Blockchain Stands to Capture One-Third of Global Economy Cost
Blockchain’s greatest potential scale of opportunity lies in its capability as a trust machine – a way to industrialise the manufacturing of truths.
Its non-human way of producing truth exposes the technology’s economy to more than a third of the global economy in coming years giving it access to an estimated 35% of global economy cost, according to Australia’s RMIT University professor, Jason Potts.
The global economy is currently worth approximately $79 trillion.
Based on Potts and his team’s findings having been looking into cryptoeconomics for several years, blockchain would be disrupting the trust issues market – identity verification, auditing, due diligence, lawyer filings etc and the the roughly $27 trillion evolves around it.
“As the fastest moving technology the world has ever seen, Blockchain is going to impact on the global economy in several ways in coming years,” Prof. Potts, who is the university’s Director of the Blockchain Innovation Hub, says at an RMIT Europe event in Barcelona on Wednesday Feb. 27.
“Some organisations will be bigger as a result while some get smaller,” he adds, describing blockchain as an institutional technology that is rare and the last of generational discoveries with massive impacts on humans in the category of watch, joint stock company and democracy. He explains the shift:
“Blockchain changes the way to organise economies. It is the new economic infrastructure; the foundation for consensus about social truth. Blockchain is a new institutional economic mechanism – not only for human to human coordination but for human to machine coordination. The main shift is that it allows, for the first time, machines to be agents in economic transactions.”
Other experts that shared insights about the future of the blockchain economy at the event held in the shadow of this year’s globally-acclaimed Mobile World Congress (MWC 2019) include the President of the Blockchain Catalonia Association, Marc Rocas and Montse Guardia Güell, General Manager, Alastria Consortium and President, Quantum Blockchain Alliance.
The atmosphere is changing, Rocas agrees though the key changes are not here yet. He adds that a time would come when there will be high novelty and high complexity in the transformation stage of the technology’s growth.
“But for now,” he maintains, “it is too soon to say that blockchain is the greatest thing to come out after the internet.”
He adds that blockchain is not going to replace anything but rather create a space for its economy to co-exist with the traditional economy.
Blockchain in a multi-chain world
Potts projects that the world is headed “towards a multi-chain world” in which there would be not hundreds but hundreds of thousands of blockchains. This spread will aid the technology in the achievement of its prospects as outlined by the Australian:
Blockchain will reduce opportunism by making promises work;
- It will disintermediate – its main and most popular function to enable P2P transactions and eliminate a third party – thus preventing intermediation costs that go into transactions, trusts, processes etc;
- Blockchain will also dehierarchicalise by allowing the interaction between people trying to work together be done with less (not all) hierarchy which could see several large organisations break up;
- It will act as a platform for ecosystems;
- Blockchain will bring about competition with governments by helping to provide services that are traditionally associated with governments e.g. identity verification;
- In coming years, blockchain would be a platform for globalization that could:
- bring about trade zones being created between trading partners based on the technology (he thinks the next phase of the World Trade Organization would adopt blockchain use for signing treaties among countries over papers;
- bring about v-form organisations;
- help introduce data markets which are new to the universe;
- lead to ecosystem accounting;
- help bring about hardcoded regulations like in the case of trade zones;
- serve as an economic infrastructure for machines and robots, AI, IoT, AR etc.
All these could be built based on the foundation of blockchain as a distributed ledger technology. Potts points out that a ledger establishes how parties keep track of social facts – intersubjective truths agreed upon (banks, economies, governments etc all run on ledgers – states fail states because their ledgers do not work).
Pott mentioned China, being half of the universe, to be one of the countries to be showing keen interest in the technology. He says the Asian giant is likely pushing blockchain as a standard trade infrastructure. Rocas adds that China’s could also be seen in the plethora of academic papers on blockchain and cryptos coming mainly from Chinese.
Blockchain boom timeframe
While they all agree that blockchain is going to transform the global economy, one area Roca seems to differ is that it may not happen in the next five years. He says the technology is going to take more time to transform into something bigger not for its capability to deliver but for its acceptance by humans.
The 5-year max timeframe outlook for blockchain to change things around was propounded by Guell who, from a business perspective, explained how blockchain will reduce time as well as the cost and energy involved to get longer processes done.
Guell also believes there is a need for skills transfer from physical to the digital world to improve the technology outlook.
Another general consensus is that blockchain – as built by developers – will enable businesses to work together better. However, the creation of value would have to come from strategic management: the blockchain industry needs management expertise to improve the technology’s adoption.
The seminar comes as KPMG released their ‘2019 Technology Industry Innovation’ survey on the adoption of blockchain for business. The auditing firm suggests that there is a rise in the number of businesses showing interest in the technology – 41% of 740 global executives surveyed say they are “very likely/likely” to implement blockchain technology in the next three years while 48% agrees that blockchain will likely change how they do business within same period.
“In addition to a maturing technology base,” Chu says, “the sheer consensus of major enterprise from JPMorgan to Alibaba to the World Bank about the benefits of blockchain are creating a pressure to engage.
“Digital assets including security tokens will revolutionize not only capital markets but will bind together retail, IoT, logistics, and more to create super-vertical value chains anchored by the blockchain backbone. This blockchain technology will empower the next digital economic age.”