European Business: The term “Blockchain” is quite complex. How would you describe it in just a few words or sentences?
Christophe Uzureau: There has been a lot of blockchain washing in the market. The wrong blockchain concepts have been used for the wrong projects and as the wrong solutions. We came up with a simple and clear view of what a real blockchain is. Blockchain includes five key components:
First, distribution. It is the ability to have the same updated copy of a ledger available across the nodes or participants in the network. Distribution itself is not new. Second, Encryption. That means how you provide the extra level of security and semi-anonymity. The third element is immutability. This is to ensure that no one can modify the record unless the participants agree on the Need to do so. Most of the projects today only include these three components and that is a problem. This is not blockchain.
If you want to talk about real blockchain, you have to include two more components. One is tokenization. That is the ability to represent an asset, an ID, a piece of data, as a token in order to enable the Exchange of value. Finally, the most important component that is essential to have a real blockchain, is decentralization. That is the use of the consensus mechanism to be able to reach a decision across the distributed network about the validity of a transaction. If you don’t have these five elements, you don’t have a real blockchain!
European Business: Can you name a practical example where blockchain is used?
Christophe Uzureau: I can give you one great example for football ticketing. A company has developed a concept for The Union of European Football Associations (UEFA). They have started a blockchain solution to improve the running, the performance and fairness of the secondary ticket market. The issue with the sale of tickets in the secondary market is a question of security. We don’t know if the person who goes to the stadium is the person who bought the ticket. Regarding fairness: a lot of tickets are bought by bots and they tend to resell the tickets at a higher price. People have to pay high prices to get into the stadium.
The UEFA started to use blockchain to tokenize the ticket itself. Of course, all of the other key components for blockchain are included. If people now really want to go to a game, the ticket is transferred as a token of value and the ticket goes to you. The blockchain helps in security terms. I can also sell the ticket privately, including via a marketplace, but I can only increase the price up to a given amount thanks to the tokenization process. And this limits the opportunity for ticket scalpers.
"Blockchain includes five key components. If you don’t have these five elements, you don’t have a real blockchain!" Christophe Uzureau
European Business: If a company wants to use blockchain for its business, what does it have to take care of?
Christophe Uzureau: There are a couple of things. You do have to be careful if you join a consortium to participate in blockchain. We suggest our clients to take a step back. You may have different reasons for joining. But you need to start get clarity of different factors. If you join a consortium you need clarity of purpose of joining and of ideally the strategic intent of the other participants. In certain cases the dominant player will define the rule of engagement. His purpose may be to introduce a blockchain to control the market. In this case the blockchain acts as a Trojan Horse. So, when thinking about joining, clarity of purpose is very important.
The next thing that is important is the clarity of governance. Ask yourself: How is the governance going to evolve? When joining a consortium after its creation, you may not be able to influence the governance components such as its structure and voting rights. Finally, the clarity of the exit strategy is important. You need to think about the costs of the exit strategy. And a lack of a roadmap for exiting a consortium is a red flag. These elements are quite basic but need to be considered upfront.
European Business: What are the risks of blockchain?
Christophe Uzureau: Especially when joining a consortium, you are consorting with the enemy, so there are competitive risks. There is also a risk about security. This sounds a bit controversial, because a real blockchain is more secure than many current solutions. However it is not only about the security of the blockchain itself, it is the security of the whole ecosystem, such as the wallets providing access to the tokens of value enabled by the blockchain.
Another risk is the organizational structure. To be able to succeed with blockchain as an organisation you need to think differently about how to make decisions for the enterprise. And this is painful. This is the reason why a lot of companies fail with blockchain. The company does not want to change the way they organize their governance and this increases their propensity to use the wrong blockchain solution for the wrong process or projects. Clearly, we need to find ways to make progress.
"We face a problem of getting more addicted to online services by sharing our own data. The more you share your data, the more you are getting controlled." Christophe Uzureau
European Business: And what are the advantages of blockchain?
Christophe Uzureau: We see a strong ability in the digitalization of assets. Adopting blockchain technology is not a sufficient condition to create a digital business but it does create powerful incentives to do so. There is the ability to help the organizations, individuals to actually access alternative funding and investment opportunities. As a result in new financing models are created as part of this decentralization of finance.
Another much more important advantage is that we all deserve more respect to our data. Blockchain can help us to take back control of our data. I control who has access to my data and for what purpose. For example, blockchain technology helps me to tokenize my data so that my data can be used only by a given company and for a specific period of time. Today, our data is abused everyday by some companies with powerful AI capabilities and sometimes by governments. Blockchain is therefore a very important contribution for this topic – not only for consumers and companies, but also for citizens. The problem is that we don’t know if our data is used and what for. As a result, our own data can be used to influence our behavior and even create an addiction to some online products and services. The more you share your data, the more you are getting controlled. That is a fundamental problem.
Interview: Vera Gaidies | Photos: Harvard Business Review Press