I have been reading articles / personal blogs about block-chain & bitcoins. As a business professional, had lot of key commercial questions and thought to share with you to understand how this all adds up!
Two key references I wish to quote are: article by Pramod Rao https://lnkd.in/fvv-2fX(https://www.linkedin.com/feed/update/urn:li:activity:6316096736595144704/) & another article is: http://www.livebitcoinnews.com/costs-10-annual-gdp-run-bitcoin-node-nigeria/
I had recently met with a start-up team who set-up their venture in this space and were mooting high valuations for 1st tranche of seed funding.
By this article, I thought of throwing open some of the basic commercial questions vis-a-vis current banking/ registry mechanisms which were not clear to many professionals like me.
If anyone can share some views, that will greatly help.
Blockchains (let’s take this point in context “Land / Property Registry Records”, which is often used as parallel to present proof of concept of blockchains):
- What lacunae in current mechanisms followed by Local Gov’t in maintaining land registry records will any “public” blockchain solve?
- What is the incentive to be “blockchain creator & operator” for such public transaction?
- Who will pay the incentive – buyer / seller of such land / property?
- Considering “multiple” blockchain creator & operators with highest computing power are expected to be part of eco-system (at least that is mooted / assumed in all discussions), won’t it come down to “who has uninterrupted electricity & stacks of super-computers” actually be successful?
- So, why multiple companies invest in same segment of computing infra & keep upgrading it with risk / uncertainty on whether it is “the best” and be able to earn incentive to recover capex/opex cost and actually make excellent ROI?
- Against payment of such incentive to “blockchain creator/operator”, what will the transacting parties get in return over his own life-time which current Gov’t doesn’t provide?
- Who will decide how much should the incentive be? How?
- Won’t this gives rise to skewed orientation that only strongest “blockchain creator & operator” will emerge as ultimate winner who will earn all the incentive(s)?
- If yes, isn’t that resulting in “one entity” being considered as “blockchain creator & operator”?
- Then, why can’t such one entity be the same State/ Central Gov’t who has secure enterprise software to get the same things done?
- So, won’t this lead to single entity mechanism present today? If Gov’t upgrades current infrastructure & mechanisms what exactly will then change by “public blockchain”?
- Isn’t the incentive present today in form of “stamp-duty”? So, what will change for the transacting parties?
- Aren’t private blockchains similar to softwares owned & maintained by each banks? At max, consortium of banks can come together and create a “walled” mega software called as #blockchain, which can be co-maintained by them by sharing the costs? Even better, like creating standalone subsidiaries for telecom-tower business, next gig may be creating standalone companies which will manage IT back-end for banking softwares in shared manner to bring down costs dramatically?
Bitcoins:
Lets look at basic commercial questions about Bitcoins.
- What “consumer need” which current currency mechanism cannot fulfill which the Bitcoin is expected to fulfill?
- If bitcoins are to be used as “incentives” for blockchain creator/operators, aren’t they more like “credit card reward points”?
- If the bitcoins are supposed to be valued based on the “cost of Bitcoin production / mining” and not against any real intrinsic asset, won’t Bitcoin have differential value depending on where the Bitcoin miner is based viz. emerging v/s developed economies? Because of arbitrage in cost mix involved for “Bitcoin mining operations”, technically, won’t 1 Bitcoin earned by miner based in Switzerland be higher than that earned by Bitcoin miner based in Zimbabwe? Then how the global currency is expected to carry different value?
- Due to anonymity of Bitcoins devoid of any backing of real intrinsic collateral – isn’t it a currency / exchange mode which may be used for Hawala type transactions for “off-book” transactions?
- As Bitcoins are not backed by real assets / Gold and doesn’t replace any of current currencies, so how does it actually help?
