Blockchain Revolution

THE ECONOMIC PAYOFF
Throughout this chapter we’ve referenced numerous potential benefits of the
distributed, blockchain-enabled IoT at many levels (individual, organizational,
industrial, societal). Redesigning and automating processes across peer-to-peer
networks, rather than through people or centralized intermediary apps, could bring
numerous benefits as already identified including:
Speed (end-to-end automation)
Reduced costs (associated with sending nearly infinite amounts of data to
giant central processing facilities; elimination of expensive intermediaries)
Increased revenue, efficiency, and/or productivity (freeing up excess capacity
for reuse)
Improved effectiveness (built-in checklists and other protocols reduce impact
of human error)
Increased security and integrity (person-to-person trust is not required as
trust is designed into the network architecture)
Reduced likelihood of system failure (elimination of bottlenecks, built-in
resiliency)
Reduced energy consumption (energy required by the network itself offset
by increased efficiency and reduced wastage, dynamic pricing, and feedback
loops)
Increased privacy protection (intermediary can’t override or ignore rules
defined in the blockchain)
Improved understanding of underlying patterns and processes and
opportunities to improve them through the collection and analysis of “infinite
data”

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Strengthened predictive capability of various events whether negative
(severe weather, earthquakes, failing health) or positive (best time to plant
crops, buying patterns).
The distributed open model means that IoT networks can be self-sustaining even
after a company pulls out or a manufacturer fails. Interoperability, when designed into
the system, will enable the connecting of different IoT networks and will unleash even
greater value.
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Many of these benefits depend upon the concepts of distributed, or decentralized,
networks and the elimination of a central (e.g., command and control) or other
intermediary (e.g., a clearinghouse or management app). Once these new
intermediaries are in place, others will feel pressure to “work around” or eliminate
them. In Eric Jennings’s view, “People will do the things they’ll do to minimize their
own discomfort, leading to silos and concentration and centralization. What’s a short-
term gain for those particular people is a long-term loss for everyone else.” He said,
“The Internet of Things should be completely decentralized where devices can be
autonomous, discover each other directly, establish secure communication with each
other directly, and eventually pay each other in value, directly between machines.”
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The IBM Institute for Business Value has conducted research into what it calls the
five major “vectors of disruption” that will increase our leverage of physical assets as
the result of the blockchain-enabled IoT.
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While IBM clearly has a business interest
in the IoT, its work on business value is nonetheless very helpful.
First, the institute noted that these new networks will enable users to instantly
search, access, and pay for available physical assets, such as underutilized storage or
computing capability. The assets in supply can match themselves to demand. Because
we can assess risk and credit automatically online and repossess virtually, we can
reprice credit and risk significantly downward. Automated usage of systems and
devices improves operational efficiency. Finally, firms can crowdsource, collaborate,
and optimize with business partners in real time through digitally integrated value
chains.
In short, you have an opportunity to make conceptually simpler, more efficient
markets. You can access previously inaccessible assets, determine price in real time,
and reduce your risk. Once the basic infrastructure is in place, barriers to entry are
low (e.g., just develop an app), and the ongoing costs also relatively low (e.g., no
more third-party service fees). It drastically lowers the cost of transmitting funds and
lowers the barrier to having a bank account, obtaining credit, and investing. It could
even support micropayment channels, matching minute-by-minute service usage with
minute-by-minute payment.

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The Ledger of Things enables “distributed capitalism,” not just redistributed
capitalism. Far from a free-for-all, these markets can be shaped according to our
values—as individuals, companies, and societies—and these values coded into the
blockchain, such as incentives to use renewable energy, use resources from our closest
neighbors first, honor price commitments, and protect privacy. In short, the Ledger of
Everything on top of the IoT animates and personalizes the physical world even as we
share more. As IBM stated, “At a macroeconomic level, we are all winners in the IoT
future, even though different industries will experience a mix of different effects.”
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According to the McKinsey Global Institute, the economic value of the IoT has, if
anything, been underestimated; the economic impact—including consumer surplus—
could be as much as $11.1 trillion per year in 2025 for IoT applications.
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That’s a 10
percent lift on current global GDP of well over $100 trillion; that’s huge!
Networked intelligence, a phrase coined in The Digital Economy, referred to how
the network would be smarter than its smartest node in one domain after another. As
we have explained, the first generation of the Internet dropped transaction costs
somewhat. We have faster supply chains, new approaches to marketing, and peer-to-
peer collaborations like Linux and Wikipedia on a massive scale, with many
innovative new business models. Blockchain technology will accelerate this process.
As the Internet of Things takes hold, these trends will go into hyperdrive.