Proponents argue that blockchain can make transfers across borders instantaneous and make the financial system far more efficientGetty Images/iStockphoto
Blockchain rhetoric has reached a near fever pitch. We've heard that it's the next Internet. We've heard it is doomed and pure hyperbole. We've heard any number of whys and wherefores. But is this blockchain thing hype or is it indeed transformational?
Blockchain – a distributed database with a continuously growing list of records, or blocks – is a powerful solution in search of a problem. Blockchain is innovative, no question, but it is not disruptive – yet. It may well be the foundation for disruptive applications to come, and thus the root source of enormous value creation, as the Internet was. But we are not there yet.
Truly disruptive applications will need to deliver on three fronts. They will need to tackle large problems; they will need to achieve demonstrably superior results than the incumbent solution; and they will need to unlock enormous – not incremental – economic value.
Even blockchain's poster child, bitcoin, does not pass this test. Do we have a burning problem with exchanging value over the Internet or otherwise? One click on Amazon works fine for me. Does bitcoin deliver vastly superior results? Faster and cheaper perhaps, but is it enough to care?
Blockchain is a technology platform in-the-making, one that could very well play a leading role in many disparate verticals. But, it is not yet disruptive. What we have here is a technology that, once matured, will perhaps support myriad disruptive and thus transformational businesses. But it is the "once matured" qualifier that deserves special emphasis here.
Last month, I streamed ultra-HD video into my home three decades after Netscape lifted the velvet rope on the then self-consciously named World Wide Web. If indeed blockchain is to assets what the Internet is to communication, then blockchain may well be just as transformational. But like the Internet, it too will take time.
The U.S. military gave us the TCP/IP foundation – the basic communication language or protocol of the Internet – to build off in the 1980s, but the Internet was not disruptive until it had enough people to disrupt. It needed scale. Likewise, blockchain may well be a foundational technology, whose value potential will only get unlocked with scale. When enough people are habitually using it, the risk/reward of disruptive innovation will be attractive. Only then will entrepreneurs rush in to successfully deploy truly disruptive applications. And only then will we start talking less about blockchain and more about the disruptive businesses built upon it.
What we must ask ourselves now, is how can Canada deliver breakthrough innovation in this category and what can we all do to make that possible? There is no question we have some natural advantages to exploit if we want to, but surely first we need to paint the target.
If Canada is serious about being a leading player in blockchain, or any innovative technology, we need to plan for it: we need to proactively identify the big problems we want to solve and put our collective minds to work solving them. And of course, government can be an important facilitating actor.
Getting from the promise, to the pudding will take a lot more than brave capital. It will take a very focused and concerted effort, supported by purpose-built infrastructure that de-risks innovation. If Canada is serious about jump-starting innovation, it needs to put its money where its mouth is: it needs to move beyond picks-and-shovels infrastructure spending to include technology infrastructure too – infrastructure that helps our innovators innovate, blockchain or otherwise.
Alistair Mitchell is a venture capitalist and the president of Generation Ventures, based in Toronto (www.generationventures.com).