Blockchain: Chain Reaction

More than 500 years ago a new accounting technique was discovered, transforming how merchants, entrepreneurs and their investors keep track of every penny they receive or spend.

This technique was viewed as an intellectual breakthrough and became known as double-entry book-keeping, which led to the birth of modern day accounting processes.

Fast forward to 2018, and blockchain has made similar promises to disrupt commerce. Over the last 2 years, blockchain experimentation and proof of concepts prevail, but progress to date has not yet delivered on the pledges made.

The blockchain is a digital, decentralized public ledger tthat was initially developed as the accounting method for the bitcoin crypto currency. New information types, such as birth records to business transactions, can be baked into the highly secure and encrypted blockchain, creating permanent and secure records which cannot be tampered with.

Blockchain Phenomenon
In December 2017, an intriguing new phenomenon began to emerge. Companies that were previously undervalued by the stock market were finding that the simple addition of the word ‘blockchain’ to their corporate identities could multiply their worth many times over.

 Soft drink companies, trade finance specialists and a photography company were, according to their share price, transformed into potential technology giants.

  • Long Island Iced Tea Corp, a maker of soft drinks, saw its shares increase in value by 500 per cent when it announced it was changing its name to Long Blockchain Corp. 
  • LongFin, a trade finance specialist, announced it had bought a blockchain-related venture, sending its shares jump by more than 1,000%. 
  • Eastman Kodak, doubled its market value after announcing a pivot to blockchain to manage ownership rights for photographers coupled with a new crypto currency called ‘Kodak Coin’.

While most genuine blockchain companies dropped the ‘blockchain’ moniker, it is hard to understand why the mere mention of blockchain should be capable of sending stock prices soaring.

Blockchain Tourists
Brad Garlinghouse, CEO of cryptocurrency and payments company Ripple, described these companies as  “tourists”, shoehorning non-fintech ideas into the blockchain in the belief that they would strike gold.

The frenzy surrounding anything vaguely tied to blockchain is the kind of buzz that attracts short-term traders, who are hungry for increased trading volatility and the opportunity to make a quick profit. Ultimately this leaves major industry players feeling somewhat queasy, as rogue actors try to game the system, in a market that feels a little like the Wild West.

While similarities can be drawn with the tech bubble of the late 1990s, when organisations saw their share price soar when they added “dot-com” to the company’s name, blockchain is more than this.

Blockchain is a technology with significant potential.  Serious industry initiatives to watch in 2018 include a new blockchain venture from the Australian Stock Exchange (ASX) which is planning the first major infrastructure switch, replacing its legacy CHESS clearing platform with a new blockchain platform planned for later this year.

Just as the modern tech giants now dominate the post “dot-com” era, serious industry initiatives can be confident that the disruptive technology will become mainstream, leaving behind the gold rush euphoria, as organisations go live with real world blockchain applications later this year.

 

 

 

 

IAN ALDERTON
Email: ian@IanAlderton.com
Tel:+44 (0) 7702 777770

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