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Nitin Gaur (LinkedIn, Twitter) has been with IBM for more than 20 years and currently serves as the director of IBM’s Digital Asset Labs. But, prior to that role, Nitin was instrumental in developing and running IBM’s Blockchain Labs. In this episode, he and Ian discuss all things blockchain, the challenges and opportunities of the technology, and what blockchain means to enterprises everywhere.

Best Advice for a first-time C-level exec: “Build a good team first. Have a human connection with people, have empathy, and I think everything will fall into place.”

Key Takeaways:

Nitin’s background in technology and entry into blockchain — (1:15)

Nitin was hired by IBM after college and he’s been with the company ever since. Just about every three years he changes areas of interest and jobs within the company so that he is always up to date and invested in everything going on.

One of his moves allowed him to focus on mobile payments and how to make a mark in the mobile payment space. While researching the best path forward, blockchain was constantly being mentioned and people were talking about blockchain as a new method to run mobile payments. After extensive research and convincing the IBM executives that blockchain was a viable option, Nitin was cleared to head up the Blockchain Labs.

“The genesis of our work in understanding, conceptualizing and figuring out blockchain is as a transaction system. That was our initial entry point into the blockchain. And of course, like any big corporation, you have to make a business case. And we did — we spent some time with the senior execs helping them understand that it’s not about bitcoin, which was cliched, but rather to fully understand what the technology can bring to the table as a transaction system. And lo and behold, a few years later we actually decided to go all in.”

The role of blockchain in the enterprise — (4:15)

A lot of people have labeled 2019 the Year of Blockchain Enterprise. Blockchain has been categorized into two different camps: permission-less camps and incumbents. The permission-less camp is the larger ecosystem that is evolving on public blockchain networks like Etherium. Incumbents are banks, financial institutions, and supply chains trying to adopt blockchain and build an ecosystem around the network. Certain businesses are ahead with this adoption, especially in the permission-less camp. But financial institutions have more hurdles to jump over in terms of security and privacy when using blockchain. In the early days, blockchain was seen as just a way to flatten business processes in order to bring assets together and be able to share information. Now, blockchain is seen as a way to accomplish asset movement rather than information dissemination.  

Nitin explains the rise of blockchain in generational and cultural terms. Every country and every society have a context in which they exist and survive. But that’s changing all the time. In many economies, millennials are redefining the way we live, the way we own things and the way we transact. Blockchain is becoming a reality because of generational demand.

“The incumbents are trying to consume, adopt the benefits of the technology and understand it. But at the same time, they are building an infrastructure and building an ecosystem around that permission-less network.”

“Oftentimes the first step we take in the enterprise world is using blockchain as a vehicle to streamline the business process between multiple enterprises.”

“The holy grail for us is to be able to do what Internet has done for information, which is making information easily accessible, and easily available anywhere in the world. I think our aspirational goal is to do just that with blockchain.”

“What I begin to see is the millennials who are redefining the way we live, redefining the way we own things, redefining the way we transact in simple things like renting apartments, being able to pay for a fraction of their usage models, the ability for us to be able to generate energy and be able to have right partitioned ownership of that energy generation and dissemination. So I think some of these are mind blowing use cases and they’re not far off. I think we’ve seen many places where these are slowly being implemented after initial successful proof of concepts and it’s a reality only because of a generational demand.”

Challenges vs. Opportunities —(12:44)

The cost of moving money has drastically declined. That created an opportunity to build a system that could capitalize on a new situation based on time and trust. Using blockchain to move money is a much more progressive use of technology and it offers a world of possibilities to companies and entities willing to adopt that new process.

Monetizing the process is still a challenge, though. According to Nitin, “you need to create an incentive infrastructure that promotes the various entities to keep up for the sake of business continuity and for the sake of transaction processing.” With a community-driven approach, in which everyone is responsible and incentivized to maintain the health and security of the network, you can create a network that is resilient and trustworthy.

“Blockchain as a trust or transactional system and its ability to adhere to some of the fundamentals of trades, trust ownership, will solve that issue of time and trust in money movement. And these two constructs have enormous implications on most industries because it takes time to move money. And when it takes time to move the money, the value of the capital is locked for one, two or six weeks in some cases because it just takes time to move money between countries.

So when somebody comes in and says that I’m going to keep the liquidity on two ends and I’m going to charge you a fee for it, and then someone else comes in with something like blockchain where I can digitize for example with a fee or tokenized money and move the money in real time and charge you a much lesser fee and provide you much better liquidity and instant access to your funds, that leads to utilizing the capital instantly and making use of it.”

“Somehow people think just doing blockchain is magic and you can make a lot of money from it.”

What industry is going to take off because of blockchain? — (23:00)

Technology service providers are the lowest hanging fruit in terms of who can take advantage of blockchain. There will be many technology companies offering to be a hosting service or providing wallet services to those enterprise companies that want to run on the blockchain. Those that succeed will be creating a network where as many people as you want can transact because that will build a marketplace for all sorts of transactions. The two things you look for in a successful system are the asset types and the liquidity available in the system.

“Blockchain is not just about technology … it’s also a marketplace because you are hopefully creating a network where likeminded entities joined the network and are able to transact. And the more participantss a network has, the more advantage the network enjoys as well as more liquidity in the system.”

“It’s not just about the technology that enables movement of assets, but it’s also about creating a marketplace of sorts that allows any-to-any transaction.”

What to look for if you’re an enterprise trying to get on the blockchain — (25:00)

You have to get the fundamental elements right and take a good look at the business blueprint. The first step in seeing viability with using a blockchain structure is that it has to be an ecosystem of problem-solving. And if you’re solving a problem in your own ecosystem it should be a problem your cohorts also encounter so that your system can grow to include as many people as possible.

“I focus heavily on the business blueprint, which is, to me, the first step in proving the viability of applying blockchain to a business structure with the business model.

What I mean by that is that if you’re solving a problem for yourself, whether using blockchain — and no single company can use blockchain for themselves and benefit from it — it has to be an ecosystem. …If you’re solving an issue for your own industry, then it should also be the problem of your cohorts because then it leads to a network effect. And that element is really important because you’re trying to get not just your competitors but new ecosystem players to a network and that means that you have to induce a sense of neutrality to these networks. So I think understanding the business model is so important.”

Mentions:

• Blockchain for Business (Nitin’s book)
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