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Why more people aren’t using blockchain, according to IBM


If blockchain is so cool then why aren't more people using it?

  • A shift from individual solutions towards broader "blockchain-ification" is allowing for better economy of scale.
  • The concept of collaboration is integral to blockchain as both an ethos and a practical tool.
  • Advancing blockchain governance models and changing attitudes are both needed to unlocking the collaborative potential of the technology.

A decade after bitcoin stepped into the world, blockchain is starting to see uptake in a range of applications. But for the most part these are still more in the nature of (very promising) tests than wholesale migration.

If blockchain is so great, why aren't more people using it?

What's the big hold up?

Cost for one, says Mark Parzygnat, IBM Blockchain program director.

"Complexity and cost... can box ideas out," he explains. "While I'm excited to see more industries, companies, non-profits and startups harness the power of blockchain, we still need to make the platform more accessible."

Signs are encouraging though, he notes. One of the major developments arriving in now is a renewed focus on "blockchain-ification" rather than niche solutions. One of the factors driving this shift is that more businesses are starting to envision blockchain as a system rather than a case-by-case tool to point at specific problems.

When used from this direction, one can start thinking about blockchain at scale and how to solve a wide range of problems with one big system. The result is much more bang for buck.

"The most encouraging aspect of adoption is that everything's getting blockchain-ified. We aren't talking anymore about how blockchain can address the challenge of food safety or cross-border payments," Parzygnat says. "We are now asking 'how can we do this at scale?' That's an incredible step forward for blockchain as more organisations and industries see the technology as a valuable and trusted tool. And consumers are getting into it, too. From tracking diamond verification for Hong Kong wedding jewelry to people selling their homes using blockchain, the idea of using digital ledger technology to simplify and safely track every element of a purchasing process is crossing into mainstream consumer uses."

This might be a significant shift from the earlier days of probing individual blockchain applications. Essentially, the question of whether blockchain can work for enough specific use cases has been adequately settled, and now it's time to start rolling out systems that can deliver these applications.

This has benefits beyond the immediate economy of scale advantages, because it goes right to the centre of what makes blockchain different – or one of those centres at least.

There's no i in blockchayn

The cryptocurrency boom is often compared to the dot com bubble. It's not a bad comparison. But one of the main differences that's most often highlighted by those who have lived and worked through both is that blockchain is collaborative by nature.

Teamwork is a powerful force of nature, but technological limitations and business realities have often precluded it, even where it would be extremely useful. And on a broader scale, the usual paradigm of business as a purely competitive activity is quite wasteful for both businesses and not really in the best interests of individuals.

Blockchain is a team sport.

"We believe that blockchain is a team sport. For a blockchain-based solution to work successfully, it requires multiple entities to come together in a symbiotic relationship and agree on common principles, operating model and governance," Parzygnat says. "The very nature of blockchain-based solutions require the vision and leadership of a governing body to convene the ecosystem in a common blockchain-based network. Then it requires each enterprise member to acknowledge their core competencies and compete in the market by defending or enhancing them."

What this looks like

Australia's energy markets provide a decent example of the purely competitive old way versus collaborative blockchain hotness.

The problem

The situation is basically that energy prices are rising.

As energy prices rise higher and faster, more homes and businesses are installing solar panels and reducing their consumption while others are unable to keep up and are going out of business.

This means the energy companies are losing revenue and losing customers, which means they raise prices to compensate. This means prices rise even higher and faster, which means more people go solar and go under, which means energy companies lose more customers, which means they raise prices to compensate... and so on. It's a quintessential death spiral.

Like most things that can be described as a "death spiral," it's not good for anyone. It has also seen a lot of pushback against renewables from the Australian government and the established energy industry which similarly isn't good for anyone.

The classic solutions

The solutions that come within the classic bounds of competitive business realities suffer from some problems. Some people are starting entirely new energy companies focused on giving customers a fair shake, but these can only do so much and don't necessarily escape the cycle. There's also talk of nationalising the energy grid but this might similarly be less than ideal, and could suffer from ongoing policy backflips.

