An effective explanation of blockchain technology deserves its own encyclopedia. A broad definition can begin by splitting the tech into two subgroups: permissionless and permissioned. Traditional blockchain is permissionless, allowing for a distributed, decentralized ledger of data available publicly. Cryptocurrencies like Bitcoin are the most recognizable forms of permissionless blockchains, giving anybody the ability to validate blockchain records and participate in its creation.
Both types of blockchains function on the same basic principles of game theory. By working together to achieve a common goal, everyone benefits more than they would if they all acted alone.
Despite the technology existing and a surging interest among companies, the enterprise blockchain is still far from revolutionizing how businesses conduct transactions. The main problem that blockchain providers like IBM are discovering is one embedded into the game theory design of the technology itself—finding ways to align different companies’ incentives and distribute power evenly throughout a permissioned blockchain. Technological problems still exist, but the overarching challenge many analysts see is the inability for companies to accept an equal playing field. Like the prisoner’s dilemma, the drive for companies to gain a competitive advantage with blockchain technology ultimately leads to an overall worse outcome for an industry as a whole.
Of course, companies should be working in their self-interest. The entire idea of a capitalist society is based around healthy competition, and in a way, so, too, is the blockchain. By competing fairly within a peer-to-peer enterprise blockchain infrastructure, businesses elevate the playing field of trade for every player in the consortium.
That’s not yet happening on the scale blockchain providers are promising. Anecdotal positive use cases are popping up more and more, but the hyper-interconnectivity of businesses and industries working together through the blockchain hasn’t been realized. Data on businesses investing more on research and one-dimensional blockchain services highlight the absence of a unifying force that could really bring the technology into its true form.
The current economic crisis stemming from COVID-19 could serve as a catalyst for increased blockchain adoption. Trust in competitors will arise out of necessity, as different companies within a supply chain encounter more and more challenges over the coming years. Maybe now more than ever, entire industries are desperate to foster more efficient trade and communication between businesses. The voice of every stakeholder in a company needs to be heard and implemented into new strategies, and a blockchain infrastructure of decentralized data distribution could be a key contributor for finding a path out of the woods. The first step starts with companies buying into trusting their competition.
Willem Roper is a market editor at Statista Inc.
The views expressed in this article are the author’s own.
