[Introduction] Director of Deloitte China Smart Future Research Institute Gao Ting believes that the challenge of blockchain commercialization lies in the need to start from the “blockchain in broad sense” and find the specific scenarios suitable for application. For 2018, it is necessary to conceptually create an industry-level platform ecosystem before inventing and formulating the rules therein, he added.
The year 2017 was called the “year of life and death for blockchain”, but blockchain seems to remain an academic term and has failed to meet the expectations for commercialization. Will blockchain have a chance to commercialize in 2018?
Director of Deloitte China Smart Future Research Institute Gao Ting believes that the challenge of blockchain commercialization lies in the need to start from the “blockchain in broad sense” and find the specific scenarios suitable for application. For 2018, it is necessary to conceptually create an industry-level platform ecosystem before inventing and formulating the rules therein, he added.
The year 2017 was called the “year of life and death for blockchain”, but it is clear to us that blockchain seems to have made little progress in terms of cost reduction and new revenue generation. Although the blockchain technology has made certain progress, it remains not adopted extensively. A common viewpoint is that blockchain still has no “killer” application other than bitcoin and that this technology has a risk of becoming a thing of little value or interest unless there will be “real-world deployment”.
In the past two years, blockchain underwent a period of fast growth featuring both progress and considerable bubbles, during which numerous financial institutions and companies have tried blockchain to different degrees; after the trials and errors, people tend to become rational and few talked about “disruption” but more people think about how far it is to reach the mature commercial application.
At the beginning of 2018, let’s talk about where exactly the commercialization challenges facing blockchain are and if there is any chance to make it happen this year?
“Narrow blockchain” and “generalized blockchain”
The first barrier to blockchain commercialization is the limitations of its perception. According to the author’s observations, many people see blockchain as a kind of visualized technology, for example, they call blockchain “distributed ledger technology” and comprises specific technical domains such as “smart contract”, “cryptography” and “zero knowledge proof” and has such technical features as “data consistency”, “reliability” and “security”. From the purely technical perspective, such blockchain actually has no special innovation but merely rearranges the existing proven technologies. I call it “narrow blockchain”. It is easy to understand that it is unlikely to produce new commercial value by only relying upon technically restructured “narrow blockchain”.
Blockchain is not merely a pure technical innovation and it can be manifested as a game field based on Nash equilibrium, with different real-life examples. We can understand blockchain in a broader sense as a “consensus system” and “autonomous community” reached through sufficient game playing and see it first as a theory then as a technology. I call it “generalized blockchain”. Take bitcoin as an example, Satoshi Nakamoto might not be the technically smartest among geeks but he might be the most philosophical; he created an autonomous community that enables “mutual supervision” and “temper-proof” feature through game and motivation and gave sufficient consideration to the possible conflicts, falsified information and malicious acts that might occur in it, thus making bitcoin system have very strong robustness without central control. Although bitcoin is relatively static and simple compared with real-world complicated systems, the “generalized blockchain” idea behind it is highly pioneering.
Why is it difficult to commercialize blockchain?
Well-established business establishments tend to be more pragmatic when it comes to blockchain and prefer to make some attempts in the vertical fields using “narrow blockchain”, but they would soon find out that there is no substantial breakthrough or commercial value; for blockchain technology innovation companies, although they attempt to practice “generalized blockchain”, they tend to be constrained by the existing organizational barriers and governance structure and therefore are unable to find the ideal deployment scenarios, thus more often than not able to only create some utopia-like decentralized blockchain communities or platforms. However, “generalized blockchain” like theses are essentially still within the category of bitcoin and therefore unable to interface with the real world (although many claim they have done so).
In other words, the biggest challenge to blockchain commercialization today is twofold: first, start with the idea of “generalized blockchain” rather than confined by narrow blockchain technology; second, with awareness in place, find the specific scenarios suitable for “generalizaed blockchain”.
Can blockchain be commercialized in 2018?
First of all, direction-wise, blockchain concept can be used to create an industry-level platform ecosystem, not merely address particular commercial problems; in fact, technically, blockchain is limited inmany ways and can not be used alone to develop real-world complicated solutions.
Compared with traditional platforms and communities, the difference of blockchain is that participants will be controlled by the system and automatically comply with the established rules and constraints (“consensus”) once they are in and any “malicious acts” in violation of the consensus will be punished by the system. A good example is the power of “environment changing people” as depicted in the movie “Stanford Prison Experiment”, where the “Stanford Prison” created by psychologists and “maintained” by all experiment participants is actually a scenario of “generalized blockchain”.
With scenarios of blockchain implementation in place, the next step is essentially about how to invent and formulate the rules therein (i.e. consensus agreement). The blockchain scenarios we have observed in daily life are usually “Nash equilibrium” reached through “decentralized” and “non-trusted” game, which usually takes a very long period of time, while a way to accelerate the implementation is to create prototype and active iteration through “centralized” means. For example, it is possible to simulate a real-life implementation scenario by creating a “scenario lab”, which is first trial run by relying upon same manmade simple rules before proceeding to constantly observe, identify issues and change the rules; this process might require the involvement of mathematics, behavioral science, philosophy or even ethics professionals, who summarize the bottom logics from the intricate and complicated user behavior and set the suitable basic rules on this basis before systemizing these rules using computer coding. Such method is essentially about creating a “axiom system” that allows the creation of a huge ecosystem using logical and IT-enabled methods after finding the initial basic assumptions. From this perspective, IT is the last step to realize “generalized blockchain”, while the “consensusalgorithms” behind each implementation scenario are different from each other.
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