Disruption, pivot, 10X change – these words describe current strategic interest in everything new, but how do we decide the future of blockchain?
In a forward-looking research project at Aalto University’s Business School in Helsinki, together with partner companies and public organisations such as the Finance Ministry of Finland, we are studying one of the future change drivers, blockchain technology. While high on the hypecurve, the business and societal implications are not yet visible despite a lot of ongoing experimentation ranging from healthcare, finance, and logistics.
The members of the ReCon research project, or “Blockchain: Disruption of Business Systems and Reconfiguration of Trust” are particularly interested in questions such as how distributed, open technologies may transform the ways in which people interact. Socially constituted, comparative trust scores are familiar from internet sites ranging from amazon.com to the darknet. We rely on our fellow people’s evaluations. Historically, or before the Internet, we relied on institutional sources of trust – the government license to operate or the family network. Or we took the risk.
Trust in cryptocurrency
A cryptocurrency like a bitcoin requires no trust: confidential buying and selling is possible without knowing the other parties at all. This is the unique characteristic of the blockchain technology – it is a way of operating an economic system without the necessity to have trust among the parties, something that has been considered essential for all economic activity. A lack of trust adds substantially to the transaction costs. Therein lies the blockchain revolution.
The Economist magazine called it “the trust machine”, yet the writers were also concerned about the large societal implications: “The idea of making trust a matter of coding, rather than of democratic politics, legitimacy and accountability, is not necessarily an appealing or empowering one.” (October 31, 2015, p. 24).
When states, governments, central banks become irrelevant, what happens to societies and their foundational legitimacy? Any political vacuum is likely filled with other interests. Prof. Lawrence Lessig from Harvard Law School in Code and the Commons, 1999, p.10, has warned: “To push the anti-government button is not to teleport us to Eden. When the interests of the government are gone, other interests take their place. Do we know what those interests are? And are we so certain they are anything better?” So blockchain could have some significant societal implications, all the way down to the foundations of our societies that we need to think through.
Nevertheless, blockchain has very useful applications. Trusting blockchain with our health data has its advantages: In the era of data breaches, blockchain appears secure but also transparent in terms who has accessed the data. And of course, there is no need to carry documents from one health care provider to another by hand (as has happened to this author several times)! No wonder many think that it is better to have the data on a blockchain, rather than in a national health institution’s (hackable) servers.
Similarly, blockchain applications could save mountains of documents and hundreds of hours required to process the transport logistics of shipping companies. The origins of sensitive goods, such as diamonds can be recorded on a blockchain, and the integrity of the supply chains, for example, whether food has been stored properly, can be shown.
And blockchain could save significant costs in financial transactions. According to a McKinsey&Company (see International Monetary Fund, The Internet of Trust, Finance & Development, June 2016, 53:2), banks extract an astonishing $1.7 trillion a year, 40% of their revenue, from global payment services. Banks and financial institutions are currently developing their own blockchain applications.
However, many issues remain to be worked on. Here are some we at the ReCon research project are thinking about.
The problem of interference:
Establish the linkage between a digital trade and its value is what blockchain is very good at. However, when the non-digital world intrudes there is the human touch with the messiness of the physical world around us. Someone records a value at a particular time. Perhaps a sensor will report it. How can we trust that the person, or the sensing device, has the right measurement and is honest, or accurate, about reporting it? Can we be sure there are no vested interests interfering with the recording?
Blockchain applications (‘use cases’):
We are surrounded by technologies that perform adequately or even superbly solving business and life problems. When is blockchain at its strongest? What are boundary conditions there for using the technology purposefully and effectively?
For example, blockchain has implications for the Internet of Things- or Industrie 4.0 – infrastructures through its smart contract capacities. A coupling with machine learning might make these capacities particularly potent, as the system could learn or be teachable. As a thought experiment: Why could cars not only drive themselves autonomously but also act as separate legal units – ‘own’ themselves and sell their services as decentralised autonomous organisations? A car might then insure itself against any traffic accidents. Over time, it might even learn to negotiate better-priced insurance contracts based on its stellar driving record!
A blockchain-like technology offers a promise for a more inclusive, open, and democratic society. It is a promise that many feel the Internet failed us and that the blockchain is the new hope for the future. How can we use blockchain in a way that respects the legitimacy of our societies and institutions, while giving the technology a chance to serve its citizen-admirers with the unique features? Disruption is excellent, provided the transformation allows for a renewal of our societal constitution in both a respectable and inviting way.
These are examples of the questions we at the ReCon research project are thinking and experimenting on. We engage in pilot projects, hackathons, studies, workshops and keynotes. Our mission is to describe, analyse and experiment on the potential of blockchain-like technologies.
We are seeking outliers, people and organisations that are in the forefront of learning from things yet to happen, to connect and think with. More information regarding the ReCon research team and our partner organisations can be found at recon.site.