Digital technology is transforming many industries by offering new capabilities like Cloud Computing, Big Data, Analytics, Artificial Intelligence, Mobility, Open Source. Each one of these building blocks have evolved over time to the point where they are easily consumable, deployable and integrated.
An inflection point has been reached, where small startups with very little capital can combine these building blocks to create digital businesses — which can disrupt existing businesses, marketplaces and partner ecosystems.
This is not a discussion — this is the new reality. And many companies and industries are likely to get blindsided in the next 5-years.
Boston Consulting recently wrote:
“The average 5-year mortality risk for 35,000 US-listed companies stands at 33%”
Just think about that for a minute. The probability that a company won’t survive in 5-years time has increased to 1 in 3.
The Banking industry and Bitcoin….
One area that has been ripe for disruption, is the banking industry. Today the process of moving money across businesses, customers, governments works through a number of intermediaries. Whether that is the exchange of money between consumers through primary bank accounts, correspondent banking arrangement using inter-bank messaging like SWIFT, MT103, or via end of day deferred settlement systems like BACS. None of these systems are perfect hence why government central banks complete the puzzle to ensure bank liquidity and payment settlement finality.
Bitcoin came about as a means to create a new currency which didn’t involve any monetary institutions and avoid the unnecessary interchange fees. So the Bitcoin architecture can disrupt many of these intermediaries and act as a layer similar to the central banks — which addresses the big headache of not holding any liabilities.
The jury seems to be out on exactly how bitcoin will play its part in the financial industry, and there there are still parts of the bitcoin architecture that needs to improve like trust, encryption, power consumption — nevertheless we’ve seen enough about the adoption speed of Bitcoin to recognize it as the cryptocurrency that succeeded.
Lets talk about Blockchain..
Because, the real success of Bitcoin is an underlying technology called Blockchain. The Blockchain is a time-stamped, distributed, immutable, non-reputable data store which contains a complete log of all transactions. Such a datastore works perfectly as an electronic ledger, a store for anything from medical records to micropayments for physical devices.
By virtue of this peer based architecture you avoid the multi-step commits with intermediaries to complete a transaction.
This has a far reaching benefit than just to the banking and financial industry — and can work in any ecosystem which has intermediaries and therefore has applicability in many industries. When you remove the intermediaries (middleman) — then suppliers and customers can transact directly. Anywhere you have customers, distributors, suppliers, business partners and even governments all playing a part in transacting — each industry and supply chain is ripe for disruption with blockchain technologies.
Take for example the company slock.it — they have build a digital business around the idea of creating smart contracts (Ethereum) for IOT devices — any physical device can effectively have its own identity, the ability to receive payments and the ability to enter into complex agreements — all without intermediaries.
Another example, a startup transactive grid — have created an energy marketplace for consumers to sell their excess energy to other consumers based on their own reasons (for maximizing profit, benefiting certain neighborhoods, etc). The democratizing of energy distribution without the need for the infrastructure for contracts, payments and billing.
Fast forward 5-years from now — add every smart fridge, smart car, smart digital media asset, smart -‘Things’ — all autonomically and economically independent. That is the power of the Blockchain Digital infrastructure.