• by William Mougayar
    Venture advisor, 4x entrepreneur, marketer & strategist. I live in Toronto, curate a lot, blog a bit, and help startups.

How to Simply Explain the Business Implications of The Blockchain to the Masses

layers imageI wrote this post to explain the blockchain in non-technical terms, and published it on Huffington Post yesterday with the title, Why the Blockchain Still Lacks Mass Understanding. I’ve been obsessed with explaining the blockchain in a variety of ways to the broader public and general business audience who need to understand it. As I said before, and written many times in blog posts and in my book, the blockchain is a multi-faceted technology, with multiple personalities, many usages and a wide array of implications. Therefore, we need to keep peeling its various layers, and explaining it in more ways than one, especially going beyond the technical definitions that center on protocol mechanics.

Why the Blockchain Still Lacks Mass Understanding

The blockchain has a severe lack of general awareness, and that is problematic to its evolution.

99% of people still don’t understand the blockchain, or Bitcoin, or cryptocurrencies. Pundits, technical visionaries and experts (including me) have attempted to explain it in a variety of ways, and often, made the subject more obscure, while raising additional questions instead of yielding increased clarity.

Much of the blockchain discussions tend to be of a technical nature, therefore not that helpful to the masses. In most debates, the tail was wagging the dog, giving the appearance of a solution awaiting the problem, while feeding many skeptics.

I believe it is time for a new tact. Rather than contorting the market with painful explanations, we need to think of blockchain technology in terms of its relation to the Internet and the Web, two familiar subjects. In essence, we need to understand the blockchain in simpler terms.

Before the Web’s arrival, the Internet was basking in the same technical obscurity as the blockchain today, i.e. it was popular within the technical segment at universities, scientific labs and research centers. Then, in 1993, when the Web appeared as we know it today, an extra layer of simplicity was brought forward and enveloped the Internet. Suddenly, the Web made it easier to cross-link information from a sprawling mesh of computers, without the need for being so technical. Pre-Web, if you wanted to get on the Internet, you were required to possess some technical knowledge about connecting a computer to a network. The Web removed that “geeky” requirement, and replaced it by letting any user type an address that called-up a section of text (the Web page) that displayed readable information on a screen. That was in essence the spark of genius that Tim Berners-Lee, the Web’s original creator bestowed on it.

What ensued in the 23 years that followed were five major capabilities: Email for communications, Publishing by anyone, E-Commerce for consumers, E-Business for corporations, and a vibrant global Social Web fabric. Much of what we see today in Web usage is a derivative of these functions, mobile Web included.

Fast forward to 2008. Entered Bitcoin, a philosophically inclined technology that was concocted by a mysterious creator who faded, as soon as its implementation took its first breath.

Whereas “linking information” was the nugget that the Web initially tackled, the blockchain’s staple is “moving value”.

That is the extent of the fundamental understanding you need to muster about the blockchain. Almost everything else that ebbs and flows from it, is a derivative of that concept, with the added caveat that no third party is required to move value between any peers, just as no third party is needed to publish information on the Web.

What you also want to remember about this new technology are two key features, and think of them as lego pieces: One, the blockchain has a sense of ownership: each “value unit” is aware of who owns it, in a self-managed way, i.e. without a required third-party to validate said ownership. Second, the blockchain knows the balance inside an account, and it can produce an irrefutable timestamp of transactions, rendering records tamper-proof.

Let’s not stop there. Once you add software programmability and various permutation varieties in assembling these lego features and mixing them with our existing world, the result is an unlimited innovation potential for creating new business and economic models.

For example, a blockchain can act as a central bank, issue and keep track of its own currency with an extreme amount of accuracy. In contrast, central banks can’t track money, today. A blockchain can also maintain a shared accounting ledger, reward participants for performing valuable work, and transfer money, ownerships or rights between users, when certain conditions are met. Finally, a blockchain can codify any mix of business logic, from operations, to governance, to law; while autonomously overseeing the enforcement of agreements. A blockchain has the memory of an elephant and the resolve of a Mechanical Turk to complete a repetitive task that is assigned to it.

Imagine if we could replace almost everything that had a trust component, by a new way, where trust is embedded inside a given transaction, therefore not needing a third party for validation. Today, we take these trust functions for granted, because there is no other way to guarantee trust except by going through holders and verifiers, such as banks, notaries, lawyers, governments and similar types of choke-point institutions.

Canadian poet John Robert Colombo said in his 1970 collection Neo Poems, “History never repeats itself but it rhymes”. The French have a related saying: “Plus ça change, plus c’est la même chose.”

Fast forward again, to a few years from now, and we will see the familiarity that rhymes with the Internet.

The biggest outcome of blockchain technology propagation will be yet another well-known disruption that was brought forward by the Web: its effect on changing the roles of intermediaries. The stamped envelope was replaced by the email, the newspaper was outstripped by instant online news, online shopping emerged as an alternative to traditional retail, and properties such as Facebook, LinkedIn or Twitter became the new social gathering estates.

For the masses, the extent of understanding the blockchain centers on realizing that it is another form of intermediaries disruption in-the-making. This is part of the evolution of the Web, and there can only be three possible outcomes: some intermediaries will be displaced, others will adapt, and new ones will emerge. If you ask yourself in which category you fit, then, you could act accordingly.

Blockchain is essentially a technology promise, but like any promise, it needs time to materialize, and it requires us to understand it, in simple, yet compelling terms.

Today, no one forces you to use the Web, but can you afford not to? The blockchain will face a similar fate on its journey to becoming the best new tool of this decade.

