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Blockchain can Revolutionise Business

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It won’t, however, be the saviour it’s being touted to be from the perspective of marketers and businesspeople who don’t understand it. Its real value lies in its ability to decentralise trust, taking that trust away from (centralised) organisations (mainly businesses and people that act as trusted third parties) and putting that trust into open, transparent computing algorithms, code and the community. This has massively disruptive potential for several different industries that have historically relied heavily on centralised networks of trust, especially financial services.

To understand more precisely why the blockchain has disruptive potential, one needs to understand, firstly, what decentralised systems are in general, and, secondly, why the blockchain exists at all. This will also help in understanding why one should not blindly trust the hype around it.

Decentralisation

Take a look at the following three pictures to understand the high-level differences between centralised, decentralised and distributed systems. In the diagrams, black dots represent “client” or “peer” nodes in the network (such as your mobile phone or laptop, or perhaps an individual customer of a bank), and blue dots represent trusted “server” nodes (such as the servers belonging to Facebook, your bank, or your e-mail service).

Centralised System
Facebook, Google, banks, most modern businesses
Decentralised System
Bitcoin/Blockchain, E-mail, YaCy
Distributed System
BitTorrent

I purposefully represented the blockchain as a decentralised system as opposed to a distributed one because not all nodes in the network are full nodes holding the whole blockchain in its entirety. It is possible to make use of the blockchain without storing all historical transactions, but if you don’t store the entire transaction history, you’re implicitly trusting all of the other full nodes who do.

More on this below.

What is the Blockchain?

For the non-technical audience: the blockchain, in the way it’s used by Bitcoin, is simply a way of representing financial ledger transactions in a sequential way (the order of all users’ transactions is vitally important to the integrity of any transactional system). So why all the fuss? Watch the following video – it does a good job of explaining the real value and significance of Bitcoin and the blockchain, and how it works, at a very high level. After that, I’ll dig into some of the differences between traditional, centralised accounting practices, as compared to decentralised, blockchain-based accounting.

The real value of Bitcoin and crypto currency technology – The blockchain explained

Traditional accounting

When using traditional financial accounting software systems (e.g. Sage One), some of the underlying assumptions are that:

  1. You can trust the person (or system) capturing financial transactions that happen in the real world.
  2. You can trust your software to store them in the correct order.
  3. You can trust your people and software to only store a single instance of a particular transaction (no double-spending allowed).
  4. You can trust the people and software to not go back and tweak or modify those transactions’ details.

Companies implement strict, usually hierarchical, controls and governance around who can actually manipulate the data stored by their accounting software, and are audited regularly to ensure there’s no foul play. The servers storing the financial data are usually centralised, so that there’s a single source of truth that all connected clients can trust to give them accurate information.

So how would it work if we decentralised our trust in the financial transaction history?

Decentralised, blockchain-based accounting

There is no single source of truth in the blockchain, which was a novel invention by Satoshi Nakamoto in trying to solve the problem of ensuring that ledger transactions are correctly ordered and cryptographically verified in a decentralised system. Here, users do not trust each other, but rather put their trust into open, transparent, cryptographic algorithms and protocols, and the strength of the network.

Comparing decentralised accounting with the traditional accounting trust points mentioned earlier:

  1. You cannot trust anyone submitting a transaction to the network, but you can trust in the algorithms used by the network to check that your transaction is valid.
  2. You can trust the blockchain to store transactions in the correct sequence. Sometimes, it does happen that the blockchain gets forked due to a disagreement between the peers as to which block of transactions should be next in the sequence. This is automatically resolved by the network.
  3. You can trust the blockchain to ensure no double-spending.
  4. You can trust the cryptographic protocols in the network to ensure that nobody modifies historical transactions. This would result in corruption of the blockchain, and the peers would reject any such modifications.

Disruptive Potential

Now we get to the so what? part of the discussion: what, then, makes the blockchain so “disruptive”?

Goodbye banks?

Since it isn’t just your bank that keeps a copy of the ledger, and you can keep a copy of the ledger yourself too (where you and the rest of the community are held accountable to each other through cryptographic algorithms), why do you need a bank to facilitate transactions for you? Beyond getting credit from the bank, what more does the bank really do for you than act as a trusted third party between you and the other person with whom you’re doing business?

This sort of disruptive potential applies to absolutely any real-world situation where there’s a need for a trusted third party whose sole purpose is to facilitate and reliably track transactions. If it’s in the interest of a community to keep track of something in a trustworthy way, a decentralised blockchain can do just as well today as a trusted third party’s software systems.

