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The Promise of Blockchain Is a World Without Middlemen (hbr.org)

Posted by BeauHD on from the chain-reaction dept.

dryriver writes: The Harvard Business Review has an interesting article about how Blockchain technology may bring down the cost of business transactions and enable new ways of doing things: "Consider the problem that small manufacturers have dealing with giants like Wal-Mart. To keep transaction costs and the costs of carrying each product line down, large companies generally only buy from companies that can service a substantial percentage of their customers. But if the cost of carrying a new product was tiny, a much larger number of small manufacturers might be included in the value network. Amazon carries this approach a long way, with enormous numbers of small vendors selling through the same platform, but the idea carried to its limit is eBay and Craigslist, which bring business right down to the individual level. While it's hard to imagine a Wal-Mart with the diversity of products offered by Amazon or even eBay, that is the kind of future we are moving into." "Decentralization" is the idea that a database works like a network "that's shared with everybody in the world, where anyone and anything can connect to it," writes Vinay Gupta for Harvard Business Review. "Decentralization offers the promise of nearly friction-free cooperation between members of complex networks that can add value to each other by enabling collaboration without central authorities and middle men." The proposition ultimately makes things "more efficient in unexpected ways." For example, "a 1% transaction fee may not seem like much, but down a 15-step supply chain, it adds up. [...] The decentralization that blockchain provides would change that, which could have huge possible impacts for economies in the developing world," writes Gupta.

14 of 73 comments (clear)

  1. I call bullshit by Anonymous Coward · · Score: 4, Insightful

    "Decentralization" is the idea that a database works like a network "that's shared with everybody in the world, where anyone and anything can connect to it," writes Vinay Gupta for Harvard Business Review. "Decentralization offers the promise of nearly friction-free cooperation between members of complex networks that can add value to each other by enabling collaboration without central authorities and middle men."

    And this wonderful decentralization, where anyone and anything can connect to "the database," is why Bitcoin transactions take hours to confirm, the network is only capable of supporting a handful of transactions per second, etc. Don't even get me started on the laughs involved if "everybody in the world, anyone and anything" is keeping local copies of "the database," or enough of it to verify transactional integrity to a level necessary for shit like inventory management at Wal-Mart scale.

    1. Re:I call bullshit by madumas · · Score: 4, Informative

      Yup that's the biggest hurdle right now but multiple ideas are being explored. The one that I personally find the most promising is "sharding", an idea developed to allow the Ethereum blockchain to scale massively. In a nutshell, they will split the blockchain in multiple shards and allow transactions between them.

      More details here: https://github.com/ethereum/wi...

  2. A middle man always comes back into the picture by Anonymous Coward · · Score: 5, Insightful

    "Decentralization offers the promise of nearly friction-free cooperation between members of complex networks that can add value to each other by enabling collaboration without central authorities and middle men."

    Let's look at the numerous examples of decentralized systems that are already out there, like git, BitTorrent, and even Bitcoin.

    What do we notice about them? Despite all of the hype about how decentralization is important, a large degree of centralization ends up happening again just to make those systems practical. With git it's GitHub. With BitTorrent it's the major tracker sites. With Bitcoin it's the major exchanges.

    Of course, doing this ends up eliminating the benefits of decentralization. Like when GitHub goes down, and now all of these git users are shit out of luck (they'll always point out they could push to or pull from each others repos, yet this is a real pain in the ass in practice and they never actually do it). Or like when a tracker is taken offline and finding content to download becomes difficult. Or like when a Bitcoin exchange gets hacked and all of the bitcoins get stolen.

    Anyone who isn't trapped in an ivory tower can see that decentralization is a fantasy at best. In the real world, decentralized systems end up centralizing again in order to become useful.

  3. Harvard by Hognoxious · · Score: 3, Insightful

    Weren't they good once?

    --
    Confucius say, "Find worm in apple - bad. Find half a worm - worse."
  4. Previously in the news by fiannaFailMan · · Score: 4, Informative

    The Economist also wrote about this in 2015.

    --
    Drill baby drill - on Mars
  5. Missing technical details by Vairon · · Score: 4, Interesting

    Most of these blockchain articles fail to mention the important technical details about how a blockchain would be used. The questions I'd like to see answered are:
    What is the "proof of work" used by the blockchain to decide which node gets to commit to the permanent blockchain record?
    How will the blockchain handle if a pool of nodes consisting of > 50% of the computing power for proof of work decides to "double spend" or alter a blockchain record?
    How decentralized will access to the blockchain be?
    Will it only be companies or individuals with access?
    Who decides who gets access?
    What is the minimum amount of time you will need to wait for a blockchain record to be permanent and unable to be altered?
    How big will blockchain be on disk?
    Will each node need a full copy of the blockchain?

