We’ve seen how many bitcoin companies have pivoted away from the digital currency to become blockchain companies. Now, here comes the next pivot: the term “blockchain” is being replaced.
With what? With “distributed ledger”. Not nearly as sexy. But much more accurate, and by that I mean “less confusing”.
We have the bitcoin blockchain. In fact, many insist that the bitcoin blockchain is the only blockchain (“There can be only one”). That is open to fierce debate, and I am in the camp of the many-blockchained universe. I know very smart people who insist that without bitcoin (or other cryptocurrency – and many argue that bitcoin is the only cryptocurrency) as an incentive, the blockchain won’t work. That’s true, if you are operating a blockchain in which the participants don’t know each other. You need a financial incentive to keep it “honest” and to prevent identity-based attempts to control the majority.
But I also know very smart people who insist that blockchains can function well in situations that do not require that level of validation work. If you don’t need the same high level of decentralization and permissionless participation (ie., anyone can join), you don’t need the same incentives. These would be private blockchains, in which the range of participants is limited to a sector or field in which everyone knows each other. While you may not trust everyone in the group, you know who they are and can verify their identity. What you need is a way to allow modifications to the database and the chain of information, while keeping the process transparent.
I’m not going to go into the technical side any more than I already have, at least not today – it’s long-winded and convoluted (and actually only interesting to total geeks like me). To appreciate the trend and the hype, it’s only necessary to grasp the difference between public blockchains such as bitcoin, in which everything is open, transparent and decentralized, and private blockchains, in which participation is limited but which still offers significant business process improvements.
Both systems operate on the same principals, but have slightly different mechanisms. Both technically are “blockchains”. Yet they serve different purposes and have different markets, and calling them both blockchains is generating a lot of confusion. And confusion is not good for new systems struggling to grasp a new concept and explain it to its markets. So, we need to find another name for private blockchains. The obvious choice is “distributed ledger”. Boring, perhaps. But that’s marketing’s problem. And I’m not sure that the financial sector should sound exciting.
I’m obviously not the only one. Big blockchain players are starting to distance themselves from the “blockchain” label. Some are substituting with “distributed ledger”. Others are not using either. This trend is fascinating to watch, and is just getting started. And in the process, it will bring on a greater clarity of purpose and communication, and foster even more innovation in a sector that really needs it.
Let’s take a look at some of the big names in the blockchain space:
Digital Asset Holdings is arguably one of the biggest. Created as a bridge between the digital currency sector and stuffy Wall Street, it boasts an impressive roster of directors from the financial sector, and deep pockets for blockchain startup acquisitions. Even though its mission is to advance blockchain technology, nowhere on its home page does it mention the word “blockchain”. Nor does the word appear on the explanation of the technology, although “distributed ledger” does. They do refer to blockchains when talking about their recent acquisitions. But their technology apparently is blockchain-free. Now they call it “Business Logic Engines”. While it’s true that they’re not just focussing on distributed ledgers, it is striking that blockchains are so conspicuously absent from the sales text.
“Our platform can commit transactions to private or public distributed ledgers or traditional databases depending on the requirements of the use case.”
R3CEV has been making headlines recently with its initiative to get big banks to experiment with the blockchain technology. While the press still insists on calling it that, R3CEV has no mention of the blockchain on its home page, not until you get down to the list of press articles about them. They do refer to distributed ledgers, but only once.
Abra, a remittance company that uses the blockchain to send money around the world, has no mention of the blockchain on its home page. Nor on the “How It Works” page. If you persist, you can find a well-hidden reference to “modern blockchain technology” on the FAQ section when you click on “What is the technology behind Abra?”.
“We allow people to create and operate their own credit unions on the Blockchain, which provide savings and lending services to their members without all the usual associated costs and restrictions.”
Safeshare Insurance, which provides insurance for the marketplace economy (sometimes mistakenly called the “sharing economy”) over the blockchain, does not mention blockchains or even ledgers anywhere on their website (that I’ve been able to find, anyway).
BuyCo, which uses the blockchain to make it easier for businesses to get together to buy things, doesn’t mention blockchain anywhere on their home page.
The list goes on…
There’s a whole lot more going on here than a simple re-branding. We’re looking at a clarification, and a step back from the hype. The press will continue to label these companies as “blockchain” players for some time, though. It sounds a lot more interesting than “distributed ledger”, and the press needs a bit of hype to get the clicks. Yet the experimentation on both sides of the bitcoin/not-bitcoin blockchain divide, whatever the system is called, will lead to a greater understanding of the potential, the business models and the economic impact. And we all will get a clearer idea of what the future will look like, with blockchains, distributed ledgers, or whatever the next transformation will be called. Not boring at all.