Large Businesses Might Adopt Blockchain Technology Faster Than Individuals

Monday, February 5, 2018

My mother came to visit this weekend, brand new iPad in tow. She’s an extremely bright woman in her late 60s, with basic proficiency on a desktop or laptop computer. Yet watching her on the tablet conjured an image of Christopher Columbus and the native Bahamians standing there staring at each other for the first time. I was baffled that she couldn’t follow the directions that seemed to me to be quite clearly stated on the screen. I realized she had no understanding of what the machine did, that the interface was different than anything she had ever used. She could memorize the steps required to operate her Netflix account, but when she challenged herself to a new task, downloading the NBC app and getting it to play the Super Bowl, she took several wrong turns and almost inadvertently changed her Apple ID. It was technology adoption in real time, in all its slow and messy glory.

I’m not writing this to embarrass my mother, but rather because it’s a parable useful for understanding the adoption of cryptocurrencies and blockchain technology. There’s no doubt my mother will become adept with her iPad, after she’s had time to learn by trial and error. But the key word is time, and understanding blockchains requires a much larger intuitive leap than going from a desktop computer to a tablet. I recently wrote that one reason technology bubbles happen is that startups, in their efforts to get funding or establish themselves before people with similar ideas, get ahead of consumers’ adoption of the technology. I confess that even though I study the ideas, I still have a hard time intuitively understanding some of the applications people propose. And it took me four tries before I considered my “What Is Bitcoin and Blockchain?” lecture a success (I’m still haunted by the image of dozens of bewildered credit union managers staring at me).

Some observers think we’re nearing a tipping point of widespread use of Bitcoin or other applications, but I’m not one of them. I think that day will come, but it will take at least several years and might even require a new generation who learn the technology young, like millennials who learned computers. It’s easy to forget when you’re part of a small community having a constant conversation about this technology that people will not trust it until they gain a basic intuition. I remember in the late ’90s the idea that people would never type their credit card number on the internet. But as the internet became a normal part of people’s lives, that trust developed.

My guess is that the first successful blockchain applications will be used by large established businesses rather than the general public, not exactly what the original developers of the technology had in mind. Corporations like IBM, JP Morgan, and Maersk have the resources and personnel to implement the technology, and stand to reap the most gains if it reduces costs or saves time. Within a large business, one can sit employees down and require them to learn a technology, whereas individuals go at their own pace. If there is indeed no tipping point around the corner, people will start pronouncing the technology dead. But the fact that it takes a long time to build intuitive comfort with it shows how transformational blockchain technology can be. My mother can now watch Netflix on her flight home, but my best guess is it’ll be a while before she pays them in Bitcoin.

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Max Gulker, PhD

Max Gulker joined AIER in 2015. His primary research areas are applied microeconomics and industrial organization. Max previously worked as an economist for Keystone Strategy, supporting expert testimony for antitrust and intellectual property litigation in high tech industries. Prior to that, he worked on financial litigation matters with NERA Economic Consulting. Max holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Follow @maxgAIER.