BLOCKCHAIN DEFINITION: WHAT YOU NEED TO KNOW

In our analysis, history suggests that two dimensions affect how a foundational technology and its business use cases evolve sầu. The first is novelty—the degree khổng lồ which an application is new to lớn the world. The more novel it is, the more effort will be required lớn ensure that users understvà what problems it solves. The second dimension is complexity, represented by the màn chơi of ecosystem coordination involved—the number & diversity of parties that need to lớn work together to lớn produce value with the công nghệ. For example, a social network with just one member is of little use; a social network is worthwhile only when many of your own connections have sầu signed on khổng lồ it. Other users of the application must be brought on board to lớn generate value for all participants. The same will be true for many blockchain applications. And, as the scale and impact of those applications increase, their adoption will require significant institutional change.

We’ve developed a framework that maps innovations against these two contextual dimensions, dividing them into lớn quadrants. (See the exhibit “How Foundational Technologies Take Hold.”) Each quadrant represents a stage of công nghệ development. Identifying which one a blockchain innovation falls into lớn will help executives understvà the types of challenges it presents, the cấp độ of collaboration and consensus it needs, và the legislative và regulatory efforts it will require. The maps will also suggest what kind of processes & infrastructure must be established to lớn facilitate the innovation’s adoption. Managers can use it to assess the state of blockchain development in any industry, as well as to lớn evaluate strategic investments in their own blockchain capabilities.

Single use.

In the first quadrant are low-novelty và low-coordination applications that create better, less costly, highly focused solutions. E-mail, a cheap alternative to phone calls, faxes, và snail mail, was a single-use application for TCP/IP. (even though its value rose with the number of users). Bitcoin, too, falls inkhổng lồ this quadrant. Even in its early days, bitcoin offered immediate value to the few people who used it simply as an alternative payment method. (You can think of it as a complex e-mail that transfers not just information but also actual value.) At the end of 2016 the value of bitcoin transactions was expected to hit $92 billion. That’s still a rounding error compared with the $411 trillion in total global payments, but bitcoin is growing fast và increasingly important in contexts such as instant payments & foreign currency và asmix trading, where the present financial system has limitations.

Localization.

The second quadrant comprises innovations that are relatively high in novelty but need only a limited number of users lớn create immediate value, so it’s still relatively easy to lớn promote their adoption. If blockchain follows the path network technologies took in business, we can expect blockchain innovations to build on single-use applications to lớn create local private networks on which multiple organizations are connected through a distributed ledger.

Much of the initial private blockchain-based development is taking place in the financial services sector, often within small networks of firms, so the coordination requirements are relatively modest. Nasdaq is working with Chain.com, one of many blockchain infrastructure providers, to lớn offer technology for processing and validating financial transactions. Bank of America, JPMorgan, the Thủ đô New York Stoông xã Exchange, Fidelity Investments, và Standard Chartered are testing blockchain giải pháp công nghệ as a replacement for paper-based and manual transaction processing in such areas as trade finance, foreign exchange, cross-border settlement, and securities settlement. The Bank of Canada is testing a digital currency called CAD-coin for interngân hàng transfers. We anticipate a proliferation of private blockchains that serve sầu specific purposes for various industries.

Substitution.

The third quadrant contains applications that are relatively low in novelty because they build on existing single-use & localized applications, but are high in coordination needs because they involve sầu broader and increasingly public uses. These innovations ayên ổn to lớn replace entire ways of doing business. They face high barriers lớn adoption, however; not only vị they require more coordination but the processes they hope lớn replace may be full-blown và deeply embedded within organizations và institutions. Examples of substitutes include cryptocurrencies—new, fully formed currency systems that have grown out of the simple bitcoin payment technology. The critical difference is that a cryptocurrency requires every buổi tiệc ngọt that does monetary transactions khổng lồ adopt it, challenging governments and institutions that have sầu long handled and overseen such transactions. Consumers also have lớn change their behavior & understvà how lớn implement the new functional capability of the cryptocurrency.

