William Mougayar: What is The State Of Blockchain?
Hi, I am William Mougayar. I am the author of The Business Blockchain that came out as the first book talking about the business implications of the blockchain. I am also a researcher and an investor in the Bitcoin and blockchain space. I write on my blog startupmanagement.org. I am also an advisor and board member in many of the companies that are involved in the blockchain, such as the Ethereum Foundation, Coin Center, OpenBazaar, OMERS Ventures, Steemit.com, and others.
What is The State Of Blockchain?
Looking at what is going on with the blockchain, you have to look at two dimensions. You want to think first of all whether you want to be involved in the private blockchain space or in the public blockchain space. And once you do that, you want to think about two other factors: is the blockchain really there to support your existing businesses, or is it there to create new businesses and new services? The large companies are mostly focused internally on supporting their existing business, whereas startups want to disrupt existing models and create new ones. That is an important distinction. I personally like a lot what is going on in the startup space, and I have a lot of hope for the innovations that are happening in that space. But we should not discount what big companies are doing as well, because there are benefits for them also.
What’s Missing in The Blockchain Space
What is missing in the blockchain space today is a really good understanding, not just of what the blockchain is, but how to think about the blockchain. So I have been shifting the way I talk about the blockchain, If I’m not just explaining it, because that can get boring very quickly. We need to think about how to use the blockchain. And the way to think about the blockchain is in four different areas. One is that it is a new development platform. If you think about the web, the web has been an incredible development platform, and everything today is developed on the web. In the future, everything is going to be developed with the blockchain in mind.
Secondly, you have to think of the blockchain as a new utility. It is a new utility network for moving value, moving assets.
Thirdly, it is a trust-based services layer. We are going to see a lot of new services that are going to emerge on the blockchain, and this is going to disrupt the way companies are currently organized.
And, finally, it is going to create a new marketplace. There is a new economy out there, what I call the Crypto-Tech Economy, that could be as big, if not bigger, than the web economy. So we have to be prepared for it.
Where Will The Blockchain Space be in 2 Years?
We have to make a distinction, again, with what is going on with consumers vs. what is going on in the business-to-business sense with big companies. Large companies are going to start to deploy a lot of the pilots that they were involved in in 2016. But we’re not going to see any big implantations until 2018.
I am a bit worried about the consumer side, because we have not yet seen the types of user-friendly applications that are on the blockchain. By and large, a lot of the consumer applications of the blockchain are still very geeky. If you start to get into the Wallet applications, for example, you have to understand what a Bitcoin address is and you have to really get a degree of technicality involved. And this is not going to be enough to deploy it to millions and millions of users. So I would like to see more user-friendliness in the area of consumer applications of the blockchain. We need to see more developers get into this space. We need to see more applications, and we have to see more users using these applications.
In the business sense, companies have figured out that the blockchain is a big savings type of application. They will spend perhaps the next ten years cutting costs, improving processes, and trying to figure out how to re-engineer their operations for the blockchain. But the consumers need to see more applications that are very easy to use, and we need to see more of that. So the challenge is for the developers to start to think regarding millions of users, not just a handful of users, when they develop these consumer types of applications
What You Most Excited About?
I am very excited about the prospect of using cryptocurrency, not just as a money equivalent, but using it as a way to earn something as a result of doing some type of work. If you think about it, we all have a third job. The first job is the current job that you have that you get paid for. The second job is the taking care of yourself, of your family, and of your surroundings. But the third job is a job that other companies have given us in the area of self-service. When we go and track a package, for example, we are doing the job of somebody else. When we go on social media, we are spending time but we are not getting compensated for it. In the near future, I’m seeing cryptocurrency coming in as this new unit of value that is going to allow us to get compensated for the time that we are spending.
An example might be a marketplace called Steemit.com If you go there and you spend time writing content or upvoting content or promoting content, you earn a cryptocurrency that can be valuable, that you can spend in this non-money economy. So I am seeing a merging of the money economy and the non-money economy. And cryptocurrency is going to be this new enabler of a new economy that, as I said earlier, is going to be potentially bigger than the web economy.
And going forward we have to make some choices as consumers. You will be picking your own cryptocurrencies, the ones that you want to be aligned with. You will be picking the economies that you want to be involved in, where you want to spend your time earning valuable tokens that you will spend in other transactions within that marketplace. And, finally, you are going to decide who you’re going to share your data with.
This is because we as consumers are a source of data, and currently, we are giving this data away for free. If Facebook were to be reinvented in the era of decentralization, they should be compensating us for the attention that we are giving them. But they are not today; they are the ones that are monetizing this attention. But I’m hopeful that in the same way that our data is valuable, our attention is valuable, our time is valuable, and cryptocurrency is the perfect currency to get us compensated for the time that we are spending online and in these new marketplaces.
Blockchain and Venture Capital
Venture capital is going to be impacted by cryptocurrency. We are seeing this today already with a new phenomenon called ICOs (Initial Cryptocurrency Offerings), which is the equivalent of an IPO (Initial Price Offering). With an ICO, companies can raise their own money; they can spit out their own currency, and raise money from consumers at large. It is like crowd sourcing and crowd funding. And this is turning the traditional venture capital model on its head, because then, theoretically, companies do not need venture capitalists.
But, having said that, this comes with a lot of caution. It opens up the way to evaluate companies. You still have to do the diligence aspects, like in startups, is it a good market, is it a good product, is the team a solid team. You also have to look at the resilience of the crypto-sale that they are planning, what are the mechanics of the selling of the tokens. Thirdly, you have to look at the level of transparency that these companies are giving you. Are they really going to let you know how they are doing, because when you do an ICO you become like a public company from day one, everything is open? And finally, you have to look at the business model and how it ties into this token that they are issuing. That area is a very important one, and sometimes it gets disconnected from the actual operations of the business.
So the more coupled the business model is with the token itself, and the more the token provides a valuable utility, the more sound a business is. So it really explodes the traditional venture capital model, and it gives us more parameters to look at. And this is a really challenging area, but at the same time, it is a very exciting area to be in.
Advice For People Who Want To Enter The Blockchain Space?
The advice I would give anybody in this space, if they want to get involved in it, is starting to read about it quite a bit and start to understand it. Get a bitcoin Wallet or sign up at one of the exchanges that exist out there. Every country has some exchanges. You have to experience how money can get transferred from one person to another without having a bank in the middle.
The second thing one can do is use an application that is using the actual blockchain in a decentralized manner. OpenBazaar comes to mind, which is a decentralized peer-to-peer application for doing commerce. By doing that you will experience doing commerce, like going on eBay without having eBay in the middle.
And, thirdly, go on a marketplace like Steemit, which is the equivalent of Reddit but where you can get money. It is an incentivized content market place; you can earn cryptocurrency by being there, by providing your attention, by writing content, by voting on content, by participating with others. And this gives you an idea of the shape of things to come.
You can follow me on my blog startupmanagement.org or Twitter @wmougayar.
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