How to make blockchain wrong
Last year when the word “blockchain” made a noise in the world I wrote a couple of fictional satirical and serious articles about a big number of problems that do not allow to apply the technology not only from the lay point of view but from a technical perspective as well.
However, I still have a feeling that for a majority of blockchain evangelists more likely I was one more madman that did not believe in the Internet at the end of 80-s. I confess I was wrong, someday something is going to change. There is definitely something about the technology (but that is not certain).
Anyway, during the Justyna Piotrowska marketing lecture review within 500 Startups and Sberbank acceleration, the idea flashed upon me.
I leave legal nature questions untouched in the article on purpose, because it is a whole independent chapter of obstacles and impossibilities, but let’s just consider the topic from the lay point of view.
According to the “Breakthrough Advertising” by Eugene Swartz, there are 5 different levels of customers awareness about the product on each of which marketing should be built by different scenarios.
The blockchain is a quite new and young technology that hasn’t found its place in customer’s mind. However, for an unknown reason, the marketing hinges on the education of its operating principles. The approach is justified for the 3rd and 4th maturity levels but never for the first so-called “Hello, market” level when it is necessary to introduce a product to your audience by offering them a killer USP.
What did not work and why
In favour of blockchain evangelists (to who I include myself), it is worth to mention, that anyway, they (we) try to prove in one line the value that a community will get after wide-scale technology adjustment.
There are examples of such messages but none of them deserved mass acknowledgement and applicability. The reasons why are:
- Services decentralization as a fight with a centralized monopoly. Historically the population majority always wanted centralization instead. It was on the level of feudal communities that was united under one centre in the end, as well as on the service level, when for instance own generating and computing power was transferred to cloud/central heating/electricity, etc., because it is convenient, there is no need to take responsibility as people are lazy by nature. Generally, decentralization (separation from the state, revolutions, etc.) was more likely to be driven by rebel leaders and adventurers that wanted more than others but, alas, were late for dividing wealth/power/influence. I as a consumer would be probably scared by the word “decentralization”. It doesn’t bring a Wow-effect. It carries more minuses than pluses.
- You do not need to rely on trust. From one side, it is cool when you can lean on Mathematics (although, I wrote about it before, in fact, it doesn’t work), but if to probe deeper, the following can be seen.
People are used to building relationships on interactions. With other people. The new generation of so-called millennials (followed by Z), is probably different, but the decision makers are still the ones who are accustomed to negotiating. Without math. As people.
If to probe deeper than in any decentralized system (that I saw/analysed), managed by mathematics, there is always a centralized element that has to be trusted. More often it is a service provider himself, that as Muller kinda says: “You cannot trust anyone but you can trust me”. The same is true even for Ethereum, that as if doesn’t belong to anyone, but there is always a “community” behind, that makes decisions, and the rest agrees with it (You remember the DAO, don’t you?).
The distrust issue is more often invented. Projectors offer projects that for instance solve the problem of the effective energy distribution or stand-alone generation in general, and put blockchain on top. The consumer doesn’t have electricity or it is expensive, that is the first problem to solve. I also took a lot of polls in “the field”, asking if people trust banks/state. The most common answer was “no”. Then I asked to give an example when bank/state deceived them last time. It turned out that it almost never happened. In cases when it happened no blockchain economy would help.
- Only you own your money, banks are bad. Firstly, banks are convenient. The responsibility can be easily passed to a bank. In their majority, people do not want to be responsible and we offer them to take their destiny, finance and wallet safety in their own hands, oh dear lord!
- Fast and cheap p2p payment instead of slow and expensive ones. Layman (as I am) immediately asks, why it is better than a transfer from card to a card where everything works in split seconds and without commissions. As a counter-argument, you get that someone needs to send money to a friend in Korea/ to the Moon and this someone can’t do that. While speaking you understand that “a friend” is not a friend but a contractor/customer. And that is a business relationship. And the point is not in the speed and safety but in the way to avoid taxation. For everything else there is ….
- With our tokens, you can “use what you need”. Tokens? Blockchain? Keys? One more app on the phone and a wallet? WATT?
- With blockchain your data is secured, it cannot be deleted or changed post factum. This is an interesting case for example in medicine or when registering your real estate ownership/ intellectual property rights. However if dive deeper it is clear that it is not possible to put all the data in the blockchain, only hash-blocks are stored (because of the operation principle of blockchain as a database from the drive space usage perspective). What does it mean? More likely that the fact of data “replacement” is found very fast but it is unclear what exactly was changed as the external source is a usual file system or a relational database. Moreover, if only this feature is needed, there are faster and cheaper centralized solutions, for example, Amazon QLDB.
What is to be done?
I communicate a lot with a blockchain community not only in Russia but internationally. The debate majority result is always a clear application about which people are afraid to speak aloud. The one that is, in fact, could significantly expand technology limitations and come into mass use. More specifically:
using our application you can avoid taxation and you will get nothing for it
using our application you can buy and sell on the black market whatever and whenever you want and you will get nothing for it, a wife/ a prosecutor will know nothing about it.
In my opinion, it is clear, simple, honest and more importantly valuable. All the rest features are secondary.
The most important fact is that the word “blockchain” is never used there. What is a difference for an end customer what is inside your product if it doesn’t solve the problem? Here you can read about it. I will just quote:
“A [product type] to help [target customer] with [#1 problem] by [#1 benefit] using our [secret sauce/differentiator].” No expert jargon, no buzzwords — explain it like you would to a 5 year old.”
That week I was able to discuss this topic thoroughly with Rob Neivert, a venture partner and a head of the 500 Startups blockchain track. He recently published a great article on the primary scoring of your blockchain project from the VC side as if there is nothing new it can be used as a good guideline or a checklist next time when you decide to ask investors for money. He also agrees that blockchain is only a database with a specific feature set that shouldn’t be served as a main dish.
For example, Yorso has a blockchain document exchange for international shipments for more than 1.5 years, although we have nowhere and never offered it as a key USP and the word can be found in a rare presentation on the 10th slide. A cake has layers and hard sauce but the blockchain is more likely to be a cherry on top but repeating myself without mentioning the word.
Blockchain is still a solution that is looking for a problem.
P.S. The fish in the picture is only for the topic and not because I am actively involved in the B2B international trading project for fish and seafood market.