    1. Re:Missing technical details by bws111 · · Score: 2

      Blockchain is not bitcoin or other cryptocurrency. There is no 'proof of work'. These things are called permissioned blockchains, who gets to see and update what is controlled by cryptography.

      If you are actually interested in those questions, look up open ledger and hyperledger. There is loads of information and places where you can see how it works and try it for yourself.

    2. Re:Missing technical details by StormReaver · · Score: 2

      Most of these blockchain articles fail to mention the important technical details about how a blockchain would be used.

      For every reason you mentioned, and an additional infinite reasons, using Blockchain to eliminate middlemen is a pipe dream even in a make believe world. It will do exactly the opposite. There will be a few (at most, and eventually merging into one) extremely large middlemen guarding all the doors and holding all the keys. It is not even a remotely viable replacement for our current economic system.

    3. Re:Missing technical details by Vairon · · Score: 2

      Sorry if I was not clear. I understand what a proof of work is. I was just wondering what the specific proof of work was going to be for the blockchain alluded to in the article. If it's a distributed network ledger based on a Byzantine fault tolerant consensus algorithm then it seems like it would be susceptible to attack if > 1/3 of the nodes on the network were traitors to the purpose of the network. What prevents a large numbers of traitorous nodes from joining the network to serve the purpose of a single party? It seems like Bitcoin's system of requiring a computationally expensive proof of work (SHA-256 to find a nounce) makes it harder for a large number of traitorous miners to exceed the 1/2 network threshold required to make a double-spend stick.

  6. Re:"Disintermediation": Remember that 90s buzzword by Motherfucking+Shit · · Score: 4, Informative

    eBay, Craigslist, Etsy, Airbnb, etc. are the middlemen, they all extract their pound of flesh from people who are "doing business with each other."

    --
    "BSD: Free as in speech. Linux: Free as in beer. Windows 10: Free as in herpes." --Man On Pink Corner in #52607549.
  7. I don't think we're going to like our new by rsilvergun · · Score: 2

    super efficient world. Waste employees a _lot_ of people. And as those folks lose more and more jobs to efficiency they'll be more and more competition for the few jobs left. We'll work harder and harder to please the owner class that calls the shots and makes the rules.

    And somehow I don't see us transitioning to Star Trek utopia. That means taking money from that owner class and giving it to everybody else. People call that stealing, and while I could write a book about how that's hokey and hogwash it wouldn't make anyone feel better about it. I've yet to hear a good, one sentence answer to the question: "You just gonna steal my money and give it to the poor?"

    --
    Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
    1. Re:I don't think we're going to like our new by RonTheHurler · · Score: 2

      Sorry, I got carried away there. I see I missed your point about efficiency and automation taking away all the jobs. It's been said before -- automation and machinery took away about 90% of the jobs we had 100 years ago, but today we're all better off for it. We'll invent new jobs and new industries. People can solve complex scientific problems through distributed gamification of them (like the protein folding game, for example). Imagine being a professional video game player, but one that makes a real contribution to the sphere of human knowledge. And people can organize and curate information and other systems, re-test all those medical studies that haven't been retested or verified, etc, etc, etc... And the world will be a better place. But it won't happen unless we EDUCATE the children and the masses and SUPPORT the efforts to make the world a better place for everyone. The top 1% could easily fund the entire education system of our country by themselves. That money could get us better quality of teachers (anyone here have kids? Isn't it alarming to you how many of the teachers can't really do their jobs?) ...

      Actually, I could write a book on this. Maybe I should go do that. Maybe some of you should too. Or better yet, go start a movement. Here's a brief instructional video -- https://www.ted.com/talks/dere...
      Don't be afraid to be the lone nut. Just turn off the TV, do something useful and make a difference for crying out loud.

  8. Shallow article by nikkipolya · · Score: 2

    Yet another shallow article on HBR. I can safely skip these HBR articles. These are more baits for unsuspecting businesses than anything else.

  9. Fiction, but probably accurate by Paul+Carver · · Score: 2

    WASH
    (sotto voce)
    Could've made more.

    MAL
    That wasn't a bad idea, Wash, but
    eliminating the middle man is never
    simple as it sounds.

    WASH
    (surprised)
    You heard about...?

    MAL
    About fifty percent of the human race
    is middle men and they don't take kindly
    to being eliminated. This quadrant,
    we play nice. We got enemies enough
    as it is.

    From: http://firefly.shriftweb.org/s...