Let’s play a game. How many times over the last four years have you heard some variant of - “AirBnB is the world’s largest accommodation provider, but they own no real estate"? Or, “Uber is the largest transportation provider and yet they own no vehicles”? For me, it’s definitely many dozens.
But I’m going to one-up the commentariat here. Think of it as disrupting the talking heads. These asset-light, sharing-economy firms, along with many other “digital natives,” face a looming, existential threat themselves in the form of Blockchain. Blockchain is a clever, relatively new technology based on the concept of de-centralized, distributed ledgers and smart contracts that, among other things, facilitates peer-to-peer transactions. Who needs rentmyweedwhacker.com when you and I can do business directly? OK, I don’t fully trust you either, but Blockchain takes care of that.
How about peer-to-peer electricity? Here’s a picture of a happy “prosumer” on the Brooklyn MicroGrid network:
The word “disrupt” is thrown around pretty loosely, but Brooklyn Microgrid really is disrupting the 100+ year old utility business model. Distributed ledgers, in combination with smart-metering systems and next-generation batteries open up the energy-market to residential producers. Produce more energy than you can consume yourself from the solar panels on your roof? That’s great, your neighbor buys the extra from you - all automatically managed and accounted for by the system. Brooklyn Microgrid only needed permission from the local government to set up this project, not the incumbent utility.
The internet obliterated some supply chains 20 years ago and Blockchain just may repeat that cycle. We might need to re-think the nature of the individual firm as well - as transaction costs march toward zero there’s no need for them. Do firms disappear as economic entities morph into Decentralized Autonomous Organizations (DAOs) that run on Etheruem-based Blockchain smart contracts? Ronald Coase is stirring.
Now that I’ve gotten your attention I’ll end this blog on a note of moderation. I recently heard an internet pioneer who is leading a major Blockchain initiative claim that “we’re investing in Blockchain like it’s 1998, but it’s really 1989.” DAOs are incredibly primitive today. In fact, one of the first DAOs had $50 million stolen from it, and to be honest, no one even knows exactly how much was stolen or who was behind the breach. Furthermore, it’s not even clear that the thieves broke any laws – they violated a “smart contract,” which is much different from a legal contract. One of my shortcuts to determine whether a new technology has arrived is to look at what the “Super 7” cloud companies (Facebook, Google, Microsoft, Amazon, Alibaba, Tencent, Baidu) are doing in it. Apart from Microsoft, the small amount of Blockchain activity strikes quite a contrast with the massive investments these companies are making in other technologies such as artificial intelligence and augmented reality.
Blockchain will disrupt industries, but it’s going to take some time. Prepare today and make sure you're ready for it with secure, cloud infrastructure.