Let’s debunk the Blockchain
An article by Frédéric Panchaud, Deputy Director of Insurance, Noima

If an award were handed out for this year’s top buzzword, “Blockchain” would certainly be among the favorites. Like any concept that garners attention during a conversation, this one definitely requires an in-depth explanation to showcase the reality of the revolution it promises.

An article written by by Frédéric Panchaud, Deputy Director of Insurance with Noima

If an award were handed out for 2016’s top buzzword, “Blockchain” would certainly be among the favorites. Like any concept that garners attention during a conversation, this one definitely requires an in-depth explanation to showcase the reality of the revolution it promises.

A succinct explanation of Blockchain necessitates simplifications that might offend some purists. Our definition therefore is neither exhaustive nor perfect, but it does allow the novice to quickly grasp the technological, organizational and professional stakes involved.

So when the term Blockchain gets bandied about, emphasis is typically being placed on an ecosystem of practices and technologies that enable:

  • conducting transactions between individuals interacting within a community setting (which assumes the form of a decentralized computer network). These transactions rely on the inter account transfer of a cryptocurrency (like Bitcoin) and are validated by (majority) consensus across the network;
  • maintaining a register that ensures transparency, distribution (i.e. duplicated N times on the network’s computers) and public access for all transactions processed in this ecosystem. Strictly speaking, Blockchain is in fact this kind of register. The notorious big book cited in all articles intended for the general public. For the sake of accuracy, cryptocurrency and Blockchain should be combined in order to better explain our point (e.g. the Bitcoin Blockchain). Since this register incorporates a time-stamping feature as well, Blockchain also provides for the certification of all possible documents;
  • setting up and managing contractual type relations by means of autonomous computer programs. Coupled with the potential offered by the world of connected devices and their artificial intelligence, this capacity allows implementing revolutionary, applications-driven ecosystems;
  • spawning new forms of collaboration, autonomous and decentralized organizations / companies, which relieved of a traditional legal apparatus are now sponsoring projects that have won a rabid following. This topic, much like the historical philosophy of the Blockchain “community” (or, in reality, Bitcoin), is very often overlooked or even ignored altogether in the literature despite offering powerful opportunities for reflection.

In taking a step back, while it is absolutely essential to understand the technological aspects to measure the potential, it is also quite probable that as Blockchain becomes a greater part of our daily lives, the tool will receive less attention while concentrating more heavily on the uses it brings (e.g. few of us are actually familiar with TCP/IP yet are fully fluent with Web apps). Consequently, the following question must now be answered:

Isn’t Blockchain simply a fad?

Interest in Blockchain began to grow around mid-2015 and has kept rising ever since. Relevant articles are now widespread with more conferences regularly announced, leading to at least three points of observation:

  • The message audience occupies higher levels (from a hierarchical standpoint) extending well beyond IT Departments;
  • Authors and speakers are quite heterogeneous, ranging from the classic “computer nerd” to “politicians” and even include “evangelicals” (with their fair share of “believers” and who had already been noticed when the Internet was first introduced);
  • Imagination still doesn’t run the show (often the same types of uses, the same startup business) and “operational” issues still receive just scant attention.

Has the Blockchain technology not matured yet ?

Along these lines, despite palpable enthusiasm and widespread communication, many key industry players have remained somewhat mute, unsure of their overall level of understanding. This stance is even more prevalent given the many good reasons to adopt a prudent attitude like a sage (or a grouch depending on who’s commenting).

For one thing, the Blockchain ecosystem is composed of “immature” technologies and environments, whose capacity to industrialize still remains to be seen. More specifically, the weaknesses typically cited pertain to transaction speed and “scalability”. Next point raised, the lack of competent tool use is another legitimate concern.

First of all, we are most definitely short of developers, in the broadest sense, to work on this ecosystem; elsewhere, at conferences, it is not uncommon to hear a story intended to instill fear whereby the world can barely muster 1,000 qualified professionals.

Let’s now consider that several projects are in competition with one another (Bitcoin, Ethereum, Ripple, etc.), featuring very disparate levels of maturities and requiring different technical skills, some of which are really hard to come by (e.g. on the Ethereum protocol layers).

Moreover, the non-technical players, which is my case, tend by and large to aggregate and, by the same token, simplify due to poor understanding of the finer points of protocol mechanics. For some of these players, who have not yet sought to really understand the technology, their role turns into something more mystical and congenial upon discovering the topic, yet highly risky when the discussion turns to projects.

Blockchain, Bitcoin and restrictions

As recalled above, the Blockchain ecosystem is closely intertwined with Bitcoin and its community. Since its founding, Bitcoin has been partially built by rejecting the traditional view of society and capitalism in particular. This difficulty has been greatly underestimated by conventional firms, which in lacking the skills to engage in multi-component discussions are hindered in their recruitment of “talented” technical experts. This shortcoming considerably limits the ability to benefit from the emergence of a very effective economic model, namely CAD tools.

And all these associated restrictions pale in comparison to the real obstacle, i.e. regulations, or more precisely the legal void, which for the most part has been overlooked during conferences, brushed aside by the same two-sentence refrain: “Naturally, the regulatory aspect lends uncertainty, but since no one can predict the future, there’s no need to talk about it. So let’s get back to the wonderful world of Blockchain.”

While it’s never easy to make predictions, there’s very little risk involved in stating that if the Blockchain environments actually emerge, then public authorities (State, Europe, etc.) will seek at the very least to restrict their anonymity or furthermore to enable tax collection.

At the present time however, the trend observed (in France, the United Kingdom, European Commission, etc.) would more likely be one of relaxing regulations in favor of further development. As such, wouldn’t it be more intelligent and pertinent to adopt a hands-off approach, preferring instead to patiently wait and focus on real subjects (e.g. Solvency 2)?

For a better grasp, you simply need to answer the two following questions:

  • Is your firm (insurance company, mutual insurer, etc.) really so far ahead of the market that it can comfortably ignore this technological breakthrough for the time being, even if such an oversight would require massively investing to bridge a future divide?
  • Is your firm comfortable with the conservatism and consumer loyalty in its sector to decide against allocating resources to “take part” in this explosion of opportunities for new uses, new markets, new partners?

If you answered yes to both these questions, you need not read this article any further (but I would encourage you to recall your attitude in 2000 with the Web and whether in hindsight you still think you were right?)

My conviction (which is shared by a good number of analysts, technologists and other strategists) is that regardless of the Blockchain technology and its technical limitations, the real revolution lies in its uses.

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