Is There Life After Blockchain? (Part 1)

This is the first part of a two-part article. The second part is available here.

Real progress happens only when advantages of a new technology become available to everybody.
Henry Ford (attrib.)

Dilbert on blockchain

It is quite annoying when someone cunningly tries to dismiss your objections, however reasonable, by labeling them as the fruit of incompetence. It is even more so when that someone avoids your questions by referring you to an inadequately informative, poorly detailed, rather generic and vague website, thus commonsensically instilling the doubt of willingly hiding something.

The impression is that those objections are more than pertinent and that those questions are not at all silly, indeed. The impression is that this someone is playing with the obscurity behind the technological side and intrinsic with the financial aspects of the proposal in question to take advantage of the naivety and real incompetence of the prospect recipients in the first place.

The doubt grows stronger and stronger when this someone announces, Urbi et Orbi, to be about to sell a majority stake to a private equity firm.

Where Are We?

Almost five years after the Tapscotts’s propaganda book, blockchain has not yet deployed the marvelous potential that should have revolutionized the world economy, and it has certainly not become the heart of the innovation economy.

Maybe the Tapscotts have their share of responsibility. Just like many other books on blockchain, even theirs tells nothing about the hows.

Truth is that no one can anticipate a disruption, no one can even see one coming. Otherwise, there would either be no innovation in the world or plenty of billionaires who have bet on some successful startup when it was still at its very beginning. Wait a minute, this is exactly what PE firms are for, securing a profitable investment for their wealthy clients. Possibly, though, one might tell whether an industry is exposed to disruption from some salient traits. This is the case of taxis, for example, or the tourist and hotel industry. This could even be the case of the translation industry, although a real disruption is yet to come…

The World’s Biggest Penny Stock Market

It seems that the ICO bubble is over now. Its growth was due to the chance to invest in the speculative blockchain projects behind most ICOs, rigging the global financial system.

In the beginning, to entrepreneurs, ICOs was a great equalizer: all they needed was an intriguing idea, an academic-looking, a vague white paper with some fancy math (when expressly required) and some good marcom, and all the world’s capitals would come knocking to their doors. And with companies offering their own token in reverse ICOs, startuppers could fund an internal blockchain-related initiative while skipping all the burdensome overhead of shareholder protections or revenue generation. In other words, ICOs were the best way to circumvent traditional channels for capital formation and, on the demand side, to entice individuals who were desperate to get access to high-growth speculative investments.

This is why and how blockchains have become the world’s biggest penny stock market. Indeed, most ICOs have not been able to rise above the noise and the ICO bubble has ended in several regulatory actions, just what initiators were trying in every way to avoid.

Sadly, technology is irrelevant and so is the business. The ICO paradigm is as simple as embarrassing:

  1. Devise a token and figure an industry for it;
  2. Develop and spread a narrative on the wonders of blockchain with some fancy math and impressive quotes;
  3. Announce a ready-for-release white paper;
  4. Establish a Swiss company;
  5. Recruit some tantalizing advisors, possibly well-known in the industry, and put them on the company’s website;
  6. Launch the ICO.

The WFP Case

Building Blocks is WFP ’s implementation of blockchain. It is an accounting system to deliver and monitor food aid and record cash-based support to refugees to allow them to buy goods at selected stores, without involving any cryptocurrency. Specifically, it is a private, permissioned blockchain integrated with UNHCR’s biometric authentication technology.

WFP allocates a set amount of entitlements to accounts associated with the biometric identities of refugees. When they buy goods, the biometric authentication system vets their iris, checks if the account has enough funds and, if yes, authorizes the transaction. All transactions are registered on the blockchain and accounts are consolidated; then WFP transfers resources—through standard banking—to the stores involved in the project.

In 2018, WFP made direct cash transfers of $1.76 billion to distribute humanitarian assistance. However, distributing cash depends on local financial institutions and, in some contexts, financial service providers are either insufficient or unreliable; in others, refugees face restrictions in opening bank accounts.

Blockchain allows WFP to authenticate and register transactions and people living in refugee camps not to worry about losing a food voucher, all without financial intermediaries. Another major outcome is the sharp reduction of transaction fees and overhead. On the other hand, the major drawback is the exclusion of smaller retailers, thus reducing their opportunity for sales.

Transparency

WFP’s Building Blocks is the living proof of an effective use of blockchain through its prime aspect—the ledger—to cut costs and secure transactions.

The problem is that not everything is transaction and not every transaction deserves the consumption of resources of a blockchain. Also, one should not necessarily try and find a way to use a technology specifically devise for something else just because that technology is at hand, possibly inflated and widely talked about although obscure to many and definitely wasteful. On the other hand, the law of the instrument seems to fit perfectly well to the translation industry, where everything looks like innovation just because all innovations has always come from outside.

As Bloomberg’s tech reporter Sarah Frier suggests, every company should better find unintended consequences of its products before others do, and think about how to address them even if it is not forced to by the law or public pressure, and then those issues will not backfire.

And talking transparency, why launching an ICO if one so strongly believes in the business project and has the means to involve some PE firms?

Critical Thinking

Apparently, critical thinking is going to be one of the ten most important skills that companies will be looking for in 2020 and on.

Peter Abelard authored the most iconic sentence expressing the value of doubt, dubitando ad veritam pervenimus. Asking questions and raising objections are both epitomes of critical thinking and trying to dismiss them with presumptuous and preposterous arguments such as that of a presumed ignorance or incompetence of the asker is never a good sign.

With no shortage of information and data, the ability to discern what information is trustworthy might be essential to every organization. Critical thinking doesn’t imply being negative; it is about being able to objectively evaluate information and how to trust and use it, and open-mindedness should be valued as well.

In this respect, being labeled as contrarian, always upstream , is like getting a critical thinking patent. And, in a strongly conservative relationship economy like the translation industry, where the only thing that matters is who you know, being conformist and mainstream is the only way to ingratiate yourself with those who matter and have some chance of success.

Continue reading part 2.

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Author: Luigi Muzii

Luigi Muzii