Bitcoin, Tesla, and the future of blockchain: Should you invest?
Back in 2014 when I was doing my PhD, it was the first time that bitcoin caught my eyes. I saw the price of the cryptocurrency suddenly jumping from about 200 AUD to more than 1000 AUD and then correcting itself. This got me curios and if it was not for my empty bank account, I would probably be a bitcoin millionaire today.
Throughout the years since 2014 I eagerly watched the rise and fall of cryptocurrency, each time more extreme than the other. This time though I was really interested in the technology itself and what it could offer the businesses and supply chains. After all, blockchain was to completely revolutionize the business and as a supply chain academic I needed to know all about it. So, I started studying blockchains, I got engaged with the many business ventures rising up in crypto mania of 2016–2017 and I even wrote a review paper that has been one of the “hot papers” on blockchain.
And all of this made me even more skeptic of blockchain technology. Just in case you wanted to know the technical aspects of blockchains, this clip sums up the technology pretty well.
The Emperor’s new clothes
So far, blockchain technology has promised a lot and delivered a little. Back in 2017–2018, supply chains were supposed to be completely overhauled by the technology. IBM started developing blockchains for Walmart, banks and financial institutions have started their own cryptocurrency, smart contracts were supposed replace the burdensome supply chain contracting and finance processes and like this the opportunities seemed endless. I engaged with a number of new businesses that promised excellent inventory tracking and supply chain transparency, which is still the Achilles’ heal of supply chains.
Today though the most I have seen out of blockchain application are the NFT markets where digital art can be traded. In fact, to this date thousands of cryptocurrencies and blockchain-based startups have flopped.
You might ask why, and the answer is simple. Blockchains are more or less data storage tools. They do not capture data for you, they do not ensure the quality of data for you and they do not analyze the data for you. Even worse, if you add the incorrect data to blockchains, it is more likely you can never correct it once it is on blockchain. This makes blockchain application in real-world extremely limited.
Should I invest?
Here is what happens when you buy cryptocurrency. You will put your money in a big pool worth over two trillion dollars with millions sitting at the table. The more money comes in, the higher the demand, the higher the price of the cryptocurrency. As long as the money coming in is more than the money going out, your investment is safe, and you make profits. In other words, if you are an earlier investor on a crypto that has risen in price, you get rewarded from the money of the later investors and this cycle can go on, i.e., a classic Ponzi market.
You might feel like I am recommending against investing in crypto, I am not. As I mentioned earlier, being an early investor in this market gives you an edge, but you do not want to be the last one at the table like the unlucky investors handing over their money to Bernie Madoff. As Elon Musk and Tesla can spike up bitcoin and dogecoin prices, they can bring them down as well as they did just a few days ago. By investing you should remember there are much bigger players in the market and individual investor is on an enabler of those big players manipulating the market.
The future of blockchain
I am still hopeful blockchain will deliver on what it promises. From tracking blood diamonds and eliminating them to increasing transparency and sustainability across supply chains, this is the holy grail of blockchain. The good news is there is much interest still in academia and in the business community to explore what blockchain can promise and how it would get improved. Similar to the invention of the internet, it can certainly have a potential to truly revolutionize supply chains. For now though, we might be witnessing a transition period, similar to the dotcom bubble two decades ago with the future still bright ahead of blockchains.
