Blockchain Revolution

Wikinomics introduced the concept of ideagoras—emerging marketplaces for ideas, inventions, and uniquely qualified minds, which enabled companies like P&G to tap global pools of highly skilled talent more than ten times the size of its own workforce. Firms use services like InnoCentive and Inno360 to facilitate holding “Challenges,” “Digital Brainstorms,” and other techniques to find the right temporary talent outside their boundaries to address critical business challenges. It’s about using data to find the right talent to hack your business for the better.

Talent—the uniquely qualified minds to solve problems—can post their availability to the ledger so that firms can find them. Rather than InnoCentive, think bInnoCentive. Individuals can cultivate not only a portable identity, but also a portable résumé (an extended version of their identity) that can provide appropriate information about them to potential contractors. Think a distributed skills inventory owned by no one or everyone.

As every business becomes a digital business, the hackathon is an important form of ideagora. Now with blockchain technology and open source code repositories, every company could provide venues to geeks and other business builders for problem solving, innovating, and creation of new business value.

Blockchains and blockchain-based software repositories will fuel such activity. Companies can now use powerful new programming languages like the Ethereum blockchain with built-in payment systems. An excerpt from a conversation on Hacker News: “Imagine how cool it would be if I could share a guid for my repo—and then your bit client (let’s call it gitcoin, or maybe just bit) can fetch new commits from a distributed block chain (essentially the git log). Github is no longer an intermediary or a single point of failure. Private repo? Don’t share the guid.”³⁶

How cool indeed! (Well, maybe you didn’t understand one iota of that little piece of coolness, but you probably get the idea.)

6. 
   Blockchain Makers
   

Manufacturing-intensive industries can give rise to planetary ecosystems for sourcing, designing, and building physical goods, marking a new phase of peer production. It’s about making it on the blockchain. Just as a modern aircraft has been described as “a bunch of parts flying in formation,” companies in most industries are tending to disaggregate into networks of suppliers and partners. Three-dimensional printing will move manufacturing closer to the user, bringing new life to mass customization.

Soon, data and rights holders can store metadata about any substance from human cells to powered aluminum on the blockchain, in turn opening up the limits of corporate manufacturing.

This technology is also a powerful monitor of the provenance of goods and their movement throughout a supply network. Consider an industry close to all our hearts (and other body parts)—the food industry. Today your local grocery store may claim

—and truly believe—that its beef is safe, raised humanely, fed quality ingredients, and given no unnecessary drugs. But it can’t guarantee it. No one keeps histories of single cows; bad things happen to good bovines. We trust our hamburger with no means to verify. Usually it makes no difference; billions and billions keep getting served. But once in a while, we get a glimpse of mad cow disease.

The food industry could store on the blockchain not just the number of every steer, but of every cut of meat, potentially linked to its DNA. Three-dimensional search abilities could enable comprehensive tracking of livestock and poultry so that users could link an animal’s identity to its history. Using sophisticated (but relatively simple to use) DNA-based technologies and smart database management, even the largest meat producers could guarantee quality and safety. Imagine how these data might expedite lab tests and a community health response to a crisis.

Knowing how our food was raised or grown is not a radical idea. Our ancestors bought supplies at local markets or from retailers who sourced products locally. If they didn’t like how a local rancher treated his cattle, they didn’t buy his beef. But transportation and refrigeration have estranged us from our foodstuffs. We’ve lost the values of the old food chain.

We could restore these values. We could lead the world in developing a modern, industrialized, open food system with down-to-earth family farm values.

Transparency lets companies with superior practices differentiate themselves. The brand could evolve from the marketing notion of a trustmark—something that customers believe in because it’s familiar—into a relationship based on transparency. Surely food producers have an appetite for that.³⁷

7. 
   The Enterprise Collaborators
   

Yochai Benkler spoke about how blockchain technology could facilitate peer-to-peer collaboration within firms, and between firms and peers of all sorts. “I’m excited about the idea that you have a fully distributed mechanism for accounting, for actions, and for digital resources across anything; whether it’s currency, whether it’s social relations and exchange, or whether its an organization.”³⁸

Today, commercial collaboration tools are beginning to change the nature of

knowledge work and management inside organizations.³⁹ Products like Jive, IBM Connections, Salesforce Chatter, Cisco Quad, Microsoft Yammer, Google Apps for Work, and Facebook at Work are being used to improve performance and foster innovation. Social software will become a vital tool for transforming virtually every part of business operations, from product development to human resources, marketing, customer service, and sales—in a sense the new operating system for the twenty-first-century organization.

But there are clear limitations to today’s suites of tools, and the blockchain takes these technologies to the next level. Existing vendors will either face disruption or embrace blockchain technologies to deliver much deeper capability to their customers.

What would a blockchain social network for the firm look like? Think Facebook for the corporation (or simply an alternative to Facebook for you). Because several companies are working on this, we can flash-forward a year or two and here’s what we get:

Every user has a multifaceted wallet, a sort of portal into the decentralized online world. Think a portable personal profile, a persona or identity that you own. Unlike your Facebook profile, the wallet has diverse functions and stores many kinds of personal and professional data and valuables including money. It is also private to you and you share only what you want. You have pairs of public-private keys that serve to anchor your persistent digital ID. While multiple personas can be housed in the wallet for each person or company, let’s assume that a wallet holds a single canonical persona anchored in a single key pair. A publishing system delivers a stream of information that you or your firm will happily pay for—a colleague’s patch of new code, a summary of a conversation with a new client, or—with the client’s permission

—a tape recording of a call, a Twitter feed from a conference that you couldn’t attend, live stream of a client’s use of your new product, photographs of your competitors’ booths at an industry expo, a Prezi presentation that seems to be closing new business, a video how-to of something a colleague just invented, assistance in completing a patent application, or anything else that you value.

