Where are all the Blockchains?

In my last article Who will win in the Brave New World of Blockchains I gave a view of how blockchains could restructure the global business ecosystem. This next article explores why we don’t currently see a lot of production blockchain deployment. It also gives my estimate on the timeline for its evolution into mainstream business.

Blockchain technology has been rolled out onto the global battlefield for a decade now. Like an omnipotent laser beam weapon, it has been touted as having enough firepower to knock Facebook, Google, Amazon and the other tech giants off their pedestals, dismembering them through its intrinsic ability to decentralise control.

After destroying the Tech Giants and behind their walled gardens, ‘blockchains’ will restructure society by laying down a democratised, transparent and trusted global network. A modern-day Hannibal, able to defeat the Roman Legions.

So where are all the blockchains? Does anyone know?

So far, we see Bitcoin and a whole lot of ‘Alt Coin’ cryptocurrencies. But we don’t yet see them being used as a ‘Means of Exchange’, like cash. Instead we see them being traded or stored, as ‘Digital Gold’.

But blockchains can do a lot more than run cryptocurrency. The technology that runs Bitcoin can also act as a distributed database, able to track any data type with an immutable trace of the data history.

Why are blockchains not coming out to fight?

Blockchains are trying to make some fundamental changes. Don’t underestimate the challenge.

From a technical point of view, ‘Blockchain technology’ or ‘Distributed Ledger Technology’ is part of a wider evolution in computing, more broadly known as ‘Networked Computing’. We are now well and truly into this epoch of computing, originating in the 1960’s with the ARPAnet. This was the first group of connected machines that could communicate with one another. This evolved into the Internet. And since the 2000’s we have seen the emergence of ‘Cloud Computing’.

So we are now living through the next evolution of networked computing, that is Blockchain technology.

Cloud Computing was designed around holding your data and even logic functions on someone else’s computer, in a third party data centre, somewhere remote to your location. Hybrid Clouds are a mix of public cloud storage and on-premise private storage to improve performance, reliability and redundancy.

Blockchains, by contrast, work by holding, the exact same copy (or pointers to copies) of, your data on every computer on a particular blockchain network. It is ‘distributed’ in terms of physical architecture, that is, there are lots of computers. And it can be ‘decentralised’ in terms of access and control. In other words, blockchain allows the users to maintain control over their own data and access to that data by third parties. Simply put, there is no ‘SYS ADMIN’. Everyone is a ‘SYS ADMIN’ and everyone controls access to their own data.

But blockchain requires more than just technological rearchitecting. There is another change needed. The business ecosystem needs to change. That is, the way business and businesses, along with customers, interact. We are already starting to see a move to more transparency in the networked models evolving.

Both the technology change and the business change will be transformational. Like two concentric spheres laid over each other, the first (technical layer) is laying the fertile ground for the second. They will evolve in parallel.

At present the technical ecosystem is being developed.

  1. The Technical Ecosystem

A blockchain can be described as a distributed database with a common validated data ‘state’. Yet it can be is more than that. It can also function like a ‘virtual computer’.

Blockchain technology will end up being a decentralised ‘virtual computer’ or ‘virtual machine’, built on a distributed network. A blockchain can perform all the functions that any computer does. It can Compute, Store and Communicate data. That data can be in any format; words, images, songs, movies, transactions, or even executable logic.

Those three basic tasks, Compute, Store and Communicate, are today, carried out by the internet and our connected devices. In the future the network may even be the computer.

From a network perspective there are, however, many technical layers to that. They can however, be boiled down to a Protocol layer (like the rails and rules) and an Application layer over the top (the code for the ‘use’ with business logic and a front end).

Blockchain technology, currently, is still at a very early stage in developing those layers.

They have some protocols (e.g. Bitcoin, Ethereum, EOS, Fabric) developed, but so far there have been few applications in production (e.g. Auger, Everledger).

More significantly, the Application layer does not yet communicate between blockchains. So this limits the ‘use case’ to the specific blockchain protocol. If thinking in the OSI structure, horizontal communication across layers is a significant challenge without standardisation widely agreed yet. Think of how the internet flourished once the TCP/IP standards had been developed. Interoperability between chains is being developed and likely to be standardised over the next two or three years.

So while the layers in the network stack need to be developed vertically, through to the User Interface, so does horizontal interconnectivity. This horizontal build needs to happen to enable blockchains that use different protocols, to talk to each other.

