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Blockchains Occam Problem PDF
Blockchains Occam Problem PDF
Matt Higginson Amid intense experimentation, industries and nearly as many headlines, evidence for a
Marie-Claude Nadeau from financial services to health care and the practical scalable use for blockchain is thin
Kausik Rajgopal arts have identified more than 100 blockchain on the ground.
use cases. These range from new land reg-
Infant technology
istries, to KYC applications and smart con-
From an economic theory perspective
tracts that enable actions from product
blockchain’s stuttering development path is
processing to share trading. The most im-
not entirely surprising. It is an infant tech-
pressive results have seen blockchains used
nology that is relatively unstable, expensive,
to store information, cut out intermediaries,
and complex. It is also unregulated and selec-
and enable greater coordination between
tively distrusted. Classic lifecycle theory sug-
companies, for example in relation to data
gests the evolution of any industry or product
standards.
can be divided into four stages: pioneering,
One sign of blockchain’s perceived potential growth, maturity, and decline (Exhibit 1, next
is the large investments being made. Venture- page). Stage 1 is when the industry is getting
capital funding for blockchain startups started, or a particular product is brought to
reached $1 billion in 2017. IBM has invested market. This is ahead of proven demand and
more than $200 million in a blockchain-pow- often before the technology has been fully
ered data-sharing solution for the Internet of tested. Sales tend to be low and return on in-
Things, and Google has reportedly been vestment is negative. Stage 2 is when demand
working with blockchains since 2016. The fi- begins to accelerate, the market expands and
nancial industry spends around $1.7 billion the industry or product “takes off.”
annually on experimentation.
Across its many applications, blockchain ar-
There is a clear sense that blockchain is a po- guably remains stuck at stage 1 in the lifecycle
tential game-changer. However, there are (with a few exceptions). The vast majority of
also emerging doubts. A particular concern, proofs of concept (POCs) are in pioneering
given the amount of money and time spent, is mode (or being wound up) and many projects
that little of substance has been achieved. Of have failed to get to Series C funding rounds.
the many use cases, a large number are still at
One reason for the lack of progress is the
the idea stage, while others are in develop-
emergence of competing technologies. In pay-
ment but with no output. The bottom line is
ments, for example, it makes sense that a
that despite billions of dollars of investment,
Exhibit 1
Lifecycle