Blockchain Will Disrupt Everything

My friend Mike sent this to me.  It was a presentation at the Stigler Center over at Chicago Booth.  David Yermack is an academic at NYU.  They did a 3 day conference on blockchain, and here is a link to the presentation.

It’s just over one hour but it’s worth your time.

Blockchain is the most exciting technology to come around in a long time. It will not only disrupt finance, but also legal and government. If you are sick of political parties, get familiar with blockchain.

The key component to Blockchain isn’t the foreign exchange or currency part of it. It’s trust.

How much of our society pays gatekeepers because of trust? Or fear? Or fear that something won’t happen? Or that someone won’t perform on an obligation?

Blockchain can make that go away.

For entrepreneurs, they will have to rethink how they do some things.  They will have to get comfortable with delegating a lot to a network that they create.  Many entrepreneurs are “control freaks” in some way.  A blockchain network is highly organized but highly decentralized.  That can make people uncomfortable.

One example I thought of was this.  Currently, if you do a trade at an exchange, it runs through a clearinghouse.  The exchange clearinghouse is a centralized database that the exchange can derive revenue off of.  What if that whole thing was outsourced to a blockchain?  The whole thing.  That means setting margins and fees too.

Reasearch scientists will use blockchains to collaborate.  People across the world will link up on blockchains and there will be immediate trust.

The most concrete example I can give is being a trader on the floor.  Prior to going on the floor, you were vetted by a membership committee.  Your clearing firm interviewed you and checked out your finances.  The clearing firm guaranteed your account with the clearinghouse.  If you went tap city, they were on the hook.  The day you got your badge and walked on the floor, you could go to any pit you wanted and make a trade.  People trusted that your trade would be good.  Implicitly.  Your word was your bond.

People that didn’t stand by their trades were run out of the community.  It wasn’t pretty.  Even if you were a huge scumbag, you had to step up.  Otherwise you were out.

Blockchain reminds me a lot of that but at scale.

This technology is going to upset A LOT of apple carts.

  • awaldstein

    I agree that change is brewing.

    I disagree that this in effect impacts how our country is governed and is an antidote to the mess we have in our government at this time.

    More engagement not less is the way to address that.

    • It could take power out of the hands of bureaucrats and conniving politicians and put it back in the hands of individuals. The system will fight it.

      • awaldstein

        It may and I hope it does.

        If won’t impact the immediate mess we are in though.

  • JLM

    .
    The blockchain will NOT cure male pattern baldness nor many of the things you suggest. It is a very promising bit of wizardry, but you are suggesting it will cure things that others do not agree are sick or for which anyone wants a cure.

    Blockchain itself is today struggling with its own governance which suggests it requires a bit of the structure and regulation it decries.

    They may be getting close to some useful apps, but the killer app eludes them.

    JLM
    http://www.themusingsofthebigredcar.com

    • I’d watch the video. It won’t cure male pattern baldness. But, it is inventing a new kind of sex.

  • Fee free distributed exchanges already exist (sometimes called dex), and with real volume. Etherdelta and OasisDex come to mind. There are even projects like 0x that want to make it easy for anyone to run an exchange. The onramp from fiat into crypto still has high fees and gatekeepers like Coinbase, but once you’re in crypto you can trade in a number of dexes or typical fee exchanges like Kraken or Bittrex.

    • The key for an exchange is not the front end. It’s the back end. Without clearing, you are simply an ATS which is simple. Clearing is everything. The one downside to blockchains I have seen is they simply aren’t fast enough, nor robust enough to clear the mountain of trading that is done every day.

      • Does “mountain of trading” refer to the number of trades made in a day? Any numbers you can share so I can wrap my head around it?

        • The Forex market trades what? 3 Trillion a day in notional volume? Eurodollars at the CME trade more in notional volume in one day than the NYSE does in an entire year. Debt markets are massive. It’s not all big blocks going through. There are millions of transactions daily. I have not seen one blockchain that could handle it, yet. Yet is the operative word.

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