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Seeking Evidence For and Against Blockchain Applications

Simon Johnson

“One of my favorite things about MIT is the enthusiasm people have here for talking through new ideas in an informal, friendly, and direct manner,” says MIT Sloan Professor Simon Johnson, faculty chair of the MIT Sloan Fellows MBA program. “We have many such discussions and research projects underway at the Institute related to blockchain. It’s all very exciting and confusing at the moment, but we’ll gain clarity over time about which aspects of the technology deliver distinct value and utility and which fall into the category of wishful thinking. If you can show us something real that you or someone else is doing with blockchain technology, we want you to join the conversation.”

In Johnson’s view, the overarching potential of blockchain is to shift the balance of power in financial, commercial, and social ecosystems away from established intermediaries toward something new and, as yet, only partially defined. “The vision of widespread decentralization is at one end of the spectrum,” he says. “The emergence of a new set of intermediaries with nontraditional business models is also in the mix. And we already see many dominant intermediaries in the marketplace morphing their policies and practices to incorporate this new technology. I expect that some companies will adapt successfully and others will fall behind.”

Predictions of blockchain’s dominance may be premature
As to the nature of prognostication outside the MIT community, Johnson notes that the Financial Times recently poked a bit of fun at business gurus who predicted that blockchain technology was well on its way to becoming an established norm. The January 10, 2019 piece “Occum’s blockchain shaver” tracked a significant rethink by a globally renowned consulting firm between 2015 and 2019. Following three and a half years of decidedly optimistic predictions, the January 2019 assessment struck a more cautionary tone:

“There is a clear sense that blockchain is a potential game-changer. However, there are also emerging doubts. A particular concern, given the amount of money and time spent, is that little of substance has been achieved. Of the many use cases, a large number are still at the idea stage, while others are in development but with no output. The bottom line is that despite billions of dollars of investment, and nearly as many headlines, evidence for a practical scalable use for blockchain is thin on the ground.”

A need to get into the weeds
“I think it’s helpful to remember that blockchain applications are still very much in an exploratory phase,” says Johnson. “We’re applying a lot of technical firepower to those efforts.” He notes, for example, that MIT’s Digital Currency Initiative (DCI) has dozens of MIT students and researchers working with a variety of companies and development agencies on projects designed to harness blockchain’s potential. DCI’s overriding mission is to empower individuals by making it as easy and fast to move value across the world as it is to move information.

Although it’s difficult to say at this point which aspects of blockchain will turn out to be interesting and consequential, Johnson is upbeat about the technology’s future. “We have robust investigations underway, and I’m confident that we will create value with blockchain applications across a variety of sectors.” Johnson’s latest book Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream, with coauthor and MIT Economics Professor Jonathan Gruber, examines the lessons of the post World-War II American success story and lays out a plan that will create the industries of the future—and the jobs that go with them.

 

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