  • Mougayar describes the blockchain as “philosophically inclined technology”. It’s one of his rare instances of understatement. Like most blockchain visionaries, Mougayar massively exaggerates what this thing does, overlooking what it was designed for, and stretching it to irrelevance. If “99% of people still don’t understand the blockchain” it’s because Mougayar and his kind are part of the problem, not part of the solution.

    Let’s review. This technology is more than philosophically “inclined”. Blockchain was invented by someone who flatly rejected fiat currency, government regulation and financial institutions. Satoshi Nakamoto wanted an electronic cash devoid of central oversight or ‘digital reserve banks’. And he solved what was thought to be an unsolvable problem, with an elaborate and brilliant algorithm that has a network of thousands of computers vote on the order in which transaction appears in a pool. The problem is Double Spend; the solution is have a crowd watch every spend to see that no Bitcoin is spent twice.

    But that’s all blockchain does. It creates consensus about the order of entries in the ledger. It does not and cannot reach consensus about anything else, not without additional off-chain processes like user registration, permissions management, access control and encryption. Yet these all require the sort of central administration that Nakamoto railed against. Nakamoto designed an amazing solution to the Double Spend problem, but nothing else. Nakamoto him/herself said that if you still need third parties in your ledger, then the blockchain loses its benefits.

    THAT is what most people misunderstand about blockchain. Appreciate what blockchain was actually for and you will see that most applications beyond its original anarchic scope for this philosophically single-minded technology simply don’t add up.

    • I’m not sure what value you’re adding with this comment. Plus, copy/pasting what you wrote elsewhere is not a genuine form of commenting.
      Tell “double spend” to any business person, let alone to the average user, and they won’t have a clue what you’re talking about.
      This is not the first time you’re making disparaging comments about something I have written, and it confirms in my mind your limited understanding of the blockchain, or your limited (perhaps intentional myopic) exposure to everything I have been writing for over three years, including my book.
      Thanks for stopping by and saying nothing except attacking me.

      • Do you have any response to the substantive points in my comment, and in my other blockchain critiques? Do you actually understand how blockchain works? What do you say to Nakamoto’s own point (in the second sentence of the abstract of the Bitcoin paper) that the algorithm loses value when you combine it with third party processes?

        • Steve, you’re being disrespectful with your tone, and clearly not making an effort to become familiar with my work, judging by your comments and above questions.
          I devoted a good part of the first chapter on my book dissecting Nakamoto’s paper.
          I’m seriously considering banning you from here, as your antogonism stands out like a soar thumb.

          • Banning me? From what?

          • Oh, I see. I didn’t realise this was your blog site.

          • bruno cecchini

            In 1952 she had an operational compiler. “Nobody believed that,” she said. “I had a running compiler and nobody would touch it. They told me computers could only do arithmetic.#Grace Hopper

          • So you’re saying just because computers turned out to be much bigger than most people imagined, that there is no limit to what blockchain can do?

          • bruno cecchini

            Don’t stuck yourself by constraint. do what you have to do, but don’t troll people. Catch a unicorn , ride a rainbow and make america great again.

  • Kevin Bae

    I don’t understand how identity is handled across different uses of the blockchain. With Bitcoin you have a wallet and that wallet identifies you on the ledger with every transaction you make. But, I don’t understand how individual identities will be handled, tracked, maintained, and secured across other uses.

    If the blockchain is used say in voting in any election where is my identity kept? How does that get authenticated? What happens if I lose that identity? How many different identities will I need to maintain?

    • Those are good questions. The answer is that when identity is necessary (as it is in most non Bitcoin use cases) the blockchain needs to be augmented with off-chain processes. Clearly, if you need to register people with keys for their blockchain wallets, that registration has to happen somewhere other than the blockchain. But here’s the rub: the blockchain algorithm utilises thousands of computers and huge resources to achieve consensus about a ledger without any central administration. That was a design condition of Bitcoin, because it was a rejection of fiat currency. But Nakamoto him/herself said that if third parties are still needed, then the blockchain loses benefits. That is, if you have an administrator, then what exactly is the blockchain network reaching consensus about? It will be cheaper and simpler to use the administrator to oversee the ledger than to outsource the consensus determination to the crowd.
      Voting is one of the very worst blockchain applications. How would you achieve one-person-one-vote with a pure blockchain solution? Voting is a million miles from what blockchain was designed for.
      Likewise identity. Think about it. Blockchain was expressly designed so people can exchange cryptocurrency without knowing or trusting anything at all about each other. That was a very special breakthrough but we must not get carried away with it. How can that sort of ruthlessly trust-free system help with identity management? Blockchain was designed to do something diametrically opposed to managing identities.
      See also my blog about key management and blockchain’s magic trick: https://www.constellationr.com/blog-news/blockchain-has-no-meaning-and-thats-its-magic-trick

    • Hi Kevin, Thanks for your comment.
      The best way to understand identity is to follow some of the companies that are developing leading solutions around that, eg uPort, Blockstack or Netki. In a nutshell, the blockchain (whether Bitcoin, Ethereum or other) is used to bind your identity in an irrefutable way. But like a passport is without travel, identity is almost useless without an App.
      As to your last question, that was the title of a blog post I recently wrote:
      http://startupmanagement.org/2016/11/10/how-many-blockchain-identities-will-we-have/

  • creative group

    WILLIAM MOUGAYAR:

    Do you concur with the Monday Quarterback view of Bitcoin quick devaluation to the Chinese Yuan?

    PS: We need to participate more. This space is invaluable for contacting the Bitcoin Community with the
    masses.

    THANKS

    • There is no doubt about the correlation between the Chinese Yuan and Bitcoin, at least for now. I am surprised they cited 98% of volumes coming from China. That seems a bit high to me. Nonetheless, I hope the speculative dependency on China diminishes soon.

  • Will Salmon

    Thanks William, as always a great read !

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