I had a fascinating chat last night with the CEO of a fairly large financial services organisation. He is in the process of assessing a few startups who are taking part in an accelerator programme. One of the startups is pushing “Blockchain”, but it wasn’t entirely clear for what end. There were a couple of business ideas. Neither of them sounded particularly applicable. This set of questions has been fermenting in my head overnight. It’s probably not extensive. It may even be wrong. But questions are usually useful.

Question 1: are you being sold “Blockchain”?

Blockchain is effectively a brand name for a type of technology known as a distributed ledger. There isn’t time here to go into the technical detail, but distributed ledger is descriptive; the unique selling point is that it is a technology that allows transactions to be recorded in a database that is distributed across many machines rather than held in one central point. The idea originally seems to have come from folk who were trying to replace the banking system with a technology that didn’t rely on having to trust banks and banks’ databases.

Search and replace all mentions of “blockchain” for “a distributed ledger held in escrow by software”. (See also: replace all use of the term “artificial intelligence” with “statistics” – generally more accurate and less scary).

Question 2: is what is being proposed something that would be advantageous to be held in a distributed ledger?

The answer to this is almost certainly “no”. The answer may be “maybe”. The answer is “yes” when there are many parties involved in a certain form of transaction and they distrust each other so much that they’d rather put their trust into shadowy computer programmers who are producing something that nobody really understands.

In most cases you probably need a database. Databases have been around for eons, and we know how they work. They are very robust, stable, quick and powerful. Google, for instance, uses forms of databases not forms of distributed ledger to do most of what they provide. Google are quite successful.

Question 3: is what is being proposed being done so on the grounds of “security” in any way?

Nobody really knows at scale how distributed ledgers work. Evangelists talk about how super-secure they are. Intel was saying the same about all of its chips until last week.

Distributed ledgers may be secure, but they just aren’t proven enough for things that demand high levels of security. Use a database for the time being.

Question 4: is what is being proposed being done so on the grounds of saving cost?

Distributed ledgers may save you money. But they are an unproven technology, so they may cost you lots more. Speculative use of emerging technology should to my mind focus on driving new revenue or better customer experiences, not saving operational cost. Wait until it’s mature until you start thinking you can reduce costs with distributed ledgers. That’s probably ten years away.

Question 5: is your business essentially fucked?

This is technically known as “doing a Kodak“. In the 1600s you’d have been buying tulip bulbs. There is undoubtedly money to be made in speculative bubbles. There is also much to be lost.

In summary

There is absolutely nothing wrong with experimenting with emerging technology. But they are experiments and you’ll find that your main business outcome will be corporate learning. Gear for that, not a successful new product or service with a technology at the stage distributed ledgers are currently at. Understand what the potential USPs of the technology are, and apply appropriately. Focus on developing new things rather than streamlining old. And keep remembering: ten years ago 3D TV was going to be massive.

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