A recent experiment at MIT highlights the challenges ahead for digital currency systems. In năm trước the MIT Bitcoin Club provided each of MIT’s 4,494 undergraduates with $100 in bitcoin. Interestingly, 30% of the students did not even sign up for the không lấy phí money, và 20% of the sign-ups converted the bitcoin khổng lồ cash within a few weeks. Even the technically savvy had a tough time understanding how or where to lớn use bitcoin.

One of the most ambitious substitute blockchain applications is Stellar, a nonprofit that aims to bring affordable financial services, including banking, micropayments, và remittances, to people who’ve never had access lớn them. Stellar offers its own virtual currency, lumens, and also allows users to lớn retain on its system a range of assets, including other currencies, telephone minutes, và data credits. Stellar initially focused on Africa, particularly Nigeria, the largest economy there. It has seen significant adoption amuốn its target population and proved its cost-effectiveness. But its future is by no means certain, because the ecosystem coordination challenges are high. Although grassroots adoption has demonstrated the viability of Stellar, khổng lồ become a banking standard, it will need to influence government policy và persuade central banks & large organizations to lớn use it. That could take years of concerted effort.

To learn more about technology adoption, go lớn these articles on thanglongsc.com.vn:

“Digital Ubiquity: How Connections, Sensors, và Data Are Revolutionizing Business” Marco Iansiti và Karlặng R. Lakhani

“Strategy as Ecology” Marco Iansiti & Roy Levien

“Right Tech, Wrong Time” Ron Adner and Rahul Kapoor

Transformation.

Inkhổng lồ the last quadrant fall completely novel applications that, if successful, could change the very nature of economic, social, & political systems. They involve coordinating the activity of many actors và gaining institutional agreement on standards and processes. Their adoption will require major social, legal, và political change.

“Smart contracts” may be the most transformative sầu blockchain application at the moment. These automate payments & the transfer of currency or other assets as negotiated conditions are met. For example, a smart contract might skết thúc a payment lớn a supplier as soon as a shipment is delivered. A firm could signal via blockchain that a particular good has been received—or the hàng hóa could have sầu GPS functionality, which would automatically log a location update that, in turn, triggered a payment. We’ve already seen a few early experiments with such self-executing contracts in the areas of venture funding, banking, and digital rights management.

The implications are fascinating. Firms are built on contracts, from incorporation to lớn buyer-supplier relationships lớn employee relations. If contracts are automated, then what will happen to traditional firm structures, processes, & intermediaries like lawyers & accountants? And what about managers? Their roles would all radically change. Before we get too excited here, though, let’s rethành viên that we are decades away from the widespread adoption of smart contracts. They cannot be effective sầu, for instance, without institutional buy-in. A tremendous degree of coordination và clarity on how smart contracts are designed, verified, implemented, & enforced will be required. We believe the institutions responsible for those daunting tasks will take a long time khổng lồ evolve. And the giải pháp công nghệ challenges—especially security—are daunting.

Guiding Your Approach lớn Blockchain Investment

How should executives think about blockchain for their own organizations? Our framework can help companies identify the right opportunities.

For most, the easiest place to lớn start is single-use applications, which minimize risk because they aren’t new và involve little coordination with third parties. One strategy is khổng lồ add bitcoin as a payment mechanism. The infrastructure & market for bitcoin are already well developed, and adopting the virtual currency will force a variety of functions, including IT, finance, accounting, sales, and sale, khổng lồ build blockchain capabilities. Another low-risk approach is lớn use blockchain internally as a database for applications like managing physical & digital assets, recording internal transactions, và verifying identities. This may be an especially useful solution for companies struggling lớn reconcile multiple internal databases. Testing out single-use applications will help organizations develop the skills they need for more-advanced applications. And thanks to the emergence of cloud-based blockchain services from both start-ups and large platforms like Amazon & Microsoft, experimentation is getting easier all the time.

