Blockchain can increase transactional trust in a world that lacks it
Blockchain technologies like distributed consensus, tokenisation, self-sovereign identification and smart contracts coupled with AI and IoT offer a means to decentralise the running of society, not just business.
Enterprises have organised to compete in traditional societies with centralised control mechanisms. This type of organisation will struggle to be effective when it must deal with citizens and customers whose expectations will be reset by blockchain. They will expect the enterprise to respect the new power that blockchain confers on users — especially self-determination of economic value exchange at the micro level.
CIOs tell Gartner that blockchain is a technology they want to deploy. Sixty per cent expect some level of blockchain deployment within the next three years, according to the 2019 Gartner CIO survey.
But many of them do not see the bigger picture. This isn’t surprising, given that most enterprise efforts are limited scope blockchain initiatives and preserve current centralised operating models.
The pre-eminence of blockchain in society will start to emerge by 2030, but enterprises will need to start preparing for it now.
CIOs who help lead digital business initiatives in their enterprises must do more than educate the CEO about blockchain technologies. They must also explain the wider social environment that blockchain will foster and how their enterprises need to adjust attitudes and practices to remain competitive in it.
Understand the differences between the two societies
An enterprise or individual cannot ignore the broader social context in which virtual and physical elements are blending into a more integrated set of systems. The merger of technology and humans has significant ramifications for how citizens and corporations operate and interact and how government policy is set.
The online world affects the physical world, through things like AI as well as augmented and virtual reality, while the physical world provides all the necessary context for online experiences, for example, by taking into account location and infrastructure.
A society enabled by blockchain will modify our traditional understanding of connections, contributions and community. This will bring into sharp focus the inefficiencies and ineffectiveness of traditional structures such as centralised governance controls, hierarchical organisations and economics based on fiat currencies.
The less trust there is, the more fragile society and the more expensive economic activity becomes. Blockchain will orchestrate a new trust dynamic.
Traditionally, executives lack of adequate, timely information limited the effectiveness of decision-making. Blockchain technologies will contribute to openness and the wider and faster sharing of data, offering capabilities such as trust, transparency.
The constant press of digital business will lead many executives to rethink their organisational structures in an effort to become more agile and better address market demands. Blockchain will offer more effective governance and incentives that can improve productivity and performance.
Enterprises that create digital business models enabled by blockchain will simultaneously have to adopt a decentralised organisation to match. It will be their new reality to remain relevant and engage with society, citizens and their customers.
Prepare for new structures around trust
Blockchain can increase transactional trust in a world that lacks it. “Trust” is the economic and societal glue.
The world suffers from low overall trust in institutions, government and media. Greater explicit trust brings higher quality interactions and lowers transaction costs by reducing the need for intermediation. Self-sovereign identity management (SSID) is one aspect of this trust. SSID also offers the potential for more commercial fluidity. The less trust there is, the more fragile society and the more expensive economic activity becomes.
Blockchain will orchestrate a new trust dynamic. It will help to guarantee proof of ownership, investment, credit, value exchange, payments and other basic aspects of economic activity. It can also offer certainty of social interaction via information auditability. This will enable people and businesses to spend more energy on activities of higher social and economic value.
Blockchain can even give people more sovereignty over their personal data via granular, self-managed consent mechanisms ensuring that personal data is shared only when directed by the owner, for adequate exchange of value, specific purposes and limited time frames. Blockchain is essential to the formation of this new fabric of trust.
Role of smart agents
In a society enabled by blockchain, trust and decision rights can be delegated to distributed and decentralised autonomous agents. Smart contracts will provide strong self-enforcement mechanisms for the exchange of value between these agents based on embedded computer rules and artificial intelligence (AI).
Smart agents operating on a blockchain-based infrastructure will change the notion of who or what is a customer and create vast new revenue sources.
Smart contracts facilitating value exchange can operate without a central authority to oversee performance. They can conduct micro-transactions, operate at scale, support market modifications on the fly and facilitate the exchange of goods and services using multiple forms of assets. They can also connect humans, things, businesses, and decentralised autonomous agents and organisations at scale, for example in the context of smart cities.
Rethink basic assumptions about economic activity
Fiat currency controlled by governments underpins all traditional economic structures. However, digitalisation – specifically blockchain - offers alternate mediums of exchange, stores of value and units of account in a decentralised context. These alternatives have started to reinforce questions about societal inequality, as well as providing a window into new economic value creation.
All institutions will need to trade in and manage these new monetary forms. Governments will need to supervise their use. Customers and citizens will need to gain awareness and comfort in their use. Tokenised value will become central to future societal development, especially in the context of IoT.
Product strategy and design, marketing, pricing, rewards and loyalty will need to be re-conceived. Accounting, taxation and legal systems adjusted. The IT organisation must, therefore, make radical changes to applications to accommodate these new forms of asset and the new and existing types of customers that will use them.
They will have to adopt new work practices to enable co-development and co-production, knowledge and resource sharing, and connectivity to new sources of value.
David Furlonger is a distinguished VP analyst at Gartner. His research analyses how long-term business and technology trends strategically impact industries and organisations. David is the author of the soon-to-be-launched new book: The Real Business of Blockchain: How Leaders Can Create Value in a New Digital Age. He will be speaking on blockchain trends at Gartner IT Symposium/Xpo 2019 on the Gold Coast, 28-31 October.
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