Putting the blocks in place
Blockchain offers much potential but communicators need to explain its function more clearly
When the photography giant Kodak said that it was launching a blockchain business, its share price more than doubled. When Long Island Iced Tea Corp changed its name to Long Blockchain Corp, its shares soared 289 per cent.
‘Blockchain’ appears to have the power to turn the dullest goose into a golden egg laying bird. Even football clubs like Arsenal are securing a blockchain partner – CashBet Coin which will be prominently advertised around the Emirates Stadium in north London. If your business is in financial services or in technology, the chances are that you will have already come across blockchain and will be familiar with what it could mean for your sector.
IBM estimated that 15 per cent of banks would be using it by the end of 2017, and up to 66 per cent by 2020. If you work in financial or professional services – such as law, accountancy or property – you may even fear that blockchain could take your livelihood away. But even if you don’t work in a sector that is facing potential disruption, you still need to know about blockchain.
What is really interesting is that blockchain could be a huge disruptive force and there are plenty of antiquated industries out there, which are ripe for change
Matt Cross, Hotwire’s UK managing director, describes the blockchain as an ‘open distributed digital ledger’. It’s basically a way of permanently recording a transaction between two people or two machines. The record of that transaction is highly secure, verified and immutable. Imagine that you wanted to buy a house, pay a bill or buy a second hand sofa on eBay. All of these transactions would be verified by a third party.
In the case of a house sale it would require solicitors and a bank or building society, paying a bill would be verified by your bank and the retailer’s bank, while buying an item like a sofa would be verified by Paypal or your bank. Blockchain means that digital transactions can be verified without a third party – through nodes on a computer network – and that creates a potentially disruptive force – not least because transactions can happen more quickly and cheaply.
Created by the mysterious Satoshi Nakamoto in 2008 (this could be one person or several), blockchain is open source technology – this means the technology’s code is developed as a public collaboration and is made freely available.
Cross adds: ‘What is really interesting is that blockchain could be a huge disruptive force and there are plenty of antiquated industries out there, which are ripe for change. Blockchain gives us the possibility to create a trusted network. If you take it further, it could allow us to reimagine or rebuild the whole Internet.’ He is certain that the potential of blockchain is not just hype, adding: ‘Like all new technologies there is hype around it but when you dig beneath the hype there is real potential.’
Laura Coffey, head of fintech at Tech City UK, the organisation which works to accelerate the UK’s tech sector, says that legacy financial services organisations are fast getting to grips with blockchain. ‘We’re seeing a lot of investment in this space precisely because of the transformative potential of the technology. Examples include trade finance and commercial insurance in financial services.’
At this point, most of the hype around blockchain has focused on Bitcoin – the best known cryptocurrency which has been one of the first applications of blockchain technology. Bitcoin’s value soared to $19,783 in December 2017 but had fallen to as low as $6,000 in early February. Some people were tempted to put their life savings into Bitcoin and have lost money.
It’s not about putting a faster train on the track, but building a new technology
The world’s financial experts fear that bitcoin may collapse, but they can not predict when. Equally, they acknowledge that the cryptocurrency could yet become a respectable, even essential, currency. Cameron Winklevoss, one half of the famous Winklevoss twins, who were briefly Bitcoin’s first billionaires, predicts the currency could be worth 40 times its current value. When economists, central bankers, business people and politicians got together at Davos last month, bitcoin was criticised but there was still praise for the blockchain technology that makes bitcoin possible.
Claudia Bate, head of financial services and fintech at Fleishmanhillard Fishburn, says that while a lot of today’s tech is about improving what we have, blockchain is about creating fundamental change. ‘It’s not about putting a faster train on the track, but building a new technology. It’s as fundamental as the creation of the Internet, in the mid-1990s.’
So which industries might be affected first and foremost? Any industry where trust and transparency are required: the legal sector, banking, accountancy could all be affected but so too could companies with a large supply chain who want to verify the authenticity or provenance of goods or products in their supply chain. Customs and excise and international trade are obvious potential uses.
Even the media sector could use blockchain: social networks, currently under fire for spreading fake news, may find that blockchain allows them to verify that people are who they say they are and that posts are genuine. A new generation of social networks is already using blockchain technology to create decentralised networks, in which users can communicate with each other without the need for a central authority and without needing to submit their personal data as part of paying the price of participation.