Unfortunately, the blockchain is also a relatively new technology and is still being battle-tested by the community to ensure that it really is secure. Information security is far more than just cryptography, as per the following XKCD comic.

Applications outside of finance

Being a decentralised transaction tracking system, the kind of transaction that gets tracked by the blockchain is totally up to the developers building the application layer of software on top of this transaction tracking system. Bitcoin, by design, is a financial transaction tracking system built on top of the blockchain.

Several application areas for the blockchain outside of finance come to my mind:

  • Accommodation booking systems, especially Airbnb-style accommodation bookings.
  • Parcel tracking systems, especially where multiple different courier services are employed to deliver a parcel.
  • Government accountability systems, where the general public can reliably track whether their government is delivering on their promises (whether this be financially or otherwise).
  • Community-oriented agricultural produce tracking systems, which could allow transparent tracking and reporting of local agricultural produce for communities.

And there are potentially loads more.

Don’t trust the (irresponsible) marketers

Therefore, the blockchain is potentially disruptive. But it won’t necessarily benefit all businesses. Disruption might just mean that your business is the one being disrupted, meaning that it might just put you out of business. (If, of course, you’re in the business of acting as a trusted third party).

Who really benefits from the blockchain?

From what I can see, your business only really stands to benefit from the blockchain if you:

  1. rely heavily on one or more trusted third parties,
  2. provide a good/service to the broader community,
  3. would save time/money/etc. if your trusted third parties were decentralised and entrusted to the community, and
  4. the broader community comprises, at least partially, of people who are technologically savvy and invested enough in your good/service to want to be part of the community to whom your data is entrusted.

Don’t trust the banks’ “love” of blockchain

Apparently, many international banks are embracing the blockchain. I would personally be very skeptical of this sort of move on their part, because it is the very nature of the financial institution that currently stands to be disrupted by blockchain-like technologies.

For example, Bank of America is apparently “going big” on Bitcoin and the blockchain. By filing patents? All this does is provide them with ammo to potentially sue people who infringe those patents, potentially hindering efforts to decentralise the financial system. From my perspective, this is a purely self-preservation-oriented move on their part.

I also call bullshit on every bank who claims they’ll benefit by implementing a blockchain internally within the bank for tracking transactions. In computer programming, this is pretty much what we call a CQRS architectural model, and the banks should be using that kind of model anyways.

The whole point of the blockchain is to decentralise its storage and entrust the transaction validation and history to the community. What good is it if all of the nodes are behind the bank’s firewalls? How is that any different, from the perspective of a bank customer, to the situation as it is today, where the customer’s trust still effectively has to be centralised within the bank?

Conclusion

The blockchain is a technology aimed at decentralising trust. This has the potential to disrupt some industries that presently rely on trusted third parties. Those who stand to benefit the most are people who currently rely on trusted third parties, whereas those who stand to lose the most are those who are trusted third parties in facilitating transactions between other people.

Finally, don’t trust irresponsible marketers when they tell you that the blockchain is the solution to all your problems (it only solves a pretty niche sort of problem, actually), and for goodness’ sake don’t trust the banks when they say they’re in full support of the blockchain. These two groups of people are the most likely candidates to, inadvertently or on purpose, strangle it to death while nobody’s paying attention.

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About the Author

This article was written by Thane Thomson, who is currently working for DStv Digital Media in research and development

Entrepreneurship

Fear & Desire with Emerging Technologies

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For all their complexity, we tend to think about emerging technologies in surprisingly simple ways. Either they are a force for good. That is, for eliminating disease and pain, and offering the prospect of not only extending our lives but bringing a level of physical and cognitive enhancement that even the previous generation could not have imagined. We get a sense of the apparently limitless power of artificial intelligence to help us grapple with the widest array of personal, social and physical problems, especially as we apply it to the massive and growing resource of Big Data. And we particularly enjoy the expanding connectivity that comes with all this.

Or we see them as threatening, especially as artificial intelligence increasingly makes important decisions for us, as that same connectivity is used to exploit us and as it distorts our view of the world, and as genomics explores and alters the very codes of life. They are also seen as a threat to the ecosystem through the toxicity from mining rare metals, from the gases and microplastic waste from modern appliances and through the dumping of ‘old’ technologies as the replacement cycle shortens.

