Cryptocurrencies and Blockchain are tremendously misunderstood and misrepresented in the media and within the industry today.  The challenge in properly understanding Blockchain and its applications such as Bitcoin are rooted in the fact that Bitcoin is neither a technology, a currency or digital gold.  It is what people think and imagine it to be at the moment, which is the problem that also infects the discourse around Blockchain.

On January 31st, 2018, neXCurve hosted a webcast discussion with special guest, Lawrence I. Lerner, CEO of Pithia Inc. to demystify Bitcoin and Blockchain about the time when Bitcoin came off of its high in December of 2017.  We discussed the pervasive and broad confusion in the industry, media and academia about the nature, present and future of cryptocurrencies and Blockchain technology.

Semantic & Conceptual Clarity

We see it happen all the time in the media, in our board room discussions, in our water cooler chats with our colleagues and friends.  We continually conflate Bitcoin with Blockchain and end up in a confusing place at the end of our crypto conversations,.. or were we talking about Blockchain?

The semantic and conceptual disconnects that are so prevalent in our discourse around Bitcoin and Blockchain stem from the classic issue of folks without technical backgrounds not fully grasping the important nuances of what the Blockchain technology really is yet are fully bought into the libertarian ideals and promises that are Blockchain and Bitcoin.  Conversely, you have the engineer types who understand the technology and infrastructure concepts and issues very well, but lack sufficient knowledge of business, markets and process to figure out where to apply Blockchain technology to enable the kind of applications that deliver business value to an enterprise.

The key to understanding Bitcoin and Blockchain is to understand that Bitcoin is a Blockchain application.  You may have heard some crypto experts say that, “Blockchain is the underlying technology of Bitcoin.”  Well, that is partially true, and yes, we all know that Blockchain is a distributed ledger, which doesn’t mean much to most business folks.  In fact, the idea of a distributed ledger probably doesn’t mean much to most business audiences.  Secure, encrypted and resilient are descriptions that will resonate better.

Blockchain is also an infrastructure deployment.  Blockchain resources, functions (consensus, hashing, etc.) and architectures can be implemented in various ways to support different kinds of Blockchain applications such as Bitcoin and smart contracts. Simply put, a deployment of Blockchain ledgers supports a suite of Blockchain platform functionality that enable the Blockchain application.  Bitcoin is just an app.

The Value of Bitcoin and Other Cryptocurrencies

After Bitcoin’s precipitous drop from its high of almost 20,000 USD/BTC back in December of 2017, it seemed everyone started to question the nature of the value of Bitcoin and other cryptocurrencies as well as the nature of these alternative currencies. Are they digital monies? Are they digital gold? Are they digital assets? Should we treat them as a commodity or as a currency? The simple answer – the value of Bitcoin is the aggregate value of what folks believe it is at any given point in time, which shifts quite a bit on a daily basis and continues to evolve as people discover what it is, what it isn’t, and what it is good for.

neXt Curve Blockchain Bitcoin 01.31.2018 v2.0 Short.003

In our view, Bitcoin is a functional asset that provides the differentiated utilities of opacity and lack of regulation versus fiat and digital payment modes such as Apple Pay, wires, money orders etc. We consider this core utility the functional value of Bitcoin represented by the aggregate spot value of transactions transacted through the Bitcoin infrastructure. There is also a non-functional value component to the spot price of Bitcoin that is speculative in nature and represented by aggregate investor/speculator investments in ICOs and hopes of becoming a Bitcoin billionaire, which we estimate comprises 70 to 85 percent of the spot value of Bitcoin over the last 10 month.

Blockchain: The Technology, Not The Solution

Why is it that with all the hype and fanfare shrouding Blockchain we have seen very few meaningful implementations of Blockchain solutions? There are constant press releases about yet another “Blockchain” company launching a supply chain, medical records, or royalty tracking solution. Maybe it is too soon to tell if these ambitions and efforts will result in anything resembling the transformative promise of Blockchain.

One thing is certain, Blockchain is not the solution. It is a technology that enables a business solution that may or may not transform an industry or create a new industry-disrupting variant. Blockchain may be a great thing to lead with for hype-driven marketing and promotion of a business idea, but times are changing quickly. Investors are starting to get smart about the risks of investing in Blockchain ventures and cryptocurrencies with recent studies estimating that more than 80 percent of ICOs are scams, and with numerous crypto exchange hacks and fraud cases.

Entrepreneurs and enterprises need to recognize that addressing the challenges of an industry or creating a new market is not easy. Certainly, saying that you are a Blockchain company with a Blockchain solution is not going to bring about the Blockchain promise of industry disintermediation and democratization. Legacies are difficult to undo. Blockchain alone will not undo them. You need a real strategy to reinvent an industry.

Why We Think Blockchain Will Change The World

Much of what Blockchain promises to do can be achieved using non-Blockchain technologies. What Blockchain does is change the way those promises and visions of a transparent, democratized, sharing digital economy can be governed. It adds another arrow in the quiver of business and industry architects who can leverage Blockchain in designing new industry infrastructures, platforms and business applications that will connect consumers, citizens, businesses and governments.

Implications for Business Leaders

It’s important for business leaders to understand the implications of Blockchain in their industry and their business with clarity. However, it is not an easy thing to do and requires a cross-domain lens. There is a tremendous amount of hype and falsehood out there at the moment that will cloud your understanding and your judgement. Make sure you ask the right questions and confer with a range of business, functional, industry and technology experts. Unfortunately, you are going to have to arrive at your own understanding of Blockchain and what it means for you and your business. There are very few experts. Just turn on CNBC and Bloomberg and you will get a feel for that lack of consensus. Those who make something of Blockchain will be few and those who stray along the path of failure will be many.

neXCurve can help you and your team develop a well-informed and rationalized hypothesis on how Blockchain and cryptocurrencies can be leveraged to unleash digital value within and outside your enterprise.  Contact us for a complimentary consultation and an overview of our advisory and coaching services.

You can listen to the audio replay of our Bitcoin & Blockchain webcast by playing the media below or downloading the Podcast available on iTunes.  Subscribe to our Podcast channel and keep up to date on the latest insights from neXt Curve.

Audio replay of the Bitcoin & Blockchain webcast

Presentation Materials

neXt Curve Blockchain Bitcoin Presentation (PDF)

Related Content & Media

by

Leonard Lee

Managing Director, neXCurve

and

Lawrence I. Lerner

Research Fellow & Advisor, neXCurve

CEO, Pithia

January 31 , 2018

© 2018 neXt Curve. All rights reserved.

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