Localized applications are a natural next step for companies. We’re seeing a lot of investment in private blockchain networks right now, and the projects involved seem poised for real short-term impact. Financial services companies, for example, are finding that the private blockchain networks they’ve sầu mix up with a limited number of trusted counterparties can significantly reduce transaction costs.

Organizations can also tackle specific problems in transactions across boundaries with localized applications. Companies are already using blockchain to lớn trachồng items through complex supply chains, for instance. This is happening in the đá quí industry, where gems are being traced from mines lớn consumers. The giải pháp công nghệ for such experiments is now available off-the-shelf.

Developing substitute applications requires careful planning, since existing solutions may be difficult to lớn dislodge. One way to lớn go may be to focus on replacements that won’t require kết thúc users to lớn change their behavior much but present alternatives lớn expensive sầu or unattractive sầu solutions. To get traction, substitutes must deliver functionality as good as a traditional solution’s and must be easy for the ecosystem khổng lồ absorb & adopt. First Data’s foray into lớn blockchain-based gift cards is a good example of a well-considered substitute. Retailers that offer them to consumers can dramatically lower costs per transaction and enhance security by using blockchain to traông chồng the flows of currency within accounts—without relying on external payment processors. These new gift cards even allow transfers of balances và transaction capability between merchants via the comtháng ledger.

Transformative sầu applications are still far away. But it makes sense lớn evaluate their possibilities now và invest in developing công nghệ that can enable them. They will be most powerful when tied khổng lồ a new business model in which the xúc tích và ngắn gọn of value creation và capture departs from existing approaches. Such business models are hard to lớn adopt but can unloông xã future growth for companies.

Consider how law firms will have sầu khổng lồ change to lớn make smart contracts viable. They’ll need lớn develop new expertise in software & blockchain programming. They’ll probably also have sầu lớn rethink their hourly payment Mã Sản Phẩm and entertain the idea of charging transaction or hosting fees for contracts, to lớn name just two possible approaches. Whatever taông chồng they take, executives must be sure they understvà & have sầu tested the business Model implications before making any switch.

Transformative sầu scenartiện ích ios will take off last, but they will also deliver enormous value. Two areas where they could have sầu a profound impact: large-scale public identity systems for such functions as passport control, và algorithm-driven decision making in the prevention of money laundering & in complex financial transactions that involve many parties. We expect these applications won’t reach broad adoption & critical mass for at least another decade và probably more.

Transformative sầu applications will also give rise lớn new platform-màn chơi players that will coordinate and govern the new ecosystems. These will be the Googles và Facebooks of the next generation. It will require patience khổng lồ realize such opportunities. Though it may be premature lớn start making significant investments in them now, developing the required foundations for them—tools and standards—is still worthwhile.

CONCLUSION

In addition to providing a good template for blockchain’s adoption, TCP/IP has most likely smoothed the way for it. TCP/IPhường. has become ubiquitous, & blockchain applications are being built on top of the digital data, communication, & computation infrastructure, which lowers the cost of experimentation & will allow new use cases to lớn emerge rapidly.

With our framework, executives can figure out where to lớn start building their organizational capabilities for blockchain today. They need to lớn ensure that their staffs learn about blockchain, to lớn develop company-specific applications across the quadrants we’ve sầu identified, and lớn invest in blockchain infrastructure.

But given the time horizons, barriers to lớn adoption, and sheer complexity involved in getting to TCP/IP levels of acceptance, executives should think carefully about the risks involved in experimenting with blockchain. Clearly, starting small is a good way to develop the know-how lớn think bigger. But the cấp độ of investment should depover on the context of the company & the industry. Financial services companies are already well down the road to blockchain adoption. Manufacturing is not.

No matter what the context, there’s a svào possibility that blockchain will affect your business. The very big question is when.

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