur.
Another interesting aspect is the idea that blockchain is more efficient, as a means of conducting transactions. Instead of two people agreeing on a deal, more than two people need to agree on the deal, which makes it inherently less efficient than the equivalent two-party transaction also conducted online. One argument holds that blockchain has value because it cuts out the middleman from transactions, such as international remittances. But asking multiple nodes to confirm a transaction is adding middlemen. This threat might make traditional middlemen obsolete, yes, or it might just make them learn how to be more efficient.
The literature on blockchain all says the same thing, but without supporting the arguments with evidence. If adding additional nodes to a transaction makes something more efficient, business will want to actually see evidence of that, before adopting it. This is not to speak of the wasteful, inefficient process of Bitcoin mining, which leaves a carbon footprint the airline industry would be jealous of. That is a massive externality not priced into any blockgeek's evaluation of the technology's merits. Computational power isn't free, and right now it's not being priced into blockchain transactions, which makes them seem a lot more efficient than they actually are.
There is another issue as well that pertains to the adoption of blockchain – what pain points does it solve? Let's say you're running a global enterprise, or even a midmarket one. You can barely manage risk now, in terms of hacking risk, or managing your legal transactions where there exists a solid rule of law. What, then, is the incentive to take on the risk of adopting a new technology where there are no legal protections and uncertain benefits? There's a reason enterprise isn't using blockchain – they benefit from the existing system, and their structures are designed around the existing system. Adopting a system where they have to surrender their trust in a system that works in favor of trusting random strangers to verify their money seems unlikely. If you don't know the people who are verifying your transaction, that's going to create risk – proponents of blockchain have this implicit trust in it, but will enterprise?
A lot of the risk lies in identity verification. Blockchain relies on people being who they say they are – and how many people genuinely trust their ability to prevent identity theft in a blockchain? If the problem with today's security lands at username/password being a problem for identification, what is different about public key/private key. The latter is a password, and the former is a long, complex username.
Projects like MIT Enigma actually hold the potential to improve on blockchain technology, resolving some of these issues – certainly issues of privacy and transparency are easier to resolve when one's entire life's data is not readily available to strangers. It will be interesting to see blockchain can evolve to the point where it is used by the public in general. A lot of the use cases presented a hypothetical and don't hold up to scrutiny. Does a musician really want to do peer-to-peer selling? Or do they want to make music and let someone else handle the selling? Peer-to-peer venture capital sounds like fun, except that a lot of information is required to make sound investment decisions. Even if that information can be transmitted instantly and accurately through a blockchain, it can't be processed by human beings any more quickly – maybe at a point where AI does the heavy lifting of analysis there's a use case, but there are still a lot of barriers in the way between now and mass adoption of blockchain technology.



References

Blockgeeks (2017) What is blockchain technology? A step-by-step guide for beginners. BlockGeeks. Retrieved December 9, 2017 from https://blockgeeks.com/guides/what-is-blockchain-technology/

Church, Z. (2017). Blockchain, explained. MIT Sloan Management School. Retrieved December 9, 2017 from http://mitsloan.mit.edu/newsroom/articles/blockchain-explained/