For the last decade or so, eCommerce has been THE thing. Consultants got into a frenzy and overnight gurus emerged with twenty years’ experience. Omni-channel became the new black. Then there was the boon in ‘social media’ and everyone was urged to enter into a ‘conversation’.
Long-time readers will know that I have cautioned about this. A few years ago I addressed a PCA conference in WA and some may remember that I raised the spectre of IoT – the internet of things. Even then, it was a watching brief only.
Something was missing to power the revolution.
Blockchain has arrived.
The reason why I am getting on this particular bandwagon is because there is one fundamental difference to previous ‘transformations’ such as the ‘general’ internet or ‘typical’ social media platforms. The natural state of affairs is that PEOPLE want to be empowered and in control. The whole economic model has been slowly evolving towards that point where the individual is enabled to exercise complete control over their life.
Blockchain provides this.
The move towards gender fluidity, being pro-choice etc. are simply social manifestations of this trend and this applies equally and more to the economic domain. It’s a whole different topic to track this particular evolution (maybe another day) but in the meantime trust me when I say that Blockchain technology enables the consumer in a way and at a scale that will make REAL peer2peer commerce possible. (Previously, P2P commerce still needed to be facilitated by a third party, effectively substituting one institution for another.) No more.
Rather than talk about ‘distributed databases’ generically, the best analogy I can come up with to explain it is think about Blockchain as follows:
Currently you will secure a PIN number by writing it down. Saving a file. Behind a firewall. Protected by a cryptographic software etc. It is safe – but it can be cracked.
In a Blockchain environment, imagine every person walking in the street has a single digit on a bracelet on their wrist. You know which six people are the ‘containers’ of your PIN. All the numbers are publicly visible. You and everyone else carry the numbers in plain sight. But it works on a system of trust. If you are asked, you will reveal whose number you are carrying. But any potential criminal can walk through the city and ask people whose numbers they are carrying. The criminal may stumble on John Smith who happens to be carrying the number 7 that is one of the six digits in my PIN, but the same digit is of course also in tens of thousands of other pins. How long will it take for the criminal to find random people in the streets of Sydney who happen to have my six digits, even if the digits are literally hidden in plain sight?
In the real Blockchain version of this, John Smith actually will reveal the exact digit if you can discover their own pin first. And the people who carry John’s digits will reveal the PIN if you can discover their PIN. (Each ‘block’ to be discovered in sequence like that. You can see the practical problem with a system like that.)
This is how Tapscott puts it: “I would have to commit fraud in the light of the most powerful computing resource in the world, not just for that ten-minute block but for the entire history of commerce, on a distributed platform. This is not practically feasible.”
(I am not technically proficient enough to really understand the maths or the programming, and all analogies are flawed, but happy to read better descriptions in the comments.)
To explain the potential impact, I am quoting insights from Don Tapscott’s book on the topic to illustrate the breadth of the impact. Few people can even image the depth of the impact – and I can’t either. But it will be massive.
Back to people power
“We have this great asset of data that’s been created by us, and yet we don’t get to keep it. It’s owned by a tiny handful of powerful companies or governments. They monetize that data or, in the case of governments, use it to spy on us, and our privacy is undermined. In the case of the Internet of Things, we’re going to need a blockchain-settlement system underneath. Banks won’t be able to settle trillions of real-time transactions between things.”
This is the cornerstone evolutionary fact that will become the rock upon which massive transformation and disruption will be built. How this can be play out can be seen from the examples below.
No more banks, insurance companies, payment gateways etc
“We can do transactions and satisfy each other’s economic needs without knowing who the other party is and independent from central authorities.”
Read it and rejoice: we don’t need a bank. Keeping our money under the (digital) pillow has just become the best option for us.
Disruptors will be disrupted
“Rather than a $60 billion car-service aggregation, why couldn’t we have a distributed app on the blockchain that manages all these vehicles and handles everything from reputation to payments? Ultimately, they’ll be autonomous vehicles moving around.”
Uber has not even finished disrupting the Taxi industry, and they may well become defunct. No doubt they are scrambling to incorporate the technology, but at the end of the day, what value will they really be adding of fridge is doing the trip planning?
Marketing as you know it will change
“Firms may have to pay just to query a prospective customer’s black box, to see whether that customer meets a firm’s target audience. That customer may decide globally to withhold certain data such as gender, because a no answer is still valuable. But in so doing, the firm will learn nothing more about the prospect beyond the yes/no results of the query. Chief marketing officers and marketing agencies will need to rethink any strategy based on e-mail, social media, and mobile marketing: where the infrastructure may lower communications costs to zero, customers will raise costs to a figure that makes reading a firm’s message worth their while. In other words, you’ll be paying customers to listen to your elevator pitch, but you will have tailored your query to pitch only to a sharply defined audience so that you will be reaching exactly the people you want to reach without invading their privacy.”
And there we were thinking we need to start mastering Facebook advertising and learn about that Snapchat thing. Fundamentally, consumers don’t want to be interrupted. And fundamentally, my ‘data’ has value, so why would I let you steal it with bots and cookies? And then sell it back to me?
“For really important decisions, firms could implement internal consensus mechanisms whereby all stakeholders vote on mission-critical decisions to end the chorus of ignorance and denial of prior knowledge.”
Of course, that is if ‘firms’ as we know them, still exist?
Example: The Music Industry
If you think music streaming has disrupted traditional publishers, consider this table below to see how the consumer progressively becomes more empowered.
Stage of Economic Evolution
Only live music
Great quality and great experience, but no ability to store music
Early Modern Era:
Vinyl records produced and distributed and marketed by Music Publisher
Consumers were able to listen to music when they wanted and it was relatively affordable
Digital Music files. Enables CDs
Easier to mass produce, better quality and slightly cheaper. Easier to share
Music Streaming from the Cloud by a crop of new players putting the labels out of business. Musicians can negotiate with new streaming service directly, no matter your size or popularity
More affordable. Perfect for sharing. All the music that exists is now on tap.
More musicians have access too, but they still only earn a fraction of the value.
Musicians can build their own app on Ethereum. They can sell directly to you and earn every cent. They can sell a fraction of the song as a ring tone or license it to be used as a soundbite or music bed on a video or a soundtrack for a movie.
You buy music for cents in the dollar – directly from the musician, for the exact purpose youi want.
All musicians all music on permanent tap. No record store, no music label, no distributor, no streaming service required: from the artists’ basement to you.
The main thrust of the article is this:
The change that is coming will be profoundly disruptive. To every industry. In fact, the whole notion of ‘industry’ will be re-imagined. (And I haven’t even layered 3D printing over this yet.)
The reason why this change will be so wide-spread and severe is because the missing piece in previous technological paradigm-shifts was always that the ‘people’ (users/consumers = the market) were marginally better off (Uber is 10% cheaper than a cab, and payment is easier) but they were still at the mercy of an institution (company) who decided how things were going to work and how much it would cost. NO MORE.
In this brave new world THINGS will transact with each other when its owner wants on terms that the owner set. And when the PERSON chooses to transact, it will be on the same terms directly with other people, exactly in accordance with their unique requirements, at the price they agree in an environment of complete transparency. Without the need for ANY intermediary.
What is your ‘industry’ going to look like then?
The Solutionist – Ganador
PS 1: The grand ‘arc’ of change is described in Rigidly Defined Uncertainty – and you can download it free here.
PS 2: We are starting a free, AMA (ask-me-anything) community on a dedicated platform. Send me your email and I will be in touch to share more details.