The Executive Guide to Blockchain: Using Smart Contracts and Digital Currencies in your Business

By Maria Grazia Vigliotti and Haydn Jones

Keeping up with fast evolving technology is a challenge that every business leader faces. As organisations start to wake up to the Fourth Industrial Revolution, it’s becoming more important than ever to be able to utilise and exploit new digital platforms.

With the simple aim of demystifying blockchain for business leaders, The Executive Guide to Blockchain offers a jargon-free explanation and framework to better understand blockchain technologies and their impact on organizations. Enabling any business leader with or without specific computing knowledge to reap the benefits of blockchain whilst understanding the limitations, this book will empower you to:

• Identify opportunities for blockchain in your own business sectors
• Understand smart contracts and their relationship with the law
• Create a blockchain strategy and business case
• Implement blockchain technologies and maximise their potential.

Written by experts in non-technical language, this practical resource can be applied to any industry, and arm you with the knowledge needed to capture the possibilities of digital business.

• Language: English
• Publisher: Palgrave Macmillan
• Release date: Feb 25, 2020
• ISBN: 9783030211073

Book preview

© The Author(s) 2020

M. G. Vigliotti, H. JonesThe Executive Guide to Blockchainhttps://doi.org/10.1007/978-3-030-21107-3_1

1. Introduction

Maria Grazia Vigliotti¹   and Haydn Jones²

(1)

Sandblocks Consulting, London, UK

(2)

Blockchain Hub, London, UK

Maria Grazia Vigliotti

Email: [e-mail]

Most of us know people who resort to using jargon in an attempt to make themselves look more knowledgeable or important. It’s hugely irritating and the inevitable result is confusion and an abject failure to explain. The renowned American computer scientist and Turing Award¹ winner Leslie Lamport² shunned jargon and on some occasions just used clocks to explain highly complex computing problems. Throughout this book, we have adopted a similar uncomplicated approach to show how blockchain technology and cryptocurrencies are changing the way we work.

Whether you are a highly experienced executive or a recent graduate (or anything in-between), this book, with its chapter-by-chapter demystification of blockchain and cryptocurrencies, will have something of interest and improve your knowledge of the technology. Differently from other books, we do not merely focus on the business’ benefits and leave details of technology to the ‘experts’, nor we focus only on the technology, leaving unclear how and when the benefits can be delivered, but aim to give balanced attention to both.

You may, of course, already be familiar with blockchain or Bitcoin. If most of what you know has come via the Internet, don’t worry, you’re in good company! Google Trends³ revealed that in 2018 ‘What is Bitcoin?’ was the most asked question on Google⁴ in the USA that year, suggesting a great interest in the subject. In the EU, 66% of people have heard of cryptocurrency, even though only 9% of them actually own a cryptocurrency [89].⁵ Ownership of a smartphone or tablet is driving knowledge of cryptocurrencies with older people showing as much interest as those between the ages of 25 and 40. In the future, one in four expects to own a cryptocurrency, and about a third believes that Bitcoin is the future of spending online [89].

../images/470098_1_En_1_Chapter/470098_1_En_1_Fig1_HTML.png

Fig. 1.1

Comparative display of amount of Google searches carried out worldwide on the words ‘Bitcoin’, ‘Cryptocurrency’ and ‘Blockchain’ from July 1, 2016 until June 30, 2019

(Data source Google Trends, https://​trends.​google.​com/​trends)

../images/470098_1_En_1_Chapter/470098_1_En_1_Fig2_HTML.png

Fig. 1.2

Comparative display of amount of searches carried out on word ‘Bitcoin’ from July 1, 2016 until June 30, 2019 displayed as percentage of the highest

(Data source Google Trends, https://​trends.​google.​com/​trends)

../images/470098_1_En_1_Chapter/470098_1_En_1_Fig3_HTML.png

Fig. 1.3

Comparative display of amount of searches carried out on word ‘Blockchain’ from July 1, 2016 until June 30, 2019 displayed as percentage of the highest

(Data source Google Trends, https://​trends.​google.​com/​trends)

You may be curious about the worldwide popularity of cryptocurrencies, Bitcoin or blockchain. Google Trends is useful to identify the geographical interest in the technology, and sufficiently reliable in its results: it has been used for scientific research across various fields [82]. When Bitcoin’s value peaked in December 2017, there was a corresponding spike in Internet searches, which is probably not surprising (see Fig. 1.1). To a lesser extent, people seem to be interested in understanding what are cryptocurrencies and blockchain as well. The strongest interest in Bitcoin came from Nigeria, South Africa and Ghana (see Fig. 1.2), while the highest number of searches for blockchain originated in China (see Fig. 1.3). This is not surprising given that China is leading the world in the use and development of blockchain technology and has filed the most patents related to blockchain in the world. The most searches for cryptocurrencies came from Slovenia (see Fig. 1.4). These results indicate interest in different aspects and application of the same technology.

