Warren Buffett said not long ago that speculation in Bitcoin, a cryptocurrency enabled by blockchain technology, was like “rat poison squared.” Meanwhile, Bill Gates agreed that cryptocurrencies in general suffer the ‘greater fool’ problem of a non-productive asset that is based on what the next buyer will pay instead of intrinsic value. When stories like these hit the media, not only those trading cryptocurrency but companies involved with blockchain end up having to explain why broad brush statements about new technology are not very useful.
It’s familiar turf. In the mid-1990s, I started an Internet appliance company called Diba that was at the forefront of new ways to let people experience the Internet beyond their desks. A Forrester Research analyst repeatedly criticized us saying there was no way people were going to want to surf the Internet or read emails in their living rooms. Pretty funny. You might be reading this on a tablet in your family room right now—or on a train, in your backyard, in a hotel lobby. Turned out there isn’t anywhere people don’t want access to the Internet.
So headlines about business notables dismissing a young technology they’re not (yet) involved or invested in, are as predictable as puberty. After all the excitement and sunny hope at birth, the new tech experiences growing pains; some developers make bad decisions; and various financial market wheeler dealers may jump in and exploit it for near-term gains–at least temporarily staining its reputation. Within that context, Buffett and Gates are right. Among some blockchain-enabled currencies there is turmoil and some bad actors.
But from where I sit, running a company using blockchain technology to secure and streamline transactions for B2B companies trying to survive intense competitive pressures, focusing on blockchain-related growing pains instead of long-term value is a big mistake. If you want to understand why, look at Estonia.
One of the most impactful tech stories of the last 50 years was that many developing countries leapfrogged traditional telecommunication wire infrastructure entirely and embraced cell phones. That led to millions of people in poor, remote communities getting access to banking, insurance, infectious disease support, and other services far faster than would otherwise have been possible. Well, thanks to blockchain technology, it’s a deja vu of sorts in Estonia today.
Estonia emerged from the former Soviet Union 25 years ago with a crumbling infrastructure, a dysfunctional public sector, and minimal economic resources. It had choices to make, and its leaders made hard ones, demanding that its government be as innovative and technologically forward-thinking as private sector companies. According to Estonian President Kersti Kaljulaid who wrote an article recently that was published on Quartz: “Today a majority of government services are offered 24/7 online, and data integrity is ensured by blockchain technology. You can use medical e-prescriptions, file taxes, or even buy a car online without needing to go to the vehicle registration office. There are only a few things that you still need to do in the analog world, such as get married or buy property.”
President Kaljulaid asks: “Why spend your life waiting in line for a piece of paper that proves you are you? Governments must learn to provide public services as efficiently as Amazon sells books: no physical presence, no cost of application, no opening hours.” And Estonia is seeing powerful, countrywide benefits: “The digital authentication and signature system used by the whole population has been estimated to save up to 2% of GDP annually,” says the President. What’s more, blockchain has created digital stamping that reveals any efforts to tamper with or inappropriately access data. She adds: “Your personal data does not belong to the Estonian state. Just because it’s in the database doesn’t mean that Estonia owns it—it belongs to you. At any second you have the right to know and control what happens to this data.” That means citizens can access a record of anyone who has ever looked at their private medical data, or request a full report of their tax records.
Estonia’s experience is fascinating and it's exciting to see government leaders with this kind of vision. They are bound to inspire many others. Yes, avoid the ‘rat poison’ in the dark corners, but realize that blockchain is pushing incredible advances and empowerment in many different sectors. At Inxeption our platform is giving powers of connection, collaboration, and cost streamlining to our B2B clients, pioneering a new approach we call I-commerce (for industrial). The distributed ledger of blockchain is allowing our customers to better collaborate with their customers and their partners in a secure, scrupulously documented way. It allows for selective sharing of data and it allows companies to take control of their relationships with customers instead of using expensive intermediaries. As in Estonia, we facilitate this transfer of data but we do not own the data—our customers do. And that’s a game-changing reality for companies who are terrified of handing their customers over to marketplaces like Amazon, where they not only give up profits but where Amazon may end up marketing its own products to their customers.
As our next milestone, we are issuing our customers blockchain-secured tokens that will be used on our I-commerce platform—not for financial speculation but to remove costs and friction in transactions, promote customer loyalty, and create aligned and mutually beneficial business communities. That’s plenty of intrinsic value in my opinion. Would any of us have predicted Buffett and Gates’ success before their voices changed?