“The Internet will completely change the way we do business. Middlemen are toast. They will be replaced by more efficient connections between buyers and sellers.” This was a common rally cry in the VC trenches in the Internet start-up heyday of the late 1990s. Replace the word “Internet” with “Blockchain” and the same message is being touted by the man-bun sporting young entrepreneurs of this generation.
The predictions for the Internet largely did come true, but in a much different fashion than the disrupters of the day built their companies. e-Steel.com did not displace US Steel. Pets.com and their ubiquitous sock puppet did not conquer the retail pet supply industry. Many companies never survived the fall of the stock prices, which heralded investor skepticism and dried up funds, unless they pivoted. My company, WasteBid.com transformed into a waste truck route optimization software company, C2Logix. There were 8 dotcom start-ups in the waste industry sector in the dotcom heyday with only one surviving. Across all sectors, entrepreneurs added dotcom to a business and claimed it to be the next big disrupter, regardless of having a sound revenue model.
It is the same story for the blockchain start-ups. Very few will survive, as few will even have a business model that actually makes money from blockchain, tokens, or their platforms. The blockchain hipsters would say that is where you are wrong. The future of a free decentralized Internet will be based on a community of contributors that will donate their server power for the communal good (see https://hackernoon.com/decentralized-internet-on-blockchain-6b78684358a). Many of these start-ups seem to be little more than a loyalty program using cryptocurrency as a funding mechanism, such as Dentacoin. The Blockchain Manifesto is missing the same business principles of the early dotcom companies. Many of these start-ups have no actual product and are only in the business to get financing. The use of cryptos as a funding mechanism is very interesting, but it is little more than a money grab from uneducated investors.
The Blockchain Manifesto is also missing the value-added role that middlemen provide in a transaction. At the Big Idea CONNECTpreneur Forum on December 13, 2017, the panel proudly claimed that middlemen would be vanquished from the marketplace by the efficiency and decentralization of blockchain. Same pitch as the dotcom era. Realtors were specifically mentioned. Regardless of how the transaction occurs, I would still want a realtor involved to guide me through the process, selection and contract negotiation. They add value as middlemen. To think blockchain will replace that value is shortsighted.
What is exciting is that there are new business models that would benefit from blockchain that have never been devised before the advent of the technology and the infrastructure to make it happen. Any distributed multi-nodal transaction or information flow that would be improved by a decentralized easily accessed facilitator of that process is what blockchain provides. Its opportunities are yet unfathomable. Just as unfathomable as the success of the many start-ups jumping on the blockchain bandwagon, regardless of having a business model or solution to a real problem.
Although my old man pessimism is shining bright in this post, I am very excited about the applications of blockchain for food supply, other supply chain tracking, digital identity sharing, and international currency transfers. A topic for another post.