../images/470098_1_En_1_Chapter/470098_1_En_1_Fig4_HTML.png

Fig. 1.4

Comparative display of amount of searches carried out on word to ‘Cryptocurrency’ from July 1, 2016 until June 30, 2019 displayed as percentage of the highest

(Data source Google Trends, https://​trends.​google.​com/​trends)

A Driver for Change—Or a Bubble About to Burst?

Since the first cryptocurrency, Bitcoin, was created a decade ago, opinion has been polarised about its benefits. Some investors, including a 12-year-old boy, have become millionaires.⁶ A $1000 investment in bitcoin at the beginning of 2013 would have been worth more than $471,000 in April 2019, an incredible return by any measure. The media have compared the volatility of cryptocurrencies to the infamous Dutch seventeenth-century ‘Tulip Mania’, generally considered to be the first-ever speculative bubble [81]. The pessimists fear the sudden drop of prices (the market fell approximately 90% between the end of December 2017 to December 2018) are the precursors of the next big financial crisis. There is, however, no evidence to back this theory. Even at its peak in December 2017, when the cryptocurrency market was estimated to be approximately $800 billion, it was less than 1% of global GDP (see Fig. 1.5). By contrast, at the peak of the dot-com bubble in 2000, the combined market capitalisation of US technology stocks was close to a third of world GDP; and in 2008, with the global economy teetering on the edge of financial meltdown, the notional value of credit default swaps was a staggering 100% of world GDP [43]. Nevertheless, it’s a fact that some very influential people do have different views about cryptocurrencies. John McAfee, the security expert and creator of the first commercial antivirus software, is a vocal supporter, while Warren Buffet, the American business magnate and investor, suggests to ‘stay away from it’.

../images/470098_1_En_1_Chapter/470098_1_En_1_Fig5_HTML.png

Fig. 1.5

Graph of historical value of the market capitalisation of cryptocurrencies. At the highest peak towards on December 21, 2017, it was estimated to be worth approximately $800 billion

(Data source Coin Dance, https://​coin.​dance/​stats/​marketcaphistori​cal)

Giving You the Facts—Chapter by Chapter

With such a range of views, it’s important that readers are able to form their own opinions and consider the impact both blockchain and cryptocurrencies could have on business.

We have set out to provide clarity in five areas:

History

Looking at the origin and development of cryptocurrencies

Technical

A jargon-free explanation of how blockchain technology and smart contracts work

Economic

How cryptocurrencies can be used to buy goods and services

Business

Building a digital strategy that includes blockchain and cryptocurrencies and an understanding of relevant case studies

Legal

Look at how cryptocurrencies are regulated and future regulation of smart contracts.

The history of cryptocurrencies, covered in Chapter 2, goes beyond the hype and examines the facts, with an explanation of the development of both blockchain and cryptocurrencies.

Chapter 3 examines cryptography, a word to strike horror in the hearts of non-mathematicians but which we think you will come to enjoy.

Understanding how Bitcoin and blockchain work is made simple in Chapter 4, where we also examine the history of Bitcoin and the reasons for the attention since it was created in 2009.

Chapter 5 offers an overview of the cryptocurrencies on the market and practical advice on how to use them to buy goods and services. It also looks at international payments using cryptocurrencies in countries with limited banking infrastructure. It also examines the various kinds of cryptocurrencies (stable coins, private coins, tokens, etc.) and provides the reader with a road map to understand this complex landscape.

The evolution of blockchains from open networks run by communities to enterprises operated by federations or large organisations is looked at in Chapter 6. Application of blockchain solutions for enterprises is thoroughly explored.

For all its benefits, blockchain isn’t suitable for everyone. Chapter 7 provides practical advice on how to implement a blockchain strategy for businesses of any size.

The history and current use of smart contracts is put under the microscope in Chapter 8. If you work in computer science or the legal sector, you won’t want to skip this chapter.

As blockchain enters its second decade, there are calls for greater regulation. Chapter 9 considers how over-regulation could stifle innovation, while too little could have damaging consequences.

Finally, in Chapter 10, we dust off our crystal ball and look at the future for both blockchain and cryptocurrencies, including whether central banks will get on the board of the cryptocurrency train.

We hope you enjoy reading this book and gain a greater understanding of the technology underpinning blockchain and cryptocurrencies, as well as the significant impact both could have on global business. Good luck and good reading.

Footnotes

1

The A.M. Turing Award, sometimes referred to as the ‘Nobel Prize of Computing’, was named in honour of Alan Mathison Turing (1912–1954), a British mathematician and computer scientist. He made fundamental advances in computer architecture, algorithms, formalisation of computing and artificial intelligence. Turing was also instrumental in British code-breaking work during Second World War (source