“Blockchain Starts To Connect: More Businesses Are Looking To Adopt This Early-Stage Technology; How Investors Can Sort The Hope From The Hype;” How Important Is Blockchain?; Blockchain Coming To A Gray-War Zone Near You
Digital currency and Bitcoin may get sucking out most of the oxygen in the room; but, it is the blockchain technology that is going to fundamentally change the economic, and perhaps military landscape when all is said and done. Avi Salzman has a feature article in this weekend’s/August 20, 2018 edition of Barron’s, on blockchain technology; and, “how investors can sort the hope…from the hype.” I refer you to Mr. Salzman’s article in this weekend’s Barron’s for the full article. I will attempt to provide some of the key details, and takeaways.
“The blockchain revolution is here,” Mr. Salzman begins. “The technology long associated with Bitcoin, is now being used to make businesses as varied as trade, finance, video-gaming, travel insurance, and diamond mining ,” as well as military weapons, and intelligence collection, “more efficient and more secure.”
Having written that, Mr. Salzman adds, “the blockchain revolution is also far, far down the road, if it ever comes.”
And, the technology is truly in its infancy. While, “partnerships and initiatives featuring blockchain seemed to be trumpeted every day,” Mr. Salzman wrote, “projects [involving the technology] that actually solve real-world problems,” are hard to find. The global research and advisory firm, Gartner, surveyed 3,160 chief information officers this year, and found that only one percent had put blockchain to work Mr. Salzman noted. Left unsaid was how many of them had plans in the works to use the technology in the short, to mid-term.
Where the technology has been employed, such as when Australian mining conglomerate BHP Billiton (Ticker: BHP) tested its potential to enhance its supply-chain tracking — the company found that blockchain was still too immature to actually improve efficiency and their bottom line, as noted in a statement by company executives earlier this month.
As the technology reaches what Gartner calls the “peak of inflated expectations,” executives and investors need to learn to access the hype versus the real potential,” Mr. Salzman wrote. Or, as we used to say — separate the wheat — from the chaff.
“Blockchain will generate $5 billion worth of business value in 2018,” Gartner estimates, and grow slowly, but incrementally over the next five to ten years. But, by 2030, some twelve years from now, Gartner forecasts blockchain technology will generate $3.1 trillion — “more than Britain’s current, entire annual economic output,” Mr. Salzman wrote. Of course, this is but a guess/forecast and, technology can — and does sometimes unexpectedly move much more swiftly than we expect. So I personally, would take the twelve-year timeline for blockchain to hit its stride — with a huge grain of salt. We are pretty bad at predicting how long it might take for a technology to take-hold or mature — and, I do not know of anyone who really is…over an extended period of time like twelve years. But, I digress.
“For investors,” Mr. Salzman wrote, “there are few ways to invest directly in blockchain. Some exchange-traded-funds (ETFs) have been introduced,” he noted, including: Amplify Transformational Data Sharing (BLOK); Reality Shares NASDAQ NextGen Economy (BLCN); and Innovation Shares NextGen Protocol (KOIN); but, they offer minimal real revenue exposure to the technology, which is currently generating little revenue,” he added.
“Big companies — particularly IBM and Microsoft (MSFT) have invested heavily in developing blockchain,” Mr. Salzman wrote, though neither company would disclose to Barron’s what their respective monetary investments in the technology actually is. WinterGreen Research, a Massachusetts-based company that tracks technology trends, estimates that IBM and Microsoft together, [currently] control 51 percent of the blockchain market, which overall, generated $706M in revenue in 2017.
“I believe we are furthest along,” said Marie Wieck, General Manager for Blockchain at IBM. Big Blue has worked with 500 individual corporate clients with respect to bockchain, according to Barron’s.
International Data Corporation estimates that companies will spend $1.5B on blockchain in 2018, a two-fold increase from 2017. But, Mr. Salzman added, “even corporations that believe in the technology, are loath to spend too much on it — because there is no guarantee of a return on that investment.”
“Blockchain challenges what you do, rather than amplifying what you do,” said Rajesh Kandaswamy of Gartner. “Technologies like mobile, amplify what you do. Mobile was additive for banks. Blockchain as an underlying technology makes you rethink your business processes, or even your business model. That will take years for people to pass.”
Count me in the camp that thinks Gartner is wrong; and, that this technology and its practical applications is going to manifest itself in unexpected, but beneficial ways — and, long before the twelve year point.
Federated Investors Portfolio Manager, Steve Chiavarone, said in May to CNBC, that “blockchain is going to be one of five key technologies — along with automation, robotics, artificial intelligence (AI), and the Internet-of-Things (IoT), that drive this next industrial revolution. He see’s FANG stocks (FaceBook, Amazon, Netflix, & Google [Alphabet]), as ultimately reaping the benefits from blockchain’s processing power — as well as areas from healthcare, to financials.
How Important Is Blockchain?
As with any, new, emerging, disruptive technologies — there is a myriad of opinions on the impact blockchain technology is going to have — economically, militarily, etc. Silicon Valley visionary Balaji S. Srinivasan has called blockchain the most important invention since the Internet. Mr. Srinivasan, now 37 yrs. old, received a BS., MS., and Ph.D. in Electrical Engineerring, and an MS. in Chemical Engineering from Stanford University, where he also occasionally teaches a class, in person, and online. He is the CEO of 21.co, and prior to undertaking this endeavor, he was a Board Partner at Andreessen Horowitz, a private, venture capital firm based in Menlo Park, California. Last fall, Dr. Srinivasan sat down for a lengthy interview with the Wall Street Journal’s Tunku Varadarajan about the digital currency — bitcoin; and, the blockchain technology platform it runs on. Mr. Varadarajan’s weekend (Sept. 23/24, 2017) Op-Ed in the Wall Street Journal provides a summary of that discussion.
During that interview, Dr. Srinivasan said that”bitcoin is a way to have programmable security — while blockchain is the data structure that records the transfer of scare objects.“The blockchain is the next phase.. With the blockchain, everything that was scarce now becomes programmable. That means cash, commodities, currencies, stocks, bonds — everything in finance is going to be transformed; and, aspects of finance baked into everything else. If you deal with information, you need the Internet. If you deal with money, you need to deal with blockchains.”
Something for the doubters to think about.
‘Disruptive Blockchain Technology Is Coming To A Gray-Zone War Near You’
Blockchain technology isn’t just going to be a disruptive economic force, it may also impact the future of warfare, in ways we can’t yet understand and appreciate.Jahara Matisek wrote in theMarch 14, 2018 edition of The National Interest that “emerging blockchain technology will offer enumerable defensive and offensive tools for military and intelligence operations in the 21st century. Whoever masters, and weaponizes blockchain first, will determine their penultimate power and influence over others.”
I refer you to Mr. Matisek’s article for his full discussion about blockchain’s potential impact on the battlefield of the future; but, information operations, ‘fake news,’ and carefully placed propaganda/data manipulation, and/or deliberate denial and deception, along with offensive and defensive cyber operations are domains where blockchain could play a disruptive and pivotal role. In the field of intelligence, government entities will be able to covertly pay their operatives in foreign countries; and, allow terrorist entities, cyber mafia’s, cyber militia’s, etc. to also do the same.
And, whoever gets their the fastest, with the best in the blockchain domain — could establish and perhaps enforce — a ‘Monroe Doctrine In Cyberspace,’ Mr. Matisek contends.
Obviously, if Mr. Matisek, and others are right about blockchain’s potential, it is an area ripe with strategic surprise; and, some potential nasty side-benefits for the darker angels of our nature. Nothing good…..comes easy. RCP, www.fortunascorner.com