Or, even more commonly, we see them as being all of this, leading us to think that all we have to do to enjoy all the benefits is to constrain the risks they pose. A comfortable trade-off, a pact of some kind.

But the story of emerging technologies may be far more interesting than this, especially if we ask questions that have not been asked before. Why is it that this ‘fear and desire’ relationship that we have with technology seems to echo a similar ‘fear and desire’ relationship that we and our forebears have had with God, with the State and even with the large corporations of the Market? Do we have – or have our forebears had – a fear of these but also a desire that the power that causes this fear be brought to bear to create sympathetic conditions for us? A series of powerful protectors and providers? Is that not similar to the relationship we are increasingly having with the new technologies? If we can see some resonance here, doesn’t that change how we should think about technology? What further questions do we then need to be asking about how this relationship works?

Technology and the Trajectory of Myth answers these and other questions. It identifies the nature of the dynamic that drives this relationship and presents evidence to show that such a dynamic has long been in play, not just with the new technologies but similarly with those ‘magnitudes’ of Deity, State and Market. This evidence is found not only in the respective fields of those magnitudes but also in science, the legislative process and in law more generally. All this allows an argument that the magnitudes have formed a trajectory that has shadowed the history of the West from the start, a trajectory in which the new technologies are a key factor in the occupation of the space previously and sequentially occupied by those magnitudes.

This dynamic is proposed as a combination of psychology and history, which not only explains the relationship between individuals and the magnitudes across this trajectory but which argues that this relationship is strongly present today. The idea of it was drawn initially from the account of mythology presented by the German philosopher Hans Blumenberg but it has then been extended and widely re-worked. The result has been the imagining of this series of magnitudes as mythological entities, the purpose of which is to deal with the pressing and persistent existential fears and desires that all individuals experience. These magnitudes are claimed by their respective dominant interests to be not only absolutely empowered – they must be so to cope with the absolute nature of those existential experiences of individuals – but which have had that fearsomeness engaged to create sympathetic conditions for each individual.

The condition on which all this relies is the full subjection of the individual to the regime of idea and practice of each such magnitude in their respective eras. In fact, it is that subjection which fully empowers the magnitudes. The outcome is that, ironically perhaps, each absolute magnitude is ‘brought to earth’ by its conversion into a sympathetic form, with its power moving from absolute to conditional. The consequence of this loss of absolute status is then a search for a replacement absolute magnitude. These successive creations and failures – which see each magnitude descend into a field of failed but persistent magnitudes – constitute the trajectory. Within this field there are competitions and alliances as the dominant interests of each magnitude seek its re-emergence into an absolutely powerful condition. The operation of this field is a way to understand, for example, the contemporary alliance between the Market and both the State and emerging technologies.

This leads to the end point, the point of our present condition. That is, that technology can only take its place in this trajectory if it acquires an absolute form. We can see this emerging in the claims that technology will fully empower the individual as an Absolute Subject. Unlike the secondary position that the individual occupied in relation to the earlier magnitudes in their absolute condition, such an individual will be empowered to deal conclusively with her own existential fears and desires.

So we come back to the point at which we began. That is, the common view that technology should be seen as comprising contradictory utopian and dystopian features and that the former will be realised if the latter are eliminated or severely constrained. In fact, both features are together essential to this story of modern mythology. We need technology to be fully empowered – thereby fearsome – so that claims can be made that it will deal with the absolute existential condition of each of us. This to be done by the full power of technology in which we are to be embedded as Absolute Subject and by which each of us can create absolutely sympathetic conditions for ourselves. Utopia and dystopia need both to be brought into the context of the modern mythology not as contradictory elements but as working parts of the mythological dynamic.

But that is not the end of the story. As we have seen, the relationship between the individual and each of the magnitudes of the trajectory is based on a subjection which is best understood as the foregoing of responsibility for oneself. To recapture this self-responsibility – and experience the respect which accompanies it – means to reject this subjection. This in turn means opting out of the mythological way of organising both our sense of self and our social arrangements and dealing with existential concerns very differently, respectfully and in radical self-reliance.

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About the Author

This article was produced by Elgar Blog, Edward Elgar Publishing‘s blog is a forum filled with debate, news, updates and views from our authors and their readership. see more.

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Entrepreneurship

Can Coworking Spaces Save Retail?

