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cover blockchain

Why care about Blockchain? [Longread]

Jerôme Crijns
Jerôme Crijns has finished his Bachelor in EBE is now combining an internship with the Young Advisory Group. His field of interest varies from economy to psychology, with anything in between. As soon as cars are involved in the news, he is there to report.

“Blockchain will do what internet has done, 20 years ago.” (Every Blockchain expert, ever)

No-one seems to know where it came from, but everyone understands: Blockchain exists, and it’s important. It’s a typical example of a concept which becomes gigantic within a brief timespan, thanks to extensive media-coverage and omni-presence within our very neutral news outlet called Facebook.

Does that make it a self-fulfilling prophecy?

In part, yes. Any finance dummy knows how strongly stock prices correlate with trust and confidence in an asset. The buzz goes around the campus and people chatter over their lunch that ‘they should also be doing something with Blockchain’. We hear success stories of people selling their houses to invest in Blockchain and buy tropical islands. Lamborghini is the very first top-notch car producer enabling customers to pay in Bitcoin, the best-known cryptocurrency. All major companies feel they should do ‘something’.

And that’s where it goes wrong. Arno Laeven, Blockchain expert within Shell, KLM and Philips, states that this way of reasoning is one of the primary misconceptions within top-management. Innovation X has arisen, so we should think of method Y to use it. Wrong, Laeven says, as you should first see into current company issues which cannot yet be solved by current methods. Then, in the second stadium, the management should see if Blockchain is indeed the preferable new method.

This is reminiscent of other modern-day innovations such as ‘agile’ and ‘scrum’. And how about the word ‘innovation’ itself? We are constantly innovating for the sake of innovating. A perverse development if it has no foundation. It not only has inflationary impact on the word ‘innovation’ – “you bought a purple flipover? How innovative!” – it also removes the necessary intrinsic drive to actually innovate. ‘Sustainability’ may perhaps be the next best example of ‘jumping on the bandwagon’. “Why are you sustainable?” “Well, we cannot lag behind, right?” Right.

On October 11, Asset | Economics and Asset | SBIT led an audience of 90 people through the brand-new and awe-inspiring realms of Blockchain in their Blockchain Symposium. We were real-time witnesses of an ICO (Initial Coin Offering, e.g. the IPO for Blockchain currencies) by the founder of a Kiev-based cryptocurrency called Byelex. We spoke about empowerment of the individual, enforcement of the weak, and corrosion of the corporate world – all of those initiated by Blockchain.

So, what does it do?

We will dive deeper in the technicalities of Blockhain in our upcoming Off the Charts article. For now, let’s focus on its features.

Arjen Krijt (Ordina) argued that Blockchain is already showing a thorough and large societal impact. In California, it is stated by law that individual energy supply – such as provided by solar panels – should first be sold to the state to then be distributed amongst individuals. The government, as in many cases, is the middleman, which causes inefficiency and slowdown. Blockchain, however, enables individual X to directly link to the energy supply of individual Y, thus creating a reliable and one-to-one transaction. In the US’ recent tropical disaster, where the central energy supply was fully knocked-out, these micro-level transactions are able to rapidly revamp an entire economy. And the state? It may conceive this as ‘disruptive’ and make additional laws to restrict the development. But Blockchain cannot be stopped given its low entry and massive potential. “The Blockchain train cannot be hindered”, Krijt assured.

Yurry Hendriks’ (ABN Amro) contribution was an interesting pilot they executed last year. It concerned the case of arranging rental contracts via the Blockchain network. Instead of the slow and bureaucratic process that renters and rentees should normally go through, Blockchain enables the relevant parties to share the same ‘ledger’ or ‘key’. All parties with this key have direct access to the common place and are able to see into the relevant information. They all have, in other words, the same ‘fingerprint’ necessary to access the data. Instead of a different key for every party, every party now has one and the same key – efficiency gurus should love it.

How about protection?

Protection is solid, because if one of these parties would change the data and hence influence the common fingerprint, the other parties would all need to give validation before the changes become permanent. They are checking each other for the sake of themselves, so the individual benefits from a strong collective and vice versa. We are thus going from an era of ‘information transfer’ (internet) to an era of ‘ownership transfer’ (Blockchain). By sharing trust in a distributed way, the importance of central institutions will diminish while enforcing the importance of individual-level validity.

Blockchain SamWouters

Libertarians are loving it, and the major corporations have no idea what to do. Laeven (external advisor to Shell, KLM, Philips): “How do you think a CEO reacts if you tell him that his value proposition will expire within 10 years? Exactly, he panics”. He vividly describes how the ‘great central value’ which an institution such as a bank provides, will be eroding: people will need each other for trust and validation, and no more middleman. That’s cool to hear from a speaker who is a pioneer within some of the world’s largest corporations.

The impact?

Gigantic. As Bill Gates stated, people tend to over-estimate the impact of a new technology in the upcoming 2 years, and under-estimate it in the upcoming 10 years. In the upcoming 2 years, we will still be chit-chatting over ‘is it a bubble yes/no’ – not interesting. In 10 years, the speakers agreed, a variety of expertises will drastically transform. Those are all fields which are designed to ‘validate’ some message: think of accountants (validating a firm’s financials), notaries (validating contracts) and firm lawyers (validating the application of private laws). So should we all become Blockchain experts then? Nah, don’t worry. Humans still value human interaction as opposed to ‘cold robot contact’. And ‘trust’ will always remain a very sensible topic, best ensured by a warm hand-shake or a real human signature.

But in modern management terms: we can be sure that the value proposition of many fields of work should innovate in order to be sustainable.

Another misconception? Bitcoin is not the same as Blockchain, just like Ferrari is not the same as a sportscar. More on that in the upcoming Off the Charts article.

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