There is advertising, perhaps from third parties or maybe from the HR department about open enrollment or changes in insurance plans, but you, not Facebook, get revenue or some reward for paying attention. This is called an “attention market.” You could receive microcompensation for agreeing to view or interact with an advertisement, or for feeding back in detail about a new product pitch, or just about anything else, such as transcribing CAPTCHAs⁴⁰ or scanned documents.

The news stream, publishing system, and the attention market all look similar, but payments flow differently for each. Said ConsenSys’s Joe Lubin, “You pay for publishing. Companies pay for your attention. The news stream has no payment flow. I am happy to read your stream, because I value that social connection, but I am not going to pay to see a picture of you and your buddies drinking at a bar, or to read your opinion on the Blue Jays pitching staff.”⁴¹

You also participate in or create topical discussion channels, where you configure your privacy. Privacy is enhanced in other manners too. For example, spy agencies can’t conduct traffic analysis because they are unable to discern the source or destination of messages.

There would also be a nifty mechanism for finding people and feeds that you might care about. In addition, distributed tools aggregate and present interesting new people or information for you to follow or friend, possibly using Facebook’s social

graph to help out. Lubin calls this “bootstrapping the decentralized Web using the pillars of the centralized Web.”⁴²

Experience shows that value ultimately wins out in the digital age. The benefits of

this distributed model are huge—at least to the users and companies. The huge resources of social media companies notwithstanding, there is no end to the richness and functionality that we can develop in such an open source environment. Compare the power and success of Linux versus proprietary operating systems. Blockchain technologies ensure security. Your privacy is completely configurable. No social media company can sell or leak your personal information to government agencies without your permission. If you’re a dissident in a totalitarian country, no one can track what you have read or said online. Because you own your data, you can monetize it along with your attention and efforts. You share in the wealth of big data.

Companies too should be enthusiastic about their employees’ using such platforms for business. To attract talent, firms need to show integrity and respect their employees’ security and privacy. More important, as any firm works to become networked, approaching talent outside its boundaries, they can offer up such interenterprise collaborative platforms that their partners can trust. Time will tell.

In summary, these are seven of the emerging business models whereby both companies large and small can make it “rain on the blockchain.” Overall, the open networked enterprise shows profound, even radical potential to supercharge innovation and harness extraordinary capability to create good value for shareholders, customers, and societies as a whole.

HACKING YOUR FUTURE: BUSINESS MODEL INNOVATION

As for a company managed by software agents, Ronald Coase must be high-fiving up there somewhere in Economists’ Heaven (although some might dispute that such a place exists). Remember the reverse of Coase’s law? A corporation should shrink until the costs of transactions inside are less than the costs of transactions outside its boundaries. As technology continues to drop costs in the market, it’s conceivable that corporations could and should have very little inside—except software and capital.

Think about it.

To begin, the cost of “search” continues to drop as new agents have the ability to conduct three-dimensional searches of the World Wide Ledger of everything commercial that exists or has existed. So no need for a corporate library, information specialists, HR search specialists, or the myriad other professionals involved in acquiring pertinent information to run a business.

Second, smart contracts would radically reduce the costs of contracting, policing contracts, and making payments. No longer paper, these programs could formulate their terms through a series of templates; bargain, accepting or rejecting terms and conditions based on rules and extensive information collected from external sources; formulate self-enforcing policies; determine when performance conditions have been met; and execute transactions.

Third, the cost of coordination of all these resources outside the organization could be trivial—measured in the energy to power the servers hosting the enterprise software. As for managing humans, organizations, and factories hired by the enterprise, the enterprise has no need for bureaucracy. With the new platform we can imagine a new organization that requires little or no traditional management or hierarchy to generate customer value and owner wealth.

Finally, the costs of establishing trust would approximate zero. Trust does not rest with the organization, but rather within the functionality, security, and auditability of the underlying code and the mass collaboration of the countless people securing the blockchain.

How would you go about designing a distributed autonomous enterprise? Such an entity could have rich functionality—agents executing ranges of tasks or more broadly business functions all based on a preapproved charter. Individuals, organizations, or collectives of potential shareholders or users will design them by defining the following:

1. 
   Conviction: a belief about the world and what needs to be done to create value or change things.
   
2. 
   Purpose: its reason for existence. Why are we creating this enterprise in the first place?
   
3. 
   Constitution: outlines the overall objectives of the enterprise and the rules by which it will create value.
   
4. 
   Modus operandi: for example, how it will go about creating this value. How it will fund itself—through crowdfunding, traditional early-stage investment, or using revenue. How it will acquire resources.
   
5. 
   Division of labor between humans and technology: for the foreseeable future, perhaps humans should be in charge.
   
6. 
   Application functions: how the enterprise will sense and respond to changing conditions.
   
7. 
   Moral guidelines: Google’s promise to “Do No Evil” is not going to be good enough. The DAE needs some clear guidelines about what is and isn’t acceptable behavior.
   

There may not be a distributed autonomous enterprise in your near future, but the thinking behind these new entities can inform your business strategizing today. With the rise of a global peer-to-peer platform for identity, trust, reputation, and transactions, we can finally re-architect the deep structures of the firm for innovation, shared value creation, and perhaps even prosperity for the many, rather than just wealth for the few. Now you have at least seven emerging business models that could help you shake some windows and rattle some doors in your industry while distributing wealth more democratically.

Overall, smart companies will work hard to participate fully in the blockchain economy rather than play its victims. In the developing world, the distribution of value creation (through entrepreneurship) and value participation (through distributed ownership of the firm) may hold a key to reconciling the prosperity paradox. Our story becomes even more interesting when you consider that billions of agents will be embedded in the physical world. Which takes us to the next chapter.