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Coworking spaces have served a plethora of modern workers through physical spaces. There have been office blocks, private member clubs, coffee shops and more. Now, there’s a new trend on the horizon: coworking spaces in shopping centres. Whilst this might be an innovative environment for coworking spaces, the arrangement also forms part of the retail industry’s move towards a new shopping mall model emerging in 2030. This trend isn’t constrained by any region; it’s unfolding on a global level with hotspots including San Francisco, Dublin, Shanghai, Melbourne or Moscow. What has the journey involved to date?

It didn’t take long for 2017 to be coined ‘the year of the great retail apocalypse.’ Retailers closed an unprecedented number of stores with many filing for bankruptcy (such as Toys ‘R’ Us), whilst shopping malls simultaneously faced growing pressure to survive declining demand for physical retail space.

Diversification of tenants and technological enhancements might have been pursued by shopping centers as survival strategies in the past, but now are we seeing coworking spaces enter the mix. Coworking operators are taking space in shopping centers and shopping centers are developing their own coworking brands.

Why are Shopping Centers an Option for Coworking Spaces?

Retailers are taking less space and more space is available. Shopping center investment slowed over the past few years and renting space has become cheaper. Forecasts back in 2015 predicted a 20-25%rental decrease in Hong Kong. In 2016 retail investment in the Netherlands was down by 40%. In 2017 Manhattan retail rents fell by 13.4%, Canada had an average 30% retail vacancy rate, Australia’s retail investor intentions dropped by 10% and UK shopping center investment fell by 45%. Now in 2018, the likes of Ginza High Street in Japan are set to hit their lowest rent rates towards the end of the year.

Shopping malls have already tried filling space with hospitality and leisure facilities in the form of restaurants, cinemas, bowling alleys and even indoor ski facilities. However, these offerings aren’t quite enough to avoid the approximate 30% closure of space required for shopping center supply to meet tenant demand.

E-commerce giants continue their notorious online role as the major driving force behind decreasing demand for physical retail space, not to mention the shift in consumer spending from goods to lifestyle experiences. Further diversification is required and it’s starting to take the shape of coworking spaces.

Shopping Mall Owners and Coworking Brands

Westfield, in partnership with Forest City, is one of the first major retail outlets to develop their own coworking brand. In 2015, Bespokeopened on the 4th floor of Westfield San Francisco Centre. The 40,000 sq ft space is designed specifically as a retail-tech ecosystem supporting coworking, events, demos and pop up shops. The space is home to corporate and start-up members spanning industries such as payments, artificial intelligence, virtual reality, experiential, e-commerce, retail analytics and more. Bespoke hit full capacity after just 6 months.

For Bespoke, the main opportunity lies in bridging the gap between startups and big-box retailers. Kimiko Thornton, Senior Director of Innovation at Bespoke highlights, “Bespoke focuses on converging the digital and physical by curating a portfolio of members who are actively working to improve the retail landscape. Members are selectively identified by Bespoke and are connected to the C-Suites of Fortune 500 companies through our corporate innovation tours. Through this program, members benefit from access to retail executives and the opportunity to run pilots in a multi-faceted, consumer-facing environment. Retailers benefit first-hand from early access to the latest retail innovations.”

So, why would a shopping center invest in their own coworking brand instead of letting space to an operator? Kimiko notes some of the benefits: “Driving thought leadership in the industry, bringing in over 100k incremental visitors to our Centre annually, and getting early access to test and support retail innovators are just a few of the benefits. By being connected, we’ve given our startups the opportunity to run successful trials throughout our properties. Examples include Hemster, the on-demand alterations service and July Systems, the retail industry’s best location intelligence and engagement platform.”

In terms of membership types, private offices have been Bespoke’s highest area of demand; offices sold out before opening and an additional office suite was built quickly. With that being said, Kimiko explains how “demand can shift from one type of membership to another within a matter of months. This is why creating a flexible space is so important; we can easily adapt to fluctuating demand. Members do get acquired and outgrow us into their own offices, but we encourage this as we welcome fresh talent on a rolling basis.”

Atmosphere is another coworking space owned by a shopping center, situated outside Moscow’s city center towards the southwest where no coworking spaces have ventured before. The space features a conference hall and is ran by Atmosphere’s multi-business mother company, Tashir, renowned for its largest chain of shopping malls in Russia.

George Engibaryan, Business Development Manager at Atmosphere, explains how “Atmosphere is part of Tashir’s aims to diversify its assets. Running our own coworking space allows us to do this without sharing revenues with an operator. The coworking market in Moscow is still in its early development stages, meaning Atmosphere is a good business opportunity given the current low supply of operators.” Similarly to Bespoke, Atmosphere is located on a higher floor (6th), which might typically be associated with less tenant demand. Yet in this case, Atmosphere benefits from ‘a perfect oval shape and lot of natural light under a panoramic roof’.