Energy companies themselves could start investing in renewables, and they are, but the economics of this might not be ideal given the rapid pace of technological development and other factors. So a more rational option might be to hang on to the old ways as long as possible, even if it's not in the best interests of customers or the planet. The most optimal solutions might require a level of collaboration and joint investment from competing energy companies that just isn't on the cards.

And even some of the more tailored solutions suffer from practical shortcomings. For example, the feed-in tariff policy that lets consumers sell energy back to the grid was envisioned as a happy compromise to help both consumers and utilities by encouraging people to go renewable while also keeping them on the grid. But counter-intuitively, it can actually be a lose-lose sometimes. During times of low-demand and high-supply from feed-in tariff households you can end up with a glut of essentially worthless energy that still costs money to move.

And so the world suffers for no real reason other than because that's the way things are done.

Blockchain collaboration

Mutually-beneficial collaborative models present a potential solution and blockchain presents a suitable medium for these models.

For example, Power Ledger is trying to get right to the heart of the problem by creating a blockchain system for collaboration between stakeholders at all levels, including consumers and energy companies, to let everyone benefit without compromising their competitiveness.

It does this by using the blockchain to bridge the gap between the consumers going home solar and the energy companies, and creating a neutral and more efficient marketplace on the blockchain.

The use of blockchain architecture creates a neutral and transparent playing field for all participants, accentuated by some other benefits that weren't achievable by top-down measures such as feed-in tariffs.

The end result is collaboration for a win-win, bringing the on- and off-grid participants into the same marketplace, letting energy companies reach more customers they would otherwise have lost, balancing prices at a more realistic level to prevent the shocks that drive people out of the market and delivering additional efficiencies such as a system that lets consumers sell their home-made energy to their geographically nearest neighbours at market prices rather than wastefully pump it back in when it's not really needed.

In a sense, the reason it's so potentially efficient relative to existing systems is because it's all about teamwork between consumers and energy companies, for the potential enrichment of all. This kind of thing is the power of blockchain collaboration.

Where to?

The reason blockchain is so good at building these collaborative systems, Parzygnat explains, is because its inherent transparency and immutability essentially allows the creation of trust from nothing.

Compared to simple shared databases, he says, "the most notable difference is trust".

juicy crypto words"Blockchain is a disintermediating technology, where each transaction is cryptographically signed, and always appended to an immutable ledger, which is visible to all participants, and distributed across boundaries of trust. All parties involved in a transaction agree that a) the transaction occurred, and b) that it occurred correctly – or the transaction is not committed to the ledger. Once in the ledger, it is set in stone."

"In other words, all parties agree – so there’s no disputing it later. The upshot? Parties that do not necessarily trust one another can still do business without a team of lawyers, because they don’t have to trust one another. They just have to trust the technology! The level of transparency built into Blockchain enables this."

But once again, if blockchain and its collaborative magic is so good then why aren't more people using it? In this respect, it might be because it's just a very challenging paradigm for businesses who are more familiar with turf wars than collaboration.

The problem might be that businesses are still looking at how blockchain can help them get one up on the competition, rather than how blockchain can benefit both them and the competition. There's a definite competitive edge in blockchain, but by exploring it solely as a competitive tool one also misses some of its most powerful possibilities.

After all, do you think an energy company would have envisioned and created something like Power Ledger? And even if they did, do you think the other energy companies would have wanted to participate in a marketplace owned by a competitor? Blockchain can allow for the efficiencies of teamwork where it used to be impossible.

There have been some teething issues around this area though, and it might be one of the tougher obstacles for blockchain. This is where things are still very much early days, Parzygnat says, but fortunately things are still progressing well, largely thanks to the companies like IBM and Power Ledger who are going out of their way to get stakeholders on the same page.

It's not quite as simple as getting everyone in the same room though, and developing acceptable governance models is an ongoing technical chore, especially for public blockchains.

"Whether you're deciding between a public or permissioned network, who holds the 'final say' in a blockchain consortium, or even broader global regulatory oversight, the technology is still in early stages. We're making headway on that with a number of consortia who utilise IBM Blockchain, and those founders who pave the way will leave a good handbook for us all," Parzygnat says.

"I believe blockchain, and the new business models that are being shaped by the technology, could democratise access to data and improve trust and accountability, across our digital economy. This will have major benefits for business and society."

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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