Blockchain and the sharing economy 2.0
The real potential of blockchain for developers
We are at the beginning of the blockchain technology cycle. Bitcoin was the first and most notable application of the blockchain, but it’s only the beginning. We now have a technology that can provide trust in a network without a central authority.
Blockchain technology has the potential to reshape all economic activity. It truly is that important. Unfortunately, awareness of the blockchain is intertwined with Bitcoin, the cryptocurrency, which limits people's thinking and obscures their vision of greater possibilities. People find it difficult to see beyond the use of blockchain as a platform for capital markets. However, its use within financial services is just one niche use case. Other valuable use cases exist for using blockchain in everything, including the supply chain, such as proving provenance in the diamond trade (for example, EverLedger), or enabling a chain of custody for valuables (such as Assetcha.in), or, for providing better tenancy agreements in the property market (such as Midasium). The opportunities are only limited only by the imagination.
The landscape is confused further by the lack of standardized terminology and competing projects. Some people talk about blockchain to refer specifically to the Bitcoin blockchain. Others use the term blockchain to mean a distributed ledger. Some companies are offering private blockchain solutions, such as Ripple for financial settlements and Guardtime for data integrity. R3CEV, for instance, is a banking consortium of 43 banks that plans to build a private banking blockchain.
The basis for all of this is that the blockchain can provide trust in a network without a central authority. Standardization will come in time. The Hyperledger project, led by Linux, and including IBM and JP Morgan, is attempting to build a cross-industry open standard.
Centralization has been a core organizing principle for the economy and society since the agricultural revolution. As the human population grew, people had to make decisions that benefited the general population, not just the individual, family, or clan. This centralization dynamic also plays out in the economic realm. Larger organizations with more customers tend toward vertical integration and centralized functions to increase efficiencies and reduce costs. Economic centralization is the most effective organizing principle when communication and transaction costs are high. But this centralization is changing and will have profound implications for human organization. The Internet brought communication costs down. Blockchain will do the same for transaction costs.
Blockchain has the potential to be the most important democratizing force in history because no central authority is required. The applications of blockchains and decentralized trust are more powerful than is understood. Industries as wide-ranging as accounting, legal services, real estate, and e-commerce have all built business models based on providing trust between a buyer and seller. In older industries, this trust has been enshrined in law—providing a barrier to entry and protection from new entrants. Blockchains, however, are a low-cost market disruption to any business that acts as a middleman in a market.
The Internet allows content to be packaged up and sent to anyone else as data without the need for a distributor. This reduces marginal communication costs to almost zero. Blockchains are the economic infrastructure that allows both physical and digital assets to be packaged up and sent to anyone else without the need for a central authority. This reduces marginal transaction costs to almost zero, which makes it just as easy to sell a house as it is to make a micropayment for reading a blog. The blockchain brings a scalable business model to anybody and everybody on the Internet.
The sharing economy 2.0
As blockchain becomes more widely understood, many will focus on how it disrupts existing industries. E-commerce, legal services, and real estate will be targeted by lower-cost blockchain-based services. Some middlemen provide far more value that just trust. Amazon.com, for example, provides logistics, recommendations, and next-day delivery. Other middlemen offer nothing more than a signature and legislation that insulates them from competition. Eliminating the need for an intermediary could impact some of the biggest technology companies. Rather than use Uber, Airbnb or eBay to connect with other people, blockchain services allow individuals to connect, share, and transact directly, ushering in the real sharing economy. Blockchain is the platform that enables real peer-to-peer transactions and a true "sharing economy."
Disruption is exciting and grabs lots of headlines and consulting fees. But more importantly, blockchain will create new markets. These markets will be ones in which individuals can trade non-traditional assets like reputation, data, and attention. Blockchain makes any activity, however small, easy to monetize. What about using blockchain to share energy and earn energy tokens in a microgrid environment? What about paying somebody an advice token for a 30-minute advisory call? Or earning tokens for sharing genomic data. Each time the data is used, the user receives a token in a licensing-type model.
The opportunities are vast—extending into all existing economic activity and even social activity that can't yet be monetized. The vision that blockchain will deliver is nothing less than the reshaping of society and the economy. It is up to developers to start building applications and experimenting. There are opportunities to provide cheaper auditing and accounting services. Many legal contracts are standardized, therefore blockchain and smart contracts can be used to offer cheaper legal services. Thinking bigger, what about voting? The requirement for security, anonymity, and fraud-resistance makes voting a prime use case for a blockchain service. Blockchain will allow entire industries to be rebuilt. It's time to jump in.
- Blockchain service on Bluemix
- Blockchain basics: Introduction to business ledgers
- How Blockchain Will Transform Business and Society
- IBM Blockchain for developers
- IBM Bluemix Garage for blockchain
- Hyperledger Project