There is already a challenge here because people see blockchain technology and crypto-assets as interchangeable
Two such networks include Steemit and Sphere. In the music industry, blockchain could be used to verify the authenticity of digital downloads. If you pay for a Neil Diamond classic, you want to make sure that you’re getting the man not an inferior cover or a sing-a-long karaoke version of Sweet Caroline. Sticking with diamonds, De Beers is planning to use blockchain to record when gems change hands, so that their authenticity can be guaranteed.
Meanwhile, a group of ten food and retail companies, including Nestlé, Unilever and Tyson Foods, have joined an IBM project to study how blockchain systems can help track food supply chains and improve food safety. There is also lot of chat around using it to authenticate expensive art, car service histories or meat provenance – basically any sector where there is currently a paperchain of verifications and certificates. In Estonia, blockchain is already being used to power everything from health record management to online notarisation and the digitisation of the nation’s cultural institutions.
So why is it important for communicators to understand this emerging technology? Bate believes that those involved in blockchain have a responsibility to communicate what it involves. ‘Right now there are very few sources of information and it is a big challenge to simplify what there is and communicate what a fundamental change it can make, in a responsible way,’ she says. ‘There is already a challenge here because people see blockchain technology and crypto-assets as interchangeable. There are potential risks and consequences of people misunderstanding this, so we need to educate ordinary people to understand the underlying technology as distinct from the applications.
‘This could be the best thing that has ever happened but it has to be used correctly. The worldwide web was created to connect people and share information, but we have seen unfortunate, even criminal uses, arise from it. That’s why we all need to know more.’
For brands there are huge implications.
Bate adds: ‘From a consumer perspective we will see benefits to the consumer. As businesses can store and share information quicker and cheaper, the impact will be passed on to consumer.’ Cross agrees: ‘This potentially opens a whole new world for communicators against a backdrop where trust has been eroded. It could be a new way for banks and insurers to come back and verify or prove a new level of trust.’ Brands that can demonstrate product or service improvement, because of blockchain, should do better than competitors.
This potentially opens a whole new world for communicators against a backdrop where trust has been eroded
However, consumers are no longer passive, as brands have already found through the rise of social networks. Brand stories are already harder to control and manage. Distributed ‘authority’ and verification will only make it harder to control the brand message and story.
John Welsh, a former editor of leading business to business titles Travel Trade Gazette and Property Week, who now works as a consultant to tech industry startups, says that many journalists are rightly sceptical of blockchain at present and corporate communications professionals can help them to understand the real story. ‘Communicators need to be wary of being distracted by the hype of things like bitcoin and missing the real story, which is the impact it will have on many industries, not just banking.’
As well as start ups, Welsh works with big brands that are both threatened by the technology and looking for the opportunities it brings. He explains: ‘Over the next two to five years this is going to put the benefits of technology into the hands of the many and not the few. In these times of increasing concern over economic inequality that is important. ‘Brands who really care about corporate social responsibility should push it, because it empowers the small person. For example, it allows a small former in Kenya to make clear the ownership of his land – that puts power in the hands of the individual not the state.’
Referring to the US President’s attempts to curtail the foundation of the Internet, net neutrality, Welsh says: ‘If net neutrality is a negative for the tech sector, then blockchain is a big positive.’
Indeed, another way to think about the potential of blockchain is as a governance breakthrough, argues George Henry, a venture capital investor in early stage tech companies at VC fund LocalGlobe. Henry says that blockchain could allow us to co-ordinate collective actions, at scale.
‘It allows us to collectively overcome individual limitation or weakness (like dishonesty). Nick Szabo, one of the pioneers in the field who invented a bitcoin precursor called bit gold, calls this social scalability. Once you believe this, it becomes easier to understand why blockchain technology could become one of the most powerful tools ever given to civilisation.’
Before that can happen, however, there are other hurdles to overcome. Blockchain networks are still considered quite slow and there are no international standards or regulations. When Fleishmanhillard Fishburn asked 30 experts in Fintech and blockchain what would be the fads and fears of 2018, the agency found that there was a very thin line between the technologies considered the most hyped and the biggest opportunities.
Blockchain has yet to move from proof of concept to product. 2018 might be the breakthrough year in which it does.