Seeing Beyond the Blockchain Hype

The potential for blockchain to transform how organizations produce and capture value is very real, but so are the challenges to its broad implementation.

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Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
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After eluding close inspection by most business leaders outside of the tech and financial sectors, blockchain technology has recently taken center stage in the conversation about management’s digital makeover. Indeed, some believe that the long-term business impact of blockchains — which are distributed ledgers that enable and record secure online transactions — may be greater than that of the technologies that have grabbed most of our recent attention, such as data and analytics and the cloud.

However, as with any emerging technology, it can be difficult to separate promise from probability. That is among the reasons why a new working paper from MIT Sloan School of Management professor Christian Catalini and University of Toronto Rotman School of Management professor Joshua S. Gans is so valuable: It offers a balanced economic analysis of blockchain and cryptocurrencies such as Bitcoin.

Catalini discussed several of the study’s key findings and their relevance for managers in a written exchange with MIT Sloan Management Review editor in chief Paul Michelman, and what follows is an edited version of their email conversation.

MIT Sloan Management Review: What prompted you to look at blockchain through an economics of innovation lens? What was it that you felt you knew — or suspected — before you began your investigation?

Catalini: There is substantial hype around blockchain and cryptocurrencies. As often happens when a breakthrough technology is on the horizon and uncertainty about its use cases is high, it becomes tempting to overstate its benefits and ignore the fact that technological change takes time to unfold and often requires entire ecosystems to adapt. Architectural changes in how value is created and appropriated within a given market do not happen overnight. They will generate resistance from regulators, who are trying to assess the risks the new technology involves, and from incumbents, who are worried about new entrants cannibalizing their revenue models.

In this phase, you often see strong polarization in opinions: On one side, you have detractors who highlight the current limitations of the technology (for example, the fact that bitcoin can process only a small number of transactions per second or that bitcoin mining is highly concentrated in China) and use them to support their view that nothing will change.

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Topics

Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
See All Articles in This Section

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Comments (2)
Dan Pike
Beyond the blockchain hype is the realization that it's always been about Bitcoin, not blockchain. Bitcoin is a trustless decentralized payment system and a store of value that allows transactions without any supervision. 
Parthasarathy Desikan
This is a good read and very lucidly written.
Since the topic is in its nascent stage, it would be great to see continual interviews with the author on the topic.