The worry about whether or not to do something with blockchain is behind a lot of the questions asked by clients, colleagues and friends at the moment, writes Paul Mitchell, fintech and blockchain lead at PwC South Africa.
The technology behind bitcoin enables multiple parties to transact based on them having a copy of the same information updated by consensus and removing the need for rent seeking intermediaries.
Concern about the technology takes a lot of forms, ranging from FOMO about the cryptocurrency boom to a growing realisation that industries are changing. The pace of that change, and the attention that blockchain is getting, is feeding a self-reinforcing process of hyper growth in this space.
Many people draw parallels between blockchain and the internet in the early 1990s. As Mark Twain is reported to have said: “History doesn’t repeat itself, but it often rhymes”. Back then we had Amazon version one, and we had Pets.com; one became the shop of everything and one disappeared without trace. Although we can explain after the fact why that turned out the way it did, it is very difficult to take that 20/20 hindsight and apply it to the current disruption.
There are also some big differences between 1990s and today. What if the growth of the internet had been fuelled by a global mechanism for distributing information, and sophisticated ways for teams to collaborate remotely, and tools for publishing the information? Or to put it another way, what if the internet had been there to accelerate the internet’s growth? That is what we have with blockchain, and the technology is developing very rapidly with new developments, regulations and breakthroughs daily.
It is not only the remote collaboration and global information sharing that the internet enables that is significant here. It is also that the first real use case for blockchain is decentralised money and the ability to transfer value over distance as easily as information. This has added fuel to the blockchain fire by creating massive interest and excitement, but also by enabling the earliest developments in blockchain to fund the next stage, which is what we are seeing now.
There are two forms to this – one is the newly ‘crypto rich’ reinvesting in blockchain technology development, and the other closely related phenomenon is the initial coin offering (ICO), whereby blockchain startups raise money to fund their development, sometimes in huge quantities.
So to come back to the question: should you be doing something about blockchain? The short answer is ‘yes’. If you are ignoring it and hoping it will go away, then you are depriving yourself of the opportunity to grow your understanding with the technology as it develops.
If you are thinking now about the strategic implications for your business, your industry and broader society, then you are making a good investment of your time. We are working with clients and industry consortiums to explore these ideas and to work out how blockchain and the related technologies will change things.
The first step is learning, analysis and strategy; the second is to learn by building, from proofs of concept to pilots; the final stage, which few have got to yet is getting the new technology into the live environment.
We are still a long way from understanding all the implications of blockchain, and of what it will enable, just as Pets.com is a long way from Slack and Facebook. But if you wanted to be someone who created Web 2.0 then getting in early on Web 1.0 would have been a pretty good place to start. We believe that companies should be experimenting to learn about blockchain now. The results may or may not be industry changing in the short term, but the learning is critical and that knowledge will lay the foundations for the next wave.