The principle challenge faced by Atmosphere is the coworker mindset that business is done within the city center, rather than outside it. George addresses this issue by highlighting how members can avoid time wasted in congested traffic and still enjoy a workspace with a nearby cinema, restaurants and supermarkets.

Atmosphere initially experienced high demand for private offices and currently operates at 80-85% occupancy, but they now see a more equal distribution of demand amongst desk and membership types with open areas preferred by freelancers. Although there is no strict member vetting process, Atmosphere attracts innovative startups through their internal investment fund and explicitly excludes companies making excessive phone calls to avoid disruption to other members.

Operators Taking Shopping Mall Space

On the flipside, we see independant coworking spaces signing leases with shopping centers. Dogpatch Labs is a start-up hub centrally located in Dublin’s digital docklands and is CHQ’s largest tenant. The 1820s shopping center lets space to interesting tenants including the EPIC Museum, is close to the rail station and surrounded by likes of LinkedIn, Facebook and more.

Located across the first 3 floors of CHQ, Membership Manager Jake Phillips states Dogpatch benefits from “being a touch point for well over 8,000 people walking past every day. We built the retail location as a strategic mechanism to deliver our brand values of community and innovation. We are also involved with corporate initiatives; CHQ recently supported Mastercard with their app pilot focusing on the city’s demographic spending data. Being situated in a retail environment means we can also deliver a live storefront.”

Given the historic protection of the converted wine and tobacco warehouse as a Grade A listed building, the fit out costs for Dogpatch were more expensive than a non-retail space. However, the company has seen high returns as a result of the investment. Jake explains how “the investment pays when focus is on design. We built a strong relationship with the landlord through a co-branded building strategy to become a unified, authentic Irish brand and top 10 tourist destination. This journey involved strategic partnerships such as those with Google for Entrepreneurs, community involvement through local food discounts and weekly metric reports.”

Renting space from a shopping center can be a challenge in terms of opening hours beyond the operators control. Dogpatch have many software development teams working early and late hours, but thanks to their strong relationship with the landlord, they’re able to make alternative arrangements for their own operating hours. Dogpatch is also surrounded by alternative laptop hotspots, but with local farmer-grown coffee and a strong ecosystem, member applications aren’t affected. Dogpatch’s typical members include corporates seeking to innovate and start-ups seeking post seed or angel investment to Series A.

Like many spaces, private offices are Dogpatch’s most popular membership type, but Jake emphasises that “the private offices are golden; we reserve and allocate them selectively to growing members. The private offices aren’t listed on our website as we don’t want to be seen as an ‘office solution’. Most of our small teams work from dedicated desks in open space.”

The Verdict

Whether the coworking space is landlord or operator ran, there are a few key ingredients for success: community-based ecosystems as opposed to office solutions, partnerships with retail-tech startups and corporates, utilization of the retail environment for product testing, investment in design and flexibility and a criteria for member selection.

Key benefits include close proximity to leisure facilities, strong transport links and parking space, position at the forefront of retail innovation, extra visibility for increased footfall and popular uptake of private office memberships. The main challenges for operators include lack of control over building operations, potential lack of daylight and opening hours, along with frequent positioning in remaining space on higher floors. The main challenge for shopping center owners is the decision to share revenue by letting space to an operator or launch their own coworking brand as a new entrant to the workspace market.

What Does the Future Look Like?

Given the optimism around coworking within shopping centers, it’s no surprise that CBRE predict shopping centers to reinvent themselves as mixed-use ‘Centers’ by 2030. Who will be the first to get there? Western Australia is particularly active as a leading region for the lifestyle revolution of shopping centers. The Government’s ‘Direction 2031’ removes limitations on the size of retail developments and encourages the development of ‘activity centers’.

The future of coworking within shopping centers is described by Kimiko Thornton as a ‘no-brainer’: “As the retail ecosystem evolves, consumers expect dynamic experiences beyond the traditional storefront. Coworking ultimately contributes to the restructuring of the entire experiential landscape. It’s a trend shopping centers are exploring at a global level.”

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About the Author

This article was produced by Deskmag. Deskmag is the magazine about the new type of work and their places, how they look, how they function, how they could be improved and how we work in them. They especially focus on coworking spaces which are home to the new breed of independent workers and small companies. see more.

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