Some experts still view blockchain technology after its entrance ten years ago as unnecessary hype. While some believe that blockchain has potentials that could transform the industry, others think that it has little economic merits.
Much Ado About Blockchain
In a report released by analysts at JPMorgan earlier in January, the Wall Street Bank said that blockchain’s usefulness is still some years away. Back in 2018, numerous experts began to promote the narrative of blockchain hype and blockchain fatigue as the prolonged cryptocurrency bear market seems to take its toll on the development of enterprise blockchain solutions.
Recently, two professors at IMD Business school, Carlos Cordon and Arturo Bris, got together to lend their voices to the ongoing debate on the Head to Head Series hosted by The Conversation.
Carlos Cordon, Professor of Strategy and Supply Chain Management, believes that the hype surrounding blockchain technology doesn’t necessarily mean that the technology has much to offer. For Arturo Bris, Professor of Finance, however, the arguments offered as criticisms of blockchain come from a fundamental lack of understanding of the paradigm-shifting technology.
Blockchain Integration in Logistics and the Cost of Trust
According to Cordon, integrating distributed ledger technology into logistics is like solving a non-existent problem. Although blockchain offers some level of transparency and trust, making it a part of the supply chain is unnecessary, as it further complicates the system.
However, Bris states that what makes blockchain technology stand out is tokenization. Bris further argues that because of the tokenization of assets, transactions are faster and smoother.
Also, big companies including IBM, Walmart, Alibaba, and Carrefour, use blockchain technology to ensure food traceability and safety. These companies would not invest in distributed ledger technology if it was unnecessary. In October 2018, IBM got a blockchain patent.
Blockchain Value Beyond Data Storage and Asset Tokenization
Cordon further argues that the blockchain storage method is clumsy, with data stored in multiple places. Cordon’s arguments rhetorize criticisms from Nouriel Roubini, CEO of Roubini Macro Associates. The notorious critic refers to blockchain as a “glorified spreadsheet” which is another economic hell. Cordon and Roubini’s criticisms oversimplify blockchain technology, thereby ridiculing the technology.
Bris, however, refers to Cordon’s claims as “a fallacy,” stating that an entire database with a small portion. Encryption also aids in shrinking the size of data stored. There is, however, more blockchain value outside data storage, as asset tokenization and lack of intermediaries would bring transformation and efficiency.
Also, distributed ledger technology removes room for human error, theft, and forgery through certificate authentication.