Think of the core elements of transactions in the business world — contracts, verification procedures and accounts for holding currency. They determine the boundaries within which individuals, organizations, communities and even nations interact. Yet, while the internet has transformed many aspects of the world economy, these tools and the bureaucracies surrounding them haven’t significantly evolved in centuries. Basic administrative control simply hasn’t kept pace with the digital revolution.
Now imagine if these core elements functioned within a decentralized, digital ledger system (picture a global team of accountants living in the cloud). It would then be possible to securely initiate and record transactions without the need for an intermediary (like a bank) and the accompanying cost. This is the promise of blockchain technology and some say it is as potentially transformative as the internet revolution.
Of course, unless you’re really into technology, the details of blockchain may make your eyes glaze over. But just like the internet, you don’t need to understand how blockchain works in order to benefit from it. What you should understand, however, is that this decentralized, digital ledger system has the potential to reorganize our entire society. By eliminating the need for centralized intermediaries in both business and society, some of our largest institutions, for example, financial institutions, could become dinosaurs. Such is the power of the technical approach block-tech enables.
To get a better handle on what businesses can do to position themselves to take advantage of this potentially transformative foundational technology, we sat down with Alexander Blum, who is a blockchain specialist, Managing Director of the Blockchain Consultancy hxa design and one of the on-demand experts available through Catalant’s online talent marketplace. He provided the following expert analysis of the blockchain trend.
Q | Tell us about your background. What makes you an expert in blockchain?
A | My education and career have revolved around emerging technologies and their relationship to society. In 2010, while consulting on the deployment of software-defined radio base stations for telecommunications businesses, international development organizations and governments, I started researching and investing in cryptocurrencies, like Bitcoin. Over time, my consulting work merged with my interest in the underlying technology of cryptocurrencies. Understanding block-tech afforded me the opportunity to consult on a range of projects for financial institutions, hedge funds, venture capital groups, international development organizations and blockchain startups.
Q | Can you tell us about a specific project you’ve worked on involving blockchain?
A | One project I particularly enjoyed consulting on involved the development of the technical specifications and design of a blockchain approach to venture capital investing. I helped the leadership of a medium-sized firm think through how to structure the technology and system, including using their own new cryptocurrency. I then helped them create a white paper to describe their plan, pitch the approach to anchor investors and raise money for their Initial Coin Offering (ICO). I spoke weekly with the company’s managing partner and exchanged clarifying questions via email and text messages between calls.
The initial deliverables for the project were technical specifications for their blockchain application, white paper creation and an accompanying pitch deck. The initial project lasted about 1.5 months (I’ve continued on as an advisor) with a number of benchmarks along the way to guide progress throughout the engagement. We measured success using a third-party audit of the white paper’s quality and feasibility, as well as total funds raised for their ICO.
Q | What was the impact/ROI of your work?
A | I developed a system for offering a historically illiquid investment vehicle as a highly liquid one with lower transaction fees than traditional competitors. Their white paper and deck received the highest rating from a third-party auditor and the organization successfully raised over $10MM USD from investors.
Q | What was the solution you provided to the client?
A | I proposed that creating a cryptocurrency that held the value of the secured underlying investment, which was the firm’s focus, the firm could list on cryptocurrency exchanges and offer investors both a stable investment and immediate liquidity. Additionally, by logging transactions and ownership of the asset class via the blockchain, much of the work could be automated, which reduced overhead costs and, ultimately, fees to investors using their technology.
Q | Can you compare your approach to that of say, a big consulting firm (e.g., Bain, BCG, Mckinsey)?
A | My approach differs from a big consulting firm in terms of agility, practicality and flexibility. Because I don’t have to carry the high overhead costs of an enormous firm with their high-rise buildings and seemingly endless levels of hierarchy, I can charge less while responding to clients more quickly and personally. Large consulting firms, like those a number of my friends work for, employ an excessive amount of process both because they need to standardize their approach for tens of thousands of employees and because they need to bill more hours to pay all those employees.
In this case, my direct communication with the client allowed us to quickly iterate and develop the project without weeks of delays between meetings and the need for additional meetings to communicate those changes to internal employees. I fit my approach to the individual client and their needs instead of forcing them into a predetermined, corporate process. Additionally, because my organization only takes on a few clients at a time, client satisfaction and referrals are of high value to me, so we’re incentivized to do whatever it takes to make the project a success.
Q | What do you see as the #1 reason companies should pay attention to blockchain moving forward?
A | Blockchain companies have started to emerge in nearly every industry you can imagine. While their impact on specific sectors may vary in significance, their ultimate effects remain to be seen. As a result, I think established businesses would be wise to at least have some sense of what the market is doing, just as they should with any relevant trend. Doing so will enable them to more successfully defend against unexpected competition and go on the offense via partnerships and internal development projects. Lastly, with the increasing prevalence of blockchain talk in the business environment, having at least a basic knowledge of what others are referring to signals that an organization has its pulse on the latest developments in their field.
Is Your Business Up to Speed or Behind the Curve?
As the ecosystem of blockchain users and businesses begins to mature, we will see block-tech become the core around which startups and existing companies organize themselves. Just as the rise of e-commerce sites reorganized many industries and disrupted businesses that refused to integrate their functions, a new wave of organizations will do the same using blockchain technology.
Think about what happened to Blockbuster in the wake of the rise of Netflix as a good analogy. Blum predicts that the “Googles” and “Amazons” of blockchain are emerging now (with Ethereum being the clearest early success). “It’s a time of great opportunity and great risk for businesses,” says Blum.
Blockchain, the technology which was originally devised for using the digital currency, Bitcoin, allows people to move digital currency around the world with almost no fee and at lightning speed. The usual processing time for Bitcoin transactions is less than one hour. In short, blockchain technology is a more secure, cost-effective and transparent method of exchanging digital information.
The application of block-tech is not limited to currency transactions. According to Blum, almost any place a business interfaces with digital information could be done more efficiently and securely with a blockchain approach. “I think businesses should be thinking about how they can replicate their existing functions with a blockchain approach,” says Blum. “If they don’t someone else surely either has or will.”
Beyond financial services, blockchain has the potential to transform supply chain management, intellectual property, data interoperability, automation and even the on-demand workforce. If you’re curious, Blum recommends checking out icoalert.com to read about the thousands of organizations currently under development.
Although it may not be immediately obvious how your organization can make use of blockchain technology, what is clear is that if you don’t yet have a strategy for evaluating the enormous potential within your industry, you’re at serious risk of being left behind.
Blockchain applications are being built on top of current digital data, communication and computation infrastructure, which lowers the barriers to entry significantly. This likely means new companies will emerge rapidly leaving little time for the “Blockbusters” of the world to adapt.
With the right framework, executives can start building their organizational capacity for blockchain and invest in blockchain infrastructure that makes sense to them. Of course the level of investment that makes sense heavily depends on context. Companies are wise to keep in mind that while the financial services industry, for example, is well down the road to adopting block-tech, manufacturing is not. Still, no matter what the context, the important question is likely when, not whether blockchain will affect your business.
In business, it’s never good to be caught flat-footed. Explore the flexibility, agility and coordination offered by experts like Alexander Blum through Catalant’s on-demand talent platform.