How Can A Decentralized Economy And Blockchain Become Mainstream?

Jeremy Epstein Blockchain, Business

The following post comes from a new eBook,  Blockchains in the Mainstream, which features 33 of the top thinkers, entrepreneurs, and investors in the world of decentralized systems.

You can read all of the entries from the “Blockchain Dream Team” in the FREE PDF here.

Today’s author is: Yorke RhodesMicrosoft

First we need to ask ourselves: “What is mainstream adoption?” This can mean different things to different people depending on their context. For Microsoft, mainstream adoption means consumer and enterprise consumer adoption. This implies that product leverages the technology that is to be adopted. It does not imply that a user of the product needs to understand the fundamental paradigm shifting technology that made it happen.

Consider the Internet as we know it today. Does the common user know what TCP/IP is? No.

Yet a huge part of our economy in the form of ecommerce and mobile and social interactions rides on top of TCP/IP. These foundations represented the last major chasms to be crossed:

  • TCP/IP (and browsers) brought us the Internet connected consumer
  • Secure online transactions and the dominance (and trustworthiness) and service of products like Amazon.com and Alibaba brought us Ecommerce as we know it today.
  • Mobile has overcome larger screen devices in terms of usage and internet connected transactions

These transformational foundations are what the next wave of chasms rest upon. Fundamentally, if you think about the last 20 years as the Internet, Mobile and Ecommerce grew, then what is the next wave that will happen and will it be more quickly realized because of the previous foundation? My prediction is: Yes, because of the foundation above, the next wave will arrive much more quickly, and if we can catch it, allow society to hang ten for much longer.

Enter decentralization and trust based systems we call blockchain. Blockchain and Bitcoin and decentralized systems represent a fundamental mind shift away from major assumptions we make in our daily developed world context.

You go to an enterprise or government to get trusted services:

• Hospital, Ambulance, Insurance, Police
• Bank Account, a loan
• Water, gas, electricity, governance
• Hotels, Airlines, Taxis

You use a centralized tool to get trusted services:
• TripAdvisor, Expedia, Priceline
• AmazonFresh, FreshDirect
• Nordstrom.com, Macy’s.com

Even AirBnB and Uber are centralized and therefore presumably trusted and trustworthy services, through which you are comfortable transacting value. In the case of Uber, in fact, we encourage loved ones to hop into a car at a specified location with a stranger who can communicate with them via their cellphone. Wind back 10 years and the advice is: “Never get into a car with a stranger and let alone tell them where you live.”

As consumers, we have been conditioned to the idea that centralized = trustworthy and have asked for centralized certifications to attest to that trust. Things like Certification Seals on websites and the USDA and others attest to the trustworthiness of a system or product. While certifications matter, more importantly service, reliability and ratings matter more. What allowed us to trust Amazon.com is that over time it established a reputation of providing secure transactions without fraud, good service, and a range of products that expanded from niche to main stream.

Let’s look briefly at currency or value exchange. In the developed world, money and value are something that consumers take for granted, but that are a privilege of working within an organization that is bound by the laws of the sovereign nation within which they reside. Depending on the stability of the government, economy, national production and other things, the currency of a nation and therefore a consumer’s net value or ability to purchase can fluctuate. The National (or at) currency therefore has a completely different meaning in the consumer context of the United States, Venezuela, Cuba or Greece. If you look at currency on a global scale, the relative value has shifted dramatically over time, as well as inflation.

The fundamental market making action is trusted parties coming together to exchange goods, services and products based on an agreed upon value. Breaking this down further, when I purchase something in a local market, my reputation is established based on the merchant knowing who I am and seeing my transaction history over time. If you take this all the way to a barter based system, a buyer and seller in any geography make a trade in person and exchange based on agreed value of their products or services. This is fundamentally a peer to peer transaction with no third party. The phenomenon of blockchain allows this type of transaction to happen digitally among parties that never meet in person, at an agreed value of exchange securely.

Blockchain imbues in a system trust between counterparties that do not know each other. The characteristics of blockchain include a shared ledger, a way to arrive at the truth of that ledger that can also include complex business logic and governance.

Getting back to how we accelerate mainstream adoption, we should focus on modifying existing products. By modifying existing products, we are tapping into a deployed ecosystem allowing adoption to happen through an upgrade cycle. Since an existing customer is far easier to upgrade than to acquire a new customer, this assures a speedy path to adoption of the new technology. Additionally, we don’t have to educate the market on “blockchain” in order to get them to buy. Any sales cycle where market education is required leads to a long adoption curve. Taking this approach, we encourage existing product vendors to innovate and iterate their products to take advantage of a new technical discovery. As a product owner, you look for opportunities to do this as a normal course of business. In this case, we help the product owner understand and acquire the characteristics of blockchain for the next version of their product.

For that to happen, it means developers and business analysts using those products need to realize the value of the new characteristics of blockchain. You might look at this adoption cycle taking the necessary following steps:

  • Tech is ideated, rolled out for public bashing – largely completed
  • Tech is sound (verifiably) – enough have vetted the concept
  • Developers kick tires and get trained – this is ongoing, but still early
  • Enough tools emerge to make developers more efficient
  • Platforms start to provide needed building blocks – this is just being conceptualized
  • Developer ecosystem builds solutions – some existing developers have started augmenting products
  • The tech nds its way into existing products and businesses already adopted based on the value proposition of the characteristics of the solution

At Microsoft, you can imagine we have a keen desire to accelerate adoption. What we do with partners and how we look at our platform investments is largely focused on driving through this adoption curve. In addition, we strategize internally on which of our products could find value in the characteristics of blockchain.

Effectively by leveraging our product or partner product as the vehicle, what we are doing is riding the shortest adoption curve to deployment of the exciting new technology. This drives the new technology and value proposition far and wide without having to educate every party. It isn’t hard to draw parallels to this approach with other technologies, like stream databases, an innovation that emerged to solve the social media problem. No consumer or company had to be educated or sold to drive this adoption. It happened as a matter of course as social networks were scaled up.