The Lull Before The Blockchain And AI Digitization Storm

We tend to over­es­ti­mate the effect of a tech­nol­o­gy in the short run and under­es­ti­mate the effect in the long run”, the old adage by Roy Amara, was more than obvi­ous dur­ing Dif­fu­sion 2019, a 400+ devel­op­ers hackathon that took place in Berlin from 18–20 OCT 2019. Con­ver­gence, the coa­les­cence of today‘s hottest tech­nolo­gies, AI and Blockchain, was the theme of two days full of work­shops, talks, and, of course, hack­ing. My impres­sion: A huge load of B2B Blockchain and AI appli­ca­tions will enter the mar­ket in 2020 - about the lull before the Blockchain and AI dig­i­ti­za­tion storm.

The layman‘s ver­sion of Amara‘s law, the Gart­ner Hype Cycle, locates AI and Blockchain as emerg­ing tech­nolo­gies that have got past eir first hype, enter­ing a phase of reori­en­ta­tion and search­ing for trac­tion through use cases, with AI, as in the ABC, lead­ing the pack before Blockchain. One could assume that both tech­nolo­gies would slow­ly and con­stant­ly gath­er momen­tum over the next years. Given the par­a­digm change that comes with Web3, I doubt that we will see slow and lin­ear adop­tion of AI and Blockchain — we rather will expe­ri­ence the con­ver­gence of AI and Blockchain as a hur­ri­cane.

The Con­ver­gence The­sis

Blockchain is a foun­da­tion­al tech­nol­o­gy layer that pro­vides a dis­trib­uted ledger for AI appli­ca­tions built on top of it. The com­bi­na­tion or con­ver­gence of AI and Blockchain defines what we call Web3, the next evo­lu­tion­ary level of the web. Dif­fu­sion 2019 host Out­lier Ven­tures, a UK-based investor in Web3 pro­to­cols I recent­ly joined as an Advi­sor, base their invest­ment deci­sions on the Con­ver­gence the­sis. and pro­vid­ed the ideal sub­strate for cre­ative ener­gy: 50 appli­ca­tions were pitched to sev­er­al teams of judges at Dif­fu­sion 2019, based on 21 dif­fer­ent Web3 pro­to­cols. Some of these pro­to­cols already are quite mature, oth­ers in their early proof-of-concept stages. Mar­ket expec­ta­tions towards these tech­nolo­gies have been ulti­mate­ly high, reflect­ing Amara‘s law: AI and Blockchain should dis­rupt whole indus­tries in no time, elim­i­nat­ing inter­me­di­aries, or human work­ers in gen­er­al. Obvi­ous­ly, this has not hap­pened, yet: there are mid­dle­men, such as notaries or sales agents all around, and we haven‘t seen waves of lay­offs.

Blockchain and AI protocols for digitization
Dif­fu­sion 2019 Line­up

High Short-Term Expec­ta­tions

There is a sim­ple expla­na­tion: since Blockchain is a foun­da­tion­al tech­nol­o­gy that starts with the basics of all soft­ware process­es, a data­base, it first has to prove its rai­son d’être and then replace lega­cy sys­tems in order to demon­strate the above described dis­rup­tive effects. AI, i.e. machine intel­li­gence, must first process huge amounts of data per any given use case, before it can start work­ing at all. This often results in a year-long appli­ca­tion of AI in niche use cases before any ben­e­fit can be real­ized.

High Long-tTerm Impact

It takes time. This is the under­ly­ing insight of the first half of Amara‘s law. The devel­op­ment of emerg­ing tech­nolo­gies usu­al­ly takes longer than expect­ed. Hav­ing worked with Web 3 com­pa­nies for some time, and hav­ing expe­ri­enced this high vari­ety of pro­to­cols and the bril­liance of its devel­op­ers dur­ing Dif­fu­sion 2019, my pre­dic­tion is sim­ple and clear: In 2020, coali­tions will be formed, con­sor­tia will be built and frame­works for col­lab­o­ra­tive­ly set stan­dards will be cre­at­ed. This will be a phase every­body will look for an opti­mal start­ing posi­tion in. Then, begin­ning with Q4 of 2020, a huge wave of appli­ca­tions, prod­ucts, and ser­vices will be unloaded to the mar­kets. First, it will be B2B appli­ca­tions, enabling indus­try play­ers to stream­line their process­es and to launch new busi­ness­es. Then, B2C appli­ca­tions will fol­low. Enter­pris­es that have not defined a prop­er dig­i­tal (Web 3)strategy until then, will lose ground. Most enter­pris­es will join the then-existing con­sor­tia, either sim­ply because of FOMO (fear of miss­ing out) or because they real­ize that it is the only way to get their fair share of the mar­ket.

The Lull Before The Blockchain And AI Dig­i­ti­za­tion Storm

This pro­ject­ed tidal wave reflects the sec­ond half of Amara‘s law: while you are read­ing this text, many peo­ple still are lick­ing their wounds from cryp­to win­ter, or doubt that any­one needs dis­trib­uted ledgers at all. How­ev­er, oth­ers have already start­ed work­ing on alliances and con­sor­tia, to be pre­pared for the posi­tion­ing game in 2020. My take and my advice for our clients is that you bet­ter start now if you want to become a dig­i­tal­ized enter­prise. You don‘t have to present a B2C killer app now, but you should define your posi­tion and cre­ate or join a con­sor­tium. The ear­li­er, the bet­ter.

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