2. The Business Ecosystem

The next stage, will be the development of the business ecosystem. This will take off at pace, once interoperability is standardised. Significantly, it will be an ecosystem that is reflective of the technical ecosystem underpinning it. But because it can be decentralised, it will unlock a whole new set of business models in a way that the internet of ‘platforms’ prevented. This will be the true evolution of a new business ecosystem, where control has been ceded from the Tech Giants and delivered back to the users of decentralised platforms or markets.

This will need more than just ‘decentralised’ versions of Uber or Facebook. It requires developing the mechanisms for interacting and generating value, in ways not seen before. With decentralised and democratised control, new co-operatives and business models will form. Power will be re-distributed. We will require something else than just access to a platform to ‘join up’. In fact, we will own access to ‘our’ platform or at least our part of it. The commercial seekers of our ‘value’ will need to offer something else more powerful than access in return.

The Business Ecosystem will be Data-Centric

This will create a whole new ecosystem that is ‘data-centric’ not ‘platform-centric’.

For example, if we post a video to our Public Key (like a pseudo-anonymised address), or share our purchasing history, we will need to seek some kind of value exchange in return. And it may not necessarily be money.

The new business ecosystem will enable multiple new paths in terms of how we interact, giving us options to choose how to get what we need. These will in many ways be rewarding, returning a sense of control and transparency to how we engage, or choose goods and services. We will have better ‘situational awareness’, a clearer picture of what we are doing. But someone will need to work out how to structure these decisions. This takes time. But many new opportunities for building this into applications will evolve.

So how long will it take?

This isn’t happening overnight but it is developing at pace. Already there is significant progress being made on blockchain performance or speed, as measured by transactions per second, via off-chain, side-chain and sharding technology.

There is however, much more work needed in other areas like interoperability and standardisation.

For this reason, I see ‘Permissioned’ and ‘Private’ Chains gaining the early ground in use-case roll out into the commercial world. Governments and large organisations will use these Permissioned Chains, using Open Source technology like Hyperledger which is a Linux set of products. Linux is now mainstream and the Open Source approach has won.

My view is that ‘Permissioned Blockchain’ roll-outs will grow exponentially in the enterprise space over the next five year horizon.

Over the next three years interoperability will develop to enable Permissioned/Private Chains to communicate between chains. Over that time, standardisation will be further progressed and within the next five years we will see interoperability between Public and Private chains.

By 2024

As an example of its potential use in the real world, if in 2023, you go to a hospital in a foreign country that uses an Ethereum (Public) chain, you will be able grant ‘timed access’ to your records, no matter what technology they are on or what country you are in. Those may be held on your own government’s (Permissioned) chain or on another Public chain.

Permissioned Blockchains will be mainstreamed by then. There will be many products, with good User Experience interfacing developed. So good in fact, that you won’t even realise you’re on a blockchain.

Beyond 2023 we will see a wider use of Public chains, largely because privacy and key security issues will have workable, easy to use, solutions. Additionally, there will be standards of interoperability and ratings, particularly of Security, developed for Public chains. These will enable Users to operate ‘on chain’ with confidence, in a decentralised world where there is no ‘SYS ADMIN’ to fix problems. The quality will be baked into the protocol, after years of open source testing.

Over the subsequent five years, after Public chains have become common, we will see wide-scale business ecosystem evolution.

By then the Tech Giants will have shapeshifted into new democratised forms that do something valuable for… us, with our data. Or they will have disappeared.

The Time Line to the Brave New World

So, it’s a five-year timeline. Don’t underestimate where this will go. More than the technical evolution, organisations need to understand the coming business evolution. The ‘Platform Economy’ of Walled Gardens will disappear.

But first, the technical ecosystem needs to build the layers into a fully interoperable stack. And that is why the Blockchain has not yet come out into large scale mainstream use just yet.

Throughout history there have been times of rapid change. It is always impossible to predict the exact form of any change. But we can guess the nature of it. Many new kinds of business operation will emerge. Those who survive and thrive will be those without crystalised mindsets. Most of today’s organisations need more expansive thinkers.

Become a shapeshifter.

Kris Vette is an Emerging Technology Strategist. He runs Chain Ecosystems, which enables organisations to orientate and develop their competitive posture in times of rapid change.

Explaining how emerging technologies will integrate into society.