Can Blockchain break Facebook, Uber, Airbnb, eBay and the like? The answer we want to give for the currently discussed Blockchain interpretation is ‘so far, no’ – contrary to common opinion.

The reason being is that for none of the Blockchain technology specifica is there is a clear path to attract users to the platform.

They are just like banks

What is it that triggers the communities fantasy on disrupting data monopolists such as Facebook, Uber, Airbnb and ebay?

Foremost, there is an obvious analogy to banks. There are two parties, who want to work together (send money, chat, have a ride, rent a flat, trade an item) but need a middleman to facilitate this. Usually, this entity takes too much of a slice of the cake. In the case of banks, it is even worse.

How Blockchain could disrupt data monopolists

Blockchains can be extended beyond the database paradigm towards a general application platform. These platforms work very differently. For example, they have shared virtualized databases, micropayments and consensus mechanisms, from common on-premise or on-cloud platforms that they have the potential to re-implement the named examples while not allowing one party to monopolize the platform.

The main Blockchains like Bitcoin are an example for a distributed autonomous organization.

These are organizations centered around code as their ‘constitution’ and have as its main players users, developers, miners (those that render the infrastructure) and evangelists. They are rewarded by tokens (e.g. Bitcoin) and sometimes in softer currencies such as reputation, career opportunities and even fame.

Usually there is a board and a foundation at the heart of the organization, who can also grant permanent salaries for a small core team. Decisions on directions of the system have to be made in a democratic way between all parties involved, even though there may not be a formalized consensus.

Ethereum and smart contracts

One example for the first paradigm would be Ethereum, other similar examples would be tendermint or fermat.

The most prominent Blockchain application platform Ethereum has at its core the idea to extend the Bitcoin model to a turing complete application platform, on which so-called smart contracts in languages such as solidity, a javascript dialect, could be defined.

Smart Contracts are an interesting concept with use cases, which so far are not common use cases in the industry. They often incorporate payments, here in ether, and usually they are paid based on the fulfilment of certain conditions. If such conditions can be determined inside the Blockchain (someone else paid or transferred a digital asset) the concept is straightforward.

If one needs an external datastream (stock values on day xyz), the challenge is to incorporate the data stream in order for it to be trusted by all sites.

Re-doing the middleman

Now, how could such Blockchain application platforms serve to ‘re-do’ the above listed ‘middleman’. Possible answers are often a combination of the following:

There is a shared, virtual infrastructure which cannot be dominated by one central vendor, rendered by Miners. Data in the underlying Blockchain is publicly shared (secured by cryptography) and cannot be changed because of Blockchain immutability features. The application code running on such platforms is publicly available and execution cannot be tempered with based on Blockchain immutability features. The distributed autonomous organization running the platform cannot be dominated by one vendor as its nature is that of a decentralized organization arranged around code with checks and balances between individuals, organizations and roles (users, miners, merchants, developers etc. … ) Ownerships & Incentives to contribute to such a platform can naturally be rewarded in tokens of the system expressed in a virtual currency. One advantage here is that payments can be executed peer2peer, directly between the two parties without a ‘man in the middle’.

Plus Technology, minus Marketing

Sometimes one can see what one might euphemistically call a ‘metaphorical argumentation’ which uses concepts like consensus (associating democratic votings), shared and distributed (implying there is no central monopolist) and community or movement, referring to the network of individuals, communities around a technology like Bitcoin.

For our purposes, we want to simply discard such metaphors as marketing.

All layers of this technology stack (Infrastructure, Database, Application Server, Organization, Incentive structure) clearly differ from on-premise or cloud traditional models, which tend to be dominated by a few technology vendors. This promises some exciting possibilities and interesting opportunities to write applications.

For the case of a ‘man in the middle’ facilitating data exchange between two parties who want to engage in business conversations – our claim is that none of this matters. Hence, if that is so, there should be no expectation that a Blockchain-Facebook, Blockchain-Uber, Blockchain-Airbnb or Blockchain-eBay would per se, just based on technology, be a serious competitor.

How about professionality?

Undoubtedly, one can build such systems. Potentially there are benefits in such systems for parties and the position of the middleman might be weaker if we move more towards a DAO running of such a system. However, distributed autonomous organizations or net-communities exist but we don’t see them maturing to the level of professionality that would be necessary to compete.

The different incentive structure, payments by cryptocurrency could let serious and professional efforts grow – we haven’t seen it so far, which doesn’t imply that it is impossible. But so far it seems for most developers conventional payment forms like fixed salaries or fees in the store of a large dominating vendor, seem more attractive.

Some might hope that verifiable code could attract clients as the platforms inherently might be more apt at creating trust. Many, including the author, would doubt the technical implementation layer matters for a user.

Making Blockchain successful

If none of these points matters, what would matter to make Blockchain technology successful in that space ?

It is the same ingredient that makes such platforms successful for any Technology. It’s the data shared by users, the amount and type of users engaging in conversations or trade over the platforms.

Users go where users are, this is a given fact, and Blockchains won’t change that.

All other factors being equal (conditions and fees to trade, user experience and so on), the one factor that matters the most and that no platform can just solve via ‘throwing money at the problem’ (you can get a better user experience by throwing money to the best design teams) is to have the right user base to engage in trade.

Technology trust platform?

Now, if any of the Blockchains players would want to claim that Blockchains could ‘break’ one of the big data monopolists, there would need to be an explanation of how the Blockchain features could incentivise users to come to the platform.

Maybe there are sophisticated micro payments which incentivise users to engage and developer to develop, maybe there are users who are interested in a ‘technology trust platform’ and prefer that over the backings of the legal systems.

Such scenarios could give Blockchains the necessary advantage in that field.

This is not a ‘mission impossible.’ Conventional platforms also have their ways to incentivise users and developers, but sometimes differences do not have be so much in kind, but rather by degree.

If Blockchains just work ‘so much smoother’ in creating trust, they could have the necessary leverage based on their technology specifics.

By Benedikt Herudek