The Right Business Model for Blockchain
November 15, 2018
Why is this so hard to get right?
Here we go again. When the business world, and especially the Western business establishment, engulfed in its own media based hypertension, smells a good deal in the air, the world turns into one great big gold rush. Whether that was the Internet as it once was 30 years ago or now with blockchain technology, being both sought after and reviled at the same time, the same pattern is reemerging. Since the “Bitcoin Affair” last year where the value of Bitcoin with through the roof (… and to this day no one really knows why) and fell just as dramatically, the quaint notion of a “Bitcoin Billionaire” has entered the business lexicon of America if not the entire world. As such there are more buzzwords, hype, paid-for drama and nonsense around cryptocurrency than common sense, practical and useful applications. When you get right down to it…we’re not talking about gold or silver, soybeans or crude oil here, this is just another form of technology. JUST technology. It’s not going to cure a rainy day or cause a flower to bloom, but as we all know, technology can be a pretty handy thing, however, it’s still up to humans to put it to good use.
Almost 30 years ago, a new “technology” entered the scene call the Internet. The Internet had existed for quite awhile but it wasn’t until it was available for commercial uses, that it became the darling of Wall Street via the infamous “Netscape” IPO. Thus the quaint notion of “Internet Billionaires” was born and an hysteria similar todays “crypto-madness” took hold of the business world and everybody and their mothers suddenly had a “Dot.com”…raising millions of dollars from investors and ready to go public any minute. Seriously, there is practically no difference between then and now. None. Everyone wanted in on the deal but no one at that time really knew what the “deal” was!
Look at it this way, if you’re a shoe maker and you create a site, “shoemaker.com”, what exactly does that mean? Does shoemaker.com help make betters shoes, sell more shoes, increase interest in shoes? Valid questions and almost always ignored. Why did all that matter if you had a big office, a few million in funding and Goldman Sachs to underwrite your IPO? Seriously this was about as close to a business model most dot coms got to regardless of what they wrote in the “official” brochures and reports. What all the financial experts didn’t seem to notice was that Netscape, itself, the IPO that started all this frenzy, was not a “Dot.com”, per se. It was a technology company who developed a useful browser and at the time a popular one. This was a time when HTML based technology was crude by today’s standards and accessing the Internet at all was a pretty big deal. Basically, the Internet wouldn’t be of much commercial value if people couldn’t use it. Netscape helped people do just that, find sites, organize bookmarks, etc., and was a pretty big deal in the “early days” of the Internet.
In other words, the success of the “Netscape” IPO was because it provided an actual product that people could use on a daily basis, en masse, providing true value…the necessary ingredients you find in any business school course. But for some reason, when people think of “value” and “money”…money is almost always the only thing people hear. So the Dot.com bubble grew enormously until the bubble burst and everyone was disappointed and far more money was lost than gained. So it goes…
But a few of the more infamous, “Dot.coms” survived because their vision was a little different; some of these “visionaries” saw that true business advantage of a network the size of the Internet was the size of the Internet; they saw economies of scale, ie, the bigger the better… Amazon, Google and, eventually, Facebook..they are all about the numbers and how many they can get their greedy little hands on. The rest is history.
But this article isn’t just about history it’s about the future and the way the past has a habit of repeating itself. Again, when it comes to blockchain business models I have seen examples of blockchains, replacing, imitating, supplementing…etc., all kinds of products and services, in other words, trying to “fit-in” into old business models that people are comfortable with, but not really realizing any real value simply due to the technology itself. To unlock the power of the blockchain is to let the blockchain BE the blockchain but to scale. The real value of the blockchain is its immutability. That should be more than enough if enough people use it simply for that. Let’s put it this way, we can try to teach a polar bear to ride a bicycle. Neither one really adds “value” to the other, unless you’re into that sort of thing. A bicycle is funny when you see a polar bear riding it, but its true purpose is transportation, getting from point A to point B. There’s a lot of people in the world that just want to do that, far more than polar bears do! We need to let blockchain do what it does best and not concentration on making something else “better”…