BlockchainburstonthetechscenetenyearsagowiththelaunchofBitcoin.Thatfirstintroductionledmanybusinessleaderstoseeblockchainandcryptocurrenciesassynonymous.Infact,blockchain’svaluepropositionisfarbroader.Atitsmostbasicitallowstwoormorepeople,businesses,orcomputerstoexchangevalueindigitalenvironmentswithouthavinganintermediarylikeabankorathird-partyplatformbetweenthem.Inotherwords,blockchainredefinesthetermsoftradeforthedigitaleconomy.
Consider,forexample,howacarinsuranceblockchaincouldstorepolicydetailsandcontractrulesandautomaticallyprocessthird-partyclaims,improvingefficiencyandreducingfraud;orahospitalblockchaincouldcapturemedicalrecordsandsharethemon-demandwithauthorizedproviders;orablockchaincouldcapturethecustodytrailofFrenchwineallthewaybacktothevineyard,ordiamondstothemine,reducingcounterfeiting.
Eachofthesesolutionsalreadyexists,alongwithscoresofothers.Despitewidespreadexperimentation,however,blockchainisstillyoungandevolving.Today’sexperimentsoftenuseonlysomeofthecoreelementsthatmakeablockchain,whilerejectingothers.Inparticular,today’sblockchainsrarelyincludetokens,andtheirtechnologyarchitectureisalmostneverdecentralized,aswasintendedintheoriginalblockchaindesign.Whatthatmeansinpracticeisthatmanyblockchainsolutionsavailabletodayareownedandgovernedbyasinglecompanyorsmallgroup,andonlyauthorizedparticipantscanjoin.(TheBitcoinblockchain,incontrast,hasnosingleowner,andanyonewhowantstocanparticipate.)
Centralizedgovernancehasallowedbusinessleaderstoexperimentwiththetechnologywhilesidesteppingcontroversialquestionsaroundsecurity,consensus,identityandanonymity,amongothers.Yetthecentralizedmodelalsocreatesnewrisksaroundhowthetechnology,economicsandgovernanceoftheblockchainarecontrolled,particularlyasitrelatestofourbusiness“currencies”producedindigitalenvironments.Thesecurrenciesare:
1)thedataaboutparticipantsandtransactionsthatthesolutionaccesses,collectsand/orgenerates
2)thecontractsthatdefinethecommercialtermsandconditionsofparticipation
3)theaccesstoagivenmarket
4)thetechnologyfromwhichablockchainisbuilt
Whenonecompanyorconsortiumofcompaniesbuildsacentralizedblockchain,thatdominantcompanycantheoreticallyownthetechnology,captureandcentralizethedata,controlwhocanaccess(ornotaccess)thesolution,andsetthetermsofthecontracts.
Ofcourse,notallblockchainshavepowerfulowners,andnotallownerswanttoexertlong-termcontrol.Somesolutionsarehighlycentralizedwithoneownerorgroupofownerscontrollingthecurrencies,whileothersexertlessabsolutecontrol.
Tohelpbusinessleadersidentifythedifferencewehavedefinedthefollowingfiveblockchainarchetypesbasedontheirdegreeofcentralization:
Archetype1:FearofMissingOutSolutions
FOMOsolutionsarecompletelycentralized,astheyoftenledbyasinglecompanyforusein-houseorwithaverylimitedsetofpartners.Theyusuallycomeaboutbecausethecompanywantstobeseenasinnovative,buthasn’tfullyconsideredhowtheblockchainwilladdvaluetothebusiness,orwhetheritisthebesttechnologyforthejob.Asaresult,FOMOprojectsmightbeblockchainshoehornedintoanexistingtechinitiativeforwhichitisill-suited.Dependingonwheretheorderoriginates,evenveryseniorleadersmightfeelliketheyhavenochoicebuttogoalong.AstheCIOofaregionalfinancialservicesfirmtoldus,“Youdon’tunderstand;myCEOtoldmetodoblockchain.”
AlthoughFOMOblockchainsolutionswon’tcreatemuchvalue,theyaren’talwayspointless.Theycouldsendamessagetothemarketthatyourorganizationisontopofcurrenttrends.Prospectivecustomersmightgiveyouasecondlook.CompetitorsmightinvesttimeandresourcesforsimilarFOMOreasons.
Beware,however,ofFOMObacklash.Whenapoorlyplannedprojectproduceslittlevalue,leadersmighterroneouslyconcludethatthey“triedblockchain”andfailed,whentheysimplyhadthewrongusecase.Thesesolutionscouldalsoburdenexistingsystemsandprocessesandcreateadditionalcoststhatbringnoincreaseinefficiency.
Archetype2:TrojanHorseSolutions
Forthisarchetype,onepowerfulactorsuchasadigitalgiant,adominantsupply-chainparticipant,orasmallgroupdevelopsablockchainsolutionandinvitesotherecosystemparticipantstouseit.We’vedubbedthesesolutionsTrojanhorsesbecausetheylookattractivefromtheoutside.Theyhavearespectedbrandbehindthem.Theyoftenhavestrongtechnologicalfoundations.Theyusuallyaddressknown,expensive,andwide-reachingproblemsinanindustry.Buttheymayalsorequireparticipantstosharetheircompany’sdataandtransfersomecontrolorinfluenceinawaythatleadstomarketconsolidationforthemainblockchainowner.
Afood-trackingblockchainisapotentialexampleofaTrojanHorsesolution.Retailerscitefoodsafetyastherationaleforlaunchingit,whichmakessense.Inthenon-blockchainenvironment,itcantakeweekstopinpointtheexactfarmorprocessingplantresponsibleforacontamination,anddozensofpeoplecanfallillinthattime.Complete,accessiblerecordswillallowstorestomorequicklyfindtheoriginsofacontaminationandstopitatitssource.Or,e-commercecompaniescanimprovetrackingandtracingofagriculturalproductsandpreventthesaleofcounterfeitmilk,wine,andhoney,tonameafew.
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