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Blockchain for Grown Ups: Cutting Through the Hype

Prasanna Pendse and Ross Pettit, ThoughtWorks | June 20, 2016
Blockchain makes it easy to create a shared, distributed database that’s simple for any possessor to append to but nearly impossible to fraudulently change, making it particularly suitable as a “registry of truths”.

This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.

Every week you get an invitation to a blockchain conference. Every magazine and newspaper has an article about blockchain, and every company you talk to has an "innovation lab" working on blockchain. You've spent more than a few idle moments imagining the possibility and promise blockchain could bring to, well, just about anything! But then you go back to work and nothing has changed, and things are getting even more complicated than before-from regulations to customer expectations. If this feels too close to reality, then this series of articles is for you.

Blockchain for grown ups

Installment #1: Cutting Through the Hype

The blockchain conference was an eye opener. Blockchain will revolutionize payments and digital rights management. It will provide iron-clad transparency over supply chain. It will disintermediate trade, reinstate trust in elections, put regulators out of a job. It will change the very definition of cash flows, companies and governments. As you ride home in a human-driven Lyft, you wonder how long until a self-driving, self-funding, self-maintaining vehicle will be driving you home. As the purple hue of the setting sun reflects off of the pristine glass and steel offices of all those financial institutions you pass by on the ride home, you wonder whether they are destined to look like abandoned auto plants in the Midwest, rendered inert by blockchain?

The morning after the night before, you're more skeptical than enthusiastic. The same companies are still on top of the S&P 500. The Dollar, Euro and Renminbi are still the world's reserve currencies. All that talk of "shared ledgers" sounds great but at the cost of making know-your-customer that much harder and money laundering that much easier. Ironically, to be a fully transparent ledger, we'd have to expose data we're expected-even required-to keep confidential.  

Which is it? Were the people at the conference harbingers of a new tomorrow or just the chattering class with too much caffeine? It's intuitively appealing, but we need to be "realistic"-whatever "realistic" is.

Here's a grown-up perspective.

Hype: Cryptocurrencies will change everything!

While most implementations of blockchain come with a cryptocurrency for free, it's important to remember that currencies are complicated. Currency values have to be relatively stable day-in and day-out if they're going to be effective stores of value. If they are controlled by a central bank, the stability of their value is a function of the convenience of the bank itself; if they are traded freely, their values can fluctuate wildly. Where it's easy to convert sovereign-backed currency into crypto-currency, governments will intervene to snuff out tax havens and prevent capital flight, particularly in times of economic stress. The current generation of crypto-currencies will remain a side-show until sovereign currencies become crypto-currencies as well-and that remains a long way off for the reserve currencies of the world.

 

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