In amongst all the Bitcoin hype there was a thought-provoking question posed in a well-shared post published just before Christmas by Kai Stinchcombe, founder of a Silicon Valley financial services startup, about whether there was actually any legitimate use at all for Blockchain technology: ‘Everyone says the blockchain, the technology underpinning cryptocurrencies such as bitcoin, is going to change EVERYTHING’ notes Kai, ‘And yet, after years of tireless effort and billions of dollars invested, nobody has actually come up with a use for the blockchain—besides currency speculation and illegal transactions.'
Kai notes how each purported use case, including payments, legal documents, so-called ‘smart-contracts’, distributed storage, and authenticity verification has flaws, and unforeseen challenges that have thus far prevented them from becoming more mainstream. And how the advantages of existing human and software systems surrounding transactions outweigh the purported benefits, (and hidden costs) of irrevocable, automated execution. What if, asks Kai, the reason nobody has adopted a distributed ledger at scale is because nobody wants it?
As a counterpoint to that, renowned VC Fred WIlson (in his post about the big tech stories of 2017) describes why Blockchain may well be over-hyped in the short-term but under-hyped in the longterm (classic Innovator's Dilemma stuff). Using the Perez technology surge cycle chart, a favourite way of looking at new technologies, Fred notes that a fenzy develops when a new technology enters the material phase of the installation period – the frenzy in effect funds the installation of the technology.
2017, he believes, is the year when crypto/blockchain entered the frenzy phase, with over $3.7 billion raised by crypto projects/startups (about equal to the total seed investment in the US in 2017), effectively to build out what he describes as Internet 3.0 or the decentralized internet. Just as the Internet 1.0 frenzy in the late 90s provided the capital to build out the broadband infrastructure that was necessary for Internet 2.0 (the broadband / mobile Internet), this year’s frenzy will provide the capital to build out the infrastructure for the decentralized Internet. That infrastructure is needed badly since whilst you can get a taste now of what things will be like, you can’t really use the technology yet as it just doesn’t work at scale:
‘But it will and the money that is getting invested via the frenzy we are in is going to make that happen.’
The transitions from Internet 1.0 to 2.0 to 3.0 cause huge disruption but also opportunity and whilst some of the big tech players will make a healthy transition, others may not (think of Amazon, Google but also Yahoo and AOL)
‘In the venture business, you wait for these moments to come because they are where the big opportunities are. And the next big one is coming. That is incredibly exciting and is why we have these ridiculous valuations on technologies that barely/don’t work.’
That question of who can successfully navigate the jump from one S-curve to the next is critical, and applies more broadly to all types of businesses and contexts. Every company is faced with a succession of S-curves to makes sense of (AI, AR, IoT, 5G, Blockchain perhaps) which defines the need for a different type of organisation that can successful respond to continuous change but also sets out some key challenges. Most notable amongst these is the challenge of managing existing business as usual whilst innovating around the unthinkable (the reality of where the rubber hits the road in many large organisations), the difficulty in a world of shareholder value of managing the short-term hit on performance that can result from this transition, and facing up to the 'dilemma zone', or the need to innovate and experiment before it is forced upon you by shifting consumer, competitive or market contexts. This is as much about mindset and orientation as it is about timing. You need to get all three of those things right, and aligned.
N.B. if you're around I'll be talking about this (and other near to mid-term trends) in my quarterly Econsultancy trends webinar this afternoon at 4pm UK time (membership required though)
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