Blockchain: Why Isn’t The Disruptor Disrupting?

In the English language, success and failure can be seen as polar opposites – perhaps even mutually exclusive. Expressing shades of meaning between them is challenging without using phrases like “pipped at the post” or “missed by a country mile.” While linguistic determinism has its limitations, non-native speakers may still struggle with the colloquial nuances in such expressions. The common use of the phrase “being a victim of your own success” reinforces the idea of success and failure as independent states of being. We need a more nuanced view. Success and failure do exist on a variable scale and are not mutually exclusive, even if we don’t define specific words along that scale – particularly when time is involved.

The victim of its own success

My recent research into blockchain has shown that the technology is a victim of its own success. The concept was simple – allow any user to validate the history of transactions and perform all transactions publicly and despite the complexities sitting behind the computer screen, cryptocurrencies were born in 2008 as simple examples of these fundamental building blocks. Bitcoin’s digital nature allowed it to proliferate and the value of the ecosystem soon passed billions into trillions of pounds. However, as with any new technology, scams and fraud were possible. The digital nature that benefitted Bitcoin ensured that new users were likely to be aware of the pitfalls and it soon became almost a pariah due to the small element of criminal activity that was performed in plain sight. Notable failings in Mt. Gox[1] (2014), The DAO[2] (2016) and FTX[3] (2023) collectively affected early adopters to the tune of billions of pounds and were publicised worldwide.

Maturity and potential uses

As blockchain has matured, the potential uses beyond cryptocurrencies have become clear. The worlds of finance, logistics, healthcare, property and more are commonly cited as examples where blockchain, as opposed to cryptocurrencies, can be used within organisations. The benefits of blockchain are not numerous but they can be so important for organisations that incorporation of the technology can be considered a strategic objective. Improvements within decentralisation, transparency, security and immutability should be game-changing. However, for true disruption to occur within an industry, consumers must be disrupted alongside the service providers. Blockchain has been touted as a great disruptive force but in 15 years, so little disruption has happened. There is no new technology that relies on blockchain that changes the consumer’s life experience, despite so many news articles proclaiming the potential for disruption. However, the perception of cryptocurrencies remains prevalent and stubbornly negative, outside of early adopters and enthusiasts.

The consumer challenge

As such, businesses have a problem. Never before have consumers been so aware of the nature of the service provider’s technological architecture. Most people don’t care whether you happen to run a Microsoft or an Oracle database, but there now exists an awareness of cryptocurrencies and their negative connotations and these are conflated with blockchain technology. The benefits offered by blockchain often impact the consumer as much as the organisation but selling those benefits with an underlying negative association with criminal activity is quite an uphill battle. My research has shown that some organisations are putting a great emphasis on consumer education with the understanding that those negative connotations exist and yet others are simply ignoring or are unaware of this problem. Some organisations recognise great potential benefits to themselves but are holding back from implementation due to their inability to sell those benefits to their consumers.

Redefining success

And so, is blockchain technology a victim of cryptocurrencies’ success? Only when we lack the granularity to differentiate between success and failure. Cryptocurrencies have been wildly successful in some areas and yet facilitated criminal activity in others. Many advocates of cryptocurrencies would hail the advances in- and simplification of- blockchain technology as clear evidence that widescale adoption is coming soon despite there being no disruption driven by Bitcoin’s white paper published in 2008.

However, the global cryptocurrency market is worth trillions of pounds. Adoption is happening in organisations across the world and efforts to educate consumers are ongoing. Some organisations will successfully incorporate blockchain into their technology stacks to provide incremental benefits and others will use it as a key strategy to drive themselves forward into new markets and new opportunities. And so perhaps we need to realign our perception of what success looks like. Success for blockchain won’t look like disruption, as was always heralded, it will be invisible to the consumer. The day that consumers no longer care that blockchain technology is in use by their service provider is the day that those service providers can exploit the technology to its fullest potential. We don’t have a word to describe “something-that-is-currently-a-victim-of-its-own-success-but-will-probably-build-on-that-success-later”. For now, we’ll just call it blockchain.

Written by Ben Trimble, University of Bristol alumni of MSc Strategy, Change and Leadership.

Learn more about MSc Strategy, Change and Leadership.

[1] Mt. Gox, short for ‘Magic: The Gathering Online eXchange’ was started in 2006 to allow users to advertise and purchase collectible cards. They pivoted to allow Bitcoin sales in 2010 and by 2014, they facilitated 70% of worldwide Bitcoin transfers before losing a large proportion of customer funds (£24.5b at today’s exchange rate) to a hacker who is believed to have compromised an employee’s computer.

[2] The Decentralised Autonomous Organisation, or The DAO was the principle of direct democracy converted into a smart contract where participants’ votes were counted in proportion to their investment. The contract was launched in April 2016 and raised £20.7b at today’s exchange rate before vulnerabilities in the code allowed a hacker to withdraw around a third of the invested Ethereum. The underlying Ethereum protocol was modified to allow the recovery of funds and this split the network into Ethereum and Ethereum Classic.

[3] FTX Trading Ltd was founded in 2019 alongside Alameda Research by Sam Bankman-Fried and others. These firms were run with minimal controls and many likely fraudulent transactions were performed using customer funds. FTX collapsed in 2023 with around £2b in customer assets missing and legal cases against the founders are ongoing.

Leave a Reply

Your email address will not be published. Required fields are marked *