How Blockchain Became a Dirty Word
How could the hot topic at the beginning of the year end up the dirty “B-word”?
By Crystal Stranger, CEO of PeaCounts
This time last year, at the height of the cryptocurrency craze, every company wanted to include blockchain in their business model. Large corporations scrambled to announce blockchain projects, whether or not there was any merit in adding this to their business model. The mantra repeated endlessly was that either you were in the blockchain movement, or you were going to be left behind. I would tell people I founded a blockchain payroll company, they were excited and saw us going big places.
Fast-forward one year and the story is radically different. Advisors and team members have suggested we distance ourselves from the word “blockchain” and any connection to cryptocurrency. So how did things end up like this? How could the hot topic at the beginning of the year end up the dirty “B-word”?
Much of the hatred of blockchain today stems from cryptocurrencies losing 80–95% of their value during the last year amidst U.S. Securities and Exchange investigations and billionaires tearing the markets apart through the Bitcoin Cash hashwar.
But should blockchain projects continue to suffer from the ills of the cryptocurrency market? It seems unfair that a technology should be judged for the market reaction of governments and investors. This would be like in 2002 people saying the internet was dead and there was no more use building websites as nobody would ever benefit from them.
The funny thing is that in technology and fintech circles blockchain is still viewed positively. I just came back from the MKB Fintechlab accelerator selection camp in Budapest and a third of the companies there were involved in blockchain or cryptocurrencies. And yet, before this trip, we had advisors and team members wanting us to stop using the word blockchain on our materials and in our pitches.
The answer lies in the cryptocurrency connections that blockchain is the technology that enabled this movement. Blockchain and cryptocurrency have an interesting codependent relationship that is misunderstood by most. Of course the OG grandaddy application of blockchain technology is the most famous cryptocurrency of all, Bitcoin. But underlying that blockchain is an accounting technology, a digital ledger, that allows for single-entry bookkeeping rather than the standard dual-entry that has been used for centuries.
The eloquence and efficiency of blockchain has yet to be put into use in many applications. Cryptocurrency applications were the first to utilize the power of blockchain, and still the only applications that take advantage of single-entry bookkeeping. But most cryptocurrency trading is done on exchanges where the records are kept using dual-entry bookkeeping and there is no inherent benefit that a cryptocurrency is being exchanged rather than a gold deposit or other asset. Many other cryptocurrencies like Ripple, Stellar, and Hedera Hashgraph, are not actually blockchains at all but other types of digital ledgers with various benefits and drawbacks to their individual technology makeup.
Blockchain in most business applications is less clear on the benefit side. I can’t speak to all applications of blockchain technology and how there may or may not be a legitimate business case, but I can speak for our company. The main benefit of blockchain technology for a payroll application is using the immutability of blockchain to verify that contractual terms are met and not changed after they are created. This is the dream of smart contracts, legally binding blockchain contracts that clearly spell out the terms of the agreement, and pay out proceeds fairly based on each party giving their benefit of the bargain. In theory though this often works better than in use, this is because people are not used to paying deposit monies at the beginning that are forfeit if the bargain is not completed. With perhaps real estate transactions being the notable exception to this, where people are used to paying a down payment or earnest money deposit stating they will complete the terms of the agreement.
Having an accounting and technology background myself, I understand and love blockchain as a technology. While certainly many people are frustrated from having lost money in scams or poorly managed investments, please don’t blame the technology for this. Blockchain is technology, and technology is just a tool. Let us use this tool in the future by building companies that help make the world a better place, rather than speculating for short-term gains. Growth over a long period of time may not be sexy, but it is what gives our lives improvement one generation over another. So stop treating blockchain like a dirty word or the next greatest thing, and focus instead on how to build the next great companies.
About Crystal Stranger
Crystal Stranger, EA, has more than 15 years of tax and finance experience, is a journalist and speaker on blockchain and crypto technologies since 2014, and author of The Crypto Island Tax Guide. Self-taught, she read every investment book in the library to catapult herself from homeless to millionaire investor in two years.
Applying the same intensity and focus to every interest, Crystal founded PeaCounts, using blockchain and AI technology to revolutionize how workers are paid, eliminate black market labor, and help individuals break the glass ceiling.