How Blockchain will transform the platform economy — Part 1
Since over three years I’m helping startups and corporates to innovate new platform business models using the Platform Innovation Kit. Additionally I received the chance to lead the Blockchain Prototyping lab @ T-Systems MMS and could work with great companies to discover the potential behind the hyped new technology. This gave me the chance to see and learn first handed, how companies look at both economic concepts and how they see how both concepts could work together.
The main question the people currently have are not technology driven, they are business driven:
- What are real use cases of Blockchain beside crypto currencies?
- What are blockchain enabled business models?
- Will Blockchain technology disrupt or boost the platform economy?
In this post series I will try to give an answer for the last question on how the technology will impact current platform approaches & thinking.
Commonalities and Differences between Platforms and Blockchain
When I talk about platforms I mean not the technology of internet portals or technology platforms like cloud — I talk about the platform business model, where you as the owner of the platform orchestrate different stakeholders to exchange value. It’s a business model.
On the other hand, when I talk about Blockchain, I talk about a technology — not a new business model. But it enables new business models.
Blockchain is a Peer-to-Peer infrastructure based on A) distributed databases and B) smart contracts as the business logic. The databases store encrypted and chained transactions.
But the most important aspect of Blockchain is, that this distributed model eliminates the need for a central / intermediate middle man.
You now think: The same is “true” for the platform business models. But is it really? Looking at e.g. AirBnB (as the stereotype of platform business): Most people think that this model is disrupting the hotel industry by removing the middle man, but in fact it just creates a new, more dominant middle man. It is disrupting the existing business hierarchy of hotel chains etc., but in fact AirBnB becomes a new middle man with an even greater power on the market (monopoly). Compared to Blockchain, platforms are a completely different approach, but compared to the existing business, both are disrupting the ownership model.
Beside the disruption of the existing ownership model, there are additional commonalities between them. Because both are fundamentally based on a Peer-to-Peer network, both allow a demand side of scale and are driven by network effects.
New types of intermediary infrastructures
Even when Blockchain will eliminate the middle man, it requires an infrastructure with governance and ownership — in a new way.
Here are 3 types of new intermediary infrastructures.
Type 1: Elimination of intermediares
The radical approach — where you completely eliminate the middle man (could also be a platform) and go from centralised to 100% P2P communication. This requires not only a secure & trusted communication, but also an completely self organize network — like the DAO (decentralize autonomous organizations initiated by Christoph Jentzsch from slock.it).
Type 2: Cross-Organizational Process Automation
When you have this P2P network running (see type 1), you can go for a maximum on automation. It’s not just about communication but also about integration. This requires a network which enables trust and traceability.
Type 3: Innovation
Type 1 and 2 are evolutionary steps, based on existing platform, networks. type 3 is different, because it establishes a trusted network between stakeholders which not had any (digital) contact so far. This new connection of trust then also enables new forms of business models.
How will this transformation happen? How can Blockchain be used to support the 3 types mentioned above?
Bitcoin is extremely successful at solving the problem it was designed for: allowing a global network to securely transact and exchange value without the need of a costly intermediary. — Christian Catallini
Looking at the origin of Blockchain — the cryptocurrency Bitcoin. The main driver to use the Blockchain technology was to eliminate the banking system with a lot of middle man dictating the rules. Today, with Bitcoin and other cryptocurrencies out there, we can witness how a public and anonymous blockchain really works. It is a great example how a technology can synchronize the world on one single legislation (finance). At the same time, the biggest drawback is the missing link to our (mostly local) existing legislation systems and therefore faces a lot of adoption problems for other use cases around the world.
That’s the main reason why companies are looking for a private blockchain, where they can set the rules and align it with the local legislation system. Plus, they can grant access and keep the control over the data → they don’t want to use a public & open blockchain with unclear governance and legal backing.
But how can both come together? Regulated blockchains could be the solution. Rules will be applied by authorize auditors to ensure governance and align it with existing legislation. And at the same time the network itself controls the usage by everybody — based on consensus mechanism. It’s not a compromise or a trade-off, it is the perfect alignment between the existing world of different legislation systems and a large P2P decentralized network.
The regulated blockchain will be the strongest driver for a trusted multi-owner economy.
Impact on the platform economy
As mention at the beginning, in the current platform economy, the power belongs to the owner of the platform. He is responsible over the infrastructure, governance and the business model. He orchestrates the value exchange and drives the development of the platform to lower the friction of using the platform.
Now, let’s combine the platform model with a regulated blockchain concept: Then you will face a shift of power from a single owner to a multi-ownership model. Consumers and Producers becoming owners too. And when the blockchain model includes a proof-of-work & token mechanism, the new owner is not only defining the governance, but also becoming investor of the platform.
(this will be described in Part 2 of this article series — from network effect to token network effects)
Also for Partners in the platform model there will be a shift — from a “feature” towards a true business enabler — from providing additional value adding services towards governance and trust related services
(Partners are basically providing additional services around the main value which is exchanged on the platform — like house cleaning services in the case of AirBnB)
For example, in a blockchain network the partners could be responsible for device certification or smart contract implementation.
Partners are transforming from value adding service provider to a neutral, trusted and governance related 3rd party of the decentralized owners.
Conclusion Part 1
Blockchain currently has only one major application — the cryptocurrencies. But industries and organizations are working on new models based on either a public, a private or a regulated blockchain. Especially the last one will be the base for the most use cases in the future and enables the shift in power from a centralized towards a decentralized ownership model.
Companies which are on the transformation from a product or service company towards a platform company, should be aware of the next evolutionary step too — blockchain enabled ecosystems.
Whereas some established players will be able to use this opportunity to further scale their operations, others will be challenged by new entrants proposing entirely new approaches to value creation and value capture. — Christian Catallini
A) transform a platform with one owner into a multi-owner platform
B) build an umbrella network to connect different platforms & organizations with each other.
In Part II we will further discuss the impact on the platform economy. If you don’t want to miss the release, please subscribe to our medium channel or our newsletter.
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The survival of any organization depends on its ability to outperform competitors and marketplaces in attracting and…www.law.ox.ac.uk
Here is my claim. Within 5 years the biggest cryptocurrency by market cap will not be Ethereum or any other platform…blog.coinfund.io
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