Is blockchain just a buzzword, or can we expect real applications? If it is for real, where’s the opportunity? Xona’s thoughts on these questions are in the video below. Here, I give my own take on these questions.
Platforms Are Key
Blockchains is a buzzword primarily because of the hype associated with Bitcoin and other crypto currencies. Unlike prior forms of digital currencies of the 1980’s and 1990’s that failed, Bitcoin succeeded in developing an ecosystem around it. Bitcoin is much more secure, efficient, and accessible to the general public than prior forms of digital money.
Bitcoin Price vs. Interest Transparent
But many more people know about bitcoin than blockchains, the underlying technology. While bitcoin as an application has validated the blockchain technology, it is very hard to see what other applications can take hold in the market. Guessing which application will succeed remains a speculative process even as there are frameworks to help assess the viability of the application [this is subject for another post]. We can surmise what applications may have better chances than others, but investing in applications is risky.
Instead, we see the next few years as formative to develop platforms and tools on which applications will ride. As we are still at the early stages of blockchain development, platforms and tools will play an important role in determining the success of applications as well. In other words, there are many elements that need to come together to set the stage for applications to succeed.
What the Internet Teaches Us
To set a perspective with the Internet world, Amazon was founded in 1994, Google in 1998, and Facebook in 2004. These are some of the most dominant companies in the Internet ecosystem today with market cap over $1.8T. Many search engine companies came onto the scene before Google: Excite (94), Lycos (94), WebCrawler (94), Alta Vista (95), Hotbot (96), Ask Jeeves (96), and Yahoo (95) which at one point had over $100B market capitalization before being acquired by Verizon for $4.5B. This shows how difficult it is to pick winners, and how first mover advantage does not always translate to winning a market.
Blockchains is definitely not a buzzword. We will see applications of blockchains, but it will take time for the ecosystem to find the right formula. In the short term, the value will be in platforms. Applications that allow new business models and monetization opportunities while presenting a low complexity and limited disruption to existing structures stand to benefit most.