Our economic, legal, and political institutions’ defining structures include contracts, transactions, and the records of those activities. They establish organizational boundaries and safeguard assets. They establish identities, confirm them, and record events. They control how communities, organizations, governments, and people interact. Management and social activity are guided by them. However, the bureaucrats set up to govern these essential instruments have not kept up with the digital change of the economy. They resemble an F1 race car being stuck in rush-hour traffic. The way we govern and uphold administrative control must alter in the digital age.
Blockchain claims to provide the answer to all these issues. Blockchain, the technology behind bitcoin and other virtual currencies, is an open, distributed ledger that can effectively record transactions between two parties in a way that can be verified and is permanent. It is also possible to configure the ledger itself to initiate transactions automatically.
With blockchain, we may picture a world in which contracts are encoded in computer code and kept in open, public databases that are secure against erasure, modification, and revision. Every agreement, procedure, task, and payment in this world would have a digital record and signature that could be identified, verified, saved, and distributed. Lawyers, brokers, and bankers may no longer be required as intermediaries. There would be little friction as people, groups, machines, and algorithms freely transacted and interacted with one another. This is the blockchain’s enormous potential.
In fact, the assertion that blockchain will transform business and reshape firms and economies has been heard by almost everyone. We are excited about its possibilities, but we are concerned about the hype. We are concerned about more than just security vulnerabilities (like the 2014 collapse of one bitcoin exchange and the more recent hacks of others). Our knowledge of technological innovation tells us that many barriers—technical, sociological, organizational, and even governmental—will need to be removed if there is to be a blockchain revolution. Rushing into blockchain innovation without first considering how it is likely to catch on would be a mistake.
We think it will be many years before the industry and government truly undergo a blockchain-led transformation. This is because blockchain is not a “disruptive” technology that can quickly overwhelm established companies and assault old business models with a lower-cost alternative. Blockchain is a fundamental technology that could lay new groundwork for our social and economic institutions. Although there will be a huge impact, it will take decades for blockchain to permeate our social and economic systems. As waves of technical and institutional change acquire strength, adoption will take place gradually and steadily rather than all at once. In this post, we’ll examine that realization and its strategic ramifications.
Edited by: Clock b Business Technology