This is Part 2/chapter 7 in The Blockchain Economy serialised book. For the index please go here.
Part 1 focussed on Infrastructure and Technology. Part 2 examines the impact of Blockchain on existing markets and the creation of entirely new markets. In short, Part 2 is about money and markets and value creation.
Tigger has been promoting how Blockchain will change the world for a few years now. In his breathless narrative:
- every asset will be tokenized and traded/settled globally in real time without intermediaries
- the cost of intermediation will crash by at least 90%, wiping out huge incumbent businesses and reshaping almost every market it touches
- this crash in cost will expand demand by bringing billions of the unbanked into a huge new global middle class and that rising tide will lift all boats
- there will be total transparency with the full history and provenance of every asset recorded on an immutable distributed ledger, bad actors will have nowhere to hide
- Blockchain will make your morning coffee and make you a better lover and bring you eternal happiness (OK, not even Tigger goes quite that far).
Meanwhile, gloomy old Eeyore is already out there debunking what he sees as ridiculous hype and tells us that:
- The only real use cases are for a) illegal activities like buying drugs and money laundering b) speculative hoarding of Bitcoin and c) ICO Altcoin Ponzi schemes
- Governments will soon put a stop to all this silliness as they want to keep their monopoly on money issuance.
- Human nature does not change and all this ICO bad behaviour shows that greed, fear, venality and stupidity are still very much with us.
Pooh Bear, humbly proclaiming himself a “bear of little brain”, was heard on the Blockchain At Pooh Corner panel saying:
- Most innovation starts at the edge with sketchy characters, so don’t sweat it.
- I don’t yet see how Blockchain will do anything useful for me, like bring me more honey, but being an optimistic kind of bear I kind of believe it will one day bring me more honey.
- From past cycles, the lesson has been that tech driven change takes a lot longer than anybody forecast but that when change does come it has far bigger impact than anybody could imagine, so be patient (but having said that I would like more honey right now).
Even the humbly wise Pooh Bear was visibly shaken by data such as Dogecoin – which was created as a joke – valued over $1 billion and XRP valued over $100 billion with only a few pilot projects. As Pooh put it wistfully:
“That is an awful lot of honey”.
Pooh is wise to be worried. It is the same concern that Vitalik Buterin expressed. If the business of business is making money, the simplest and quickest way to make money is best. Today the simplest and quickest method is copying something from Github, paying somebody via Mechanical Turk to write a Minimum Viable White Paper, raise $ gazillions via an ICO and buy a house in Monaco. If it is that easy, actually building a valuable business (which is hard) seems like a stupid thing to do. That lack of motivation to build real value is what could strangle innovation and lead to Eeyore being able to say – in his most gloomy voice:
“I told you this would end badly”
Tigger is then seen happily chasing after AI and IOT.
Then again we see news such as Soros investing $100m into Overstock and $20m going to fund DeSoto Inc., the blockchain property rights joint venture he is working on in partnership with economist Hernando DeSoto. This is one of those massive change-the-world use cases for Blockchain – immutable property rights for the unbanked – that will make Tigger look prescient.
“Yes but” says Eeyore, using his favourite opening words:
“Yes but, all this speculative fever only makes the currency use case invalid. Those transaction fees make Visa/Mastercard look like a bargain. No way I would pay those fees for my thistles.”
That is why the last chapter in Part 1 – Infrastructure – was all about Multi Layer Scaling solutions such as Lightning Network on Bitcoin and Raiden on Ethereum. So Eeyore will just have to wait a bit longer for cheap thistles.
Next week’s thrilling instalment examines one big market that is being disrupted – the global capital markets aka “Wall Street”. Stay tuned.
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