Blockchain: "Where are you?"

Ah, Blockchain — You are everywhere we look these days at Vestigo. This is a good outcome if it results in an investable business.

Ah, Blockchain — You are everywhere we look these days at Vestigo. This is a good outcome if it results in an investable business. Most of the time though, it seems that blockchain projects  have been launched without much in the way of sustainable revenues.

This caused us to think about a framework for how blockchain might find markets in which to grow and prosper. It has also helped us think about how big an idea blockchain really is and what the potential total addressable market will look like for its chosen solution.

We think of three areas that are a natural place to use blockchain technology. They are:

Loose assets: The New York Times had a great piece on the use of blockchain recently. Tracking shipping of parts of the supply chain is a great use for blockchain, as you can then see every step in the chain of ownership and control. This allows you to trace back to a specific owner if a problem shows up in the product.

The other benefit is to protect ownership records of freely movable assets such as diamonds. You can take the codes now placed on a diamond and add a blockchain record of its ownership from the mine onward and be sure of the provenance of that stone.

Not only a benefit to supply chains, the protection of hard to trace assets also makes the world a safer and better place. Finding start-up companies who supply these capabilities is key. They can specialize in any part of this value chain.

Large markets: Bonds, stocks and other financial assets are huge markets that involve lots of players. Payment systems trade in that large commodity of money! These all could use the efficiency of blockchain.

There have been announcements of industry endorsed settlement systems for derivatives for example. The key players are there: DTCC, Wells Fargo, Goldman Sachs. JP Morgan and others. They have backed an approach to a single market. They have a start-up as the vendor to them and asked IBM to help.

It is just this sort of broad, cross-industry participation that is critical to this type of market for blockchain solutions. As you can see once this market is created any start-ups not chosen that focused on derivatives are of little value. This makes finding the right winner in this type of application exceedingly difficult and quite risky.

Corrupt systems: Real estate, payments due to citizens, and any place where there is corruption in the world could use blockchain to prove ownership.

Think of how this would aid a country like India that is on a crusade to stamp out corruption by removing large demonization paper money. Remarkable, but probably necessary. If they used registries for land ownership or payments due from the state to a specific person, it would dramatically reduce corruption as well. It would also lead to other uses of the data, like tax collection being more effective.

Of course, the difficulty of this market is to get a corrupt system to support its own clean-up. India is seeing how hard it is to bring about these types of changes.

Other use cases: Then, there are the vanity projects like a company issuing its own stock using blockchain as the registry. Interesting, but unlikely to bring real benefits. Also unlikely to create a compelling market for the blockchain company handling this activity.

We are studying the market carefully given such a wide range of uses. Part of the excitement we have at Vestigo is in seeing how this plays out in the world and we are watching it all very closely!