Dot Com and Social Media changed our world but were limited to exchanging content online.  The Internet was the perfect free copy copy machine. Blockchain enables us to exchange value online- where copying is not allowed (if I send you that asset I no longer have it).

This is the Introduction to The Blockchain Economy book. This serialised book is a practical guidebook for investors, entrepreneurs and employees who want to learn how to prosper during the transition to an economy where value exchange is permissionless and disintermediated. For the index please go here.

In Pre Blockchain Fintech, we used Internet for content exchange and traditional finance for value exchange.

Fintech as we know it today (Pre Blockchain Fintech) grew from frustration with traditional banking in the aftermath of the Global Financial Crisis in 2008.

Pre Blockchain Fintech leveraged the SMAC technologies (Social Mobile Analytics Cloud) that had reached mainstream adoption. Startups beat incumbents by creating better User Experience (UX). It was only a question of time before incumbents caught up by creating better UX.

2014 was the watershed year.

2014 was high water mark of Pre Blockchain Fintech with the Lending Club IPO.

2014 was also the year when Ethereum was born.

There is still a lot of opportunity for incumbents to add value in the Blockchain Economy, but incumbents do not control the pace of change.

Pre Blockchain Fintech was an era of pugnacious public talk, but with private negotiations around partnership and collaboration. Banks needed startups and vice versa.  Incumbents cannot control Blockchain ventures, because they are being financed by ICOs not incumbent VCs. Blockchain ventures also need less capital, because they don’t need to buy giant server farms in order to scale (the user’s machines are the servers) and because Utility Token crowdfunding coopts early adopters as investors.

A lot of the activity around “enterprise blockchain” is an attempt by banks to get back to the “good old days” when they controlled the pace of change. Banks usually state scepticism about Bitcoin, but interest in the “underlying Blockchain technology”. Then the conversation shifts to “we are not interested in Blockchain, more in the underlying Distributed Ledger Technology (DLT)”. At that point the bank takes a call from their favoured enterprise software vendor about their latest version with its DLT features. This would be like Kodak upgrading their ERP system to deal with the disruption from digital photography.

The ICO innovation enables customers who are also investors. This is a “back to the future” world, like traditional financial technology when vendors financed from customer revenue. This puts entrepreneurs fully in control. The incumbent can no longer simply call a VC and say “we would like to buy Company X in your portfolio”.

Next Chapter

Bernard Lunn is the CEO of Daily Fintech and author of The Blockchain Economy. He provides advisory services to companies involved with Fintech (reach out to julia at daily fintech dot com to discuss his services).