I started telling people that blockchain isn’t hot sauce in mid-2017 to help explain why initial coin offerings (ICOs) were just the latest form of unregulated, online gambling. In November 2017, with Bitcoin nearing a high of $19k per bitcoin, I was telling anyone who would listen that 98% of ICOs were destined to fail. As of April 2019, ~87% of ICOs have failed and the global investor community has come to realize that it’s true; blockchain isn’t hot sauce. However, it should be noted that a 2% survival rate for entrepreneurs looking to leverage an emerging, novel technology is actually a sign of a healthy startup ecosystem.
So what, right? As compliance managers, SMEs and leaders, why do you care that blockchain isn’t hot sauce? Here are eight reasons why blockchain not being hot sauce matters (or should matter) to compliance professionals:
- You can’t “invest in blockchain.” You can invest in businesses that leverage blockchain technology to be more profitable. If blockchain doesn’t make your business more profitable, why would you use it?
- Less than 1% of businesses will ever be true blockchain businesses. This statement requires a little explanation. AOL (American Online) and Comcast Cable are internet service providers (ISPs). Amazon, Google, Uber, and other web/mobile app based businesses are not ISPs but they do use the internet as a tool to generate profits. Consensys is the blockchain equivalent of AOL. They are a true “blockchain business.” Leveraging Consensys’ ERC20 protocol and others, Consensys is happy to build you, or any business, a blockchain infrastructure on which to conduct your business for a fee, of course. Does your business need a blockchain infrastructure to make money? This would mean making your company more profitable than it currently is, not just for a quarter but for the long run. For 99% of businesses the answer is “No.” Blockchain as a technology will be a help desk job by 2024. So the real question is, Do you want to invest in today’s blockchain “AOLs” or tomorrow’s businesses that leverage blockchain, as Amazon does the internet, as a tool to generate profit?
- Blockchains come with risk. Do you want everyone to be able to see all your business records? What are the legal requirements of “self-reporting” when you have 100% transparency to every transaction? What are the moral, ethical and reputational realities of having the ability to monitor and potentially prevent 100% of malfeasance within your business operations? How do you maintain data privacy when records are “immutable?” What are the regulatory requirements for managing data, access and records internationally, when using a blockchain? #GDPR
- Cryptocurrencies are a customer service battle. Customers want convenience in banking. Banking is a verb. Ultimately customers will choose whichever noun (bank, Facebook, Apple, cellphone, etc…) that can provide them with the most convenient banking services and experiences. So, how does KYC/AML work on a burner phone?
- Stablecoins don’t exist but nonetheless come with real risk. From JPMorgan to Facebook, institutions are rolling out new, ever more clever ways of creating “value” from thin air. How has the industry acknowledged the risk of stablecoins? How do we as an industry verify the value of something made, not by a government-backed bank out of thin air, but by some other private institution that provides banking services? So-called stablecoins present a variety of unknown risks that your institution and you as compliance experts will be tasked with discovering. So, what is a stablecoin? And what exactly makes it stable?
- Shitty data on a blockchain is shitty data on a blockchain. Blockchain isn’t quality assurance for your data. However, your business’ data is its most valuable asset. How will you profitably manage your data in a decentralized ecosystem?
- Blockchains present a whole new world of cybersecurity risks. Systemic risks of blockchains will not be known until after they’re built and hacked. Who wants to volunteer to be hacked first?
- Smart Contracts aren’t smart, nor contracts. Smart contracts are at best “terms and conditions.” You don’t want to find this out the hard way.
The above is by no means an exhaustive list of why Blockchain isn’t hot sauce. Blockchain isn’t hot sauce because it does not magically resolve even basic business issues such as operations, customer acquisition, service delivery, or profit generation. Blockchain also does not fix human issues of trust, transparency, and accountability. That said, blockchain technology is here to stay.
Looking forward to seeing you all in a couple of weeks at the Ascendant Compliance Solutions Strategies Spring 2019 Conference in Miami. Come prepared to discuss what blockchain is, why blockchain is here to stay, how its poised to impact your wallets and which technologies will be even more disruptive to your business operations, organizational culture and bottom lines than blockchain.
See you in South Beach!
It’s not too late to join us in Miami. For more information or to register, click here.