Saturday, March 26, 2022

Edge Computing and Blockchain-Based Disintermediation

Edge computing is in some ways a complement to cloud computing, in some ways an alternative. To some extent, edge computing is a form of disintermediation, the removal of steps or stages in any supply chain. 

Disintermediation has reshaped computing and communications in the past. Could blockchain launch a new wave of change? Perhaps, many believe. 

Disintermediation is at the heart of the promise and period of a wide range of potentially-huge new enablers of business and economic life, including blockchain, cryptocurrencies, distributed finance and distributed autonomous organizations. 


Disintermediation is the process of removing  “middle men” or distributors, steps or layers or retailers from a supply chain. 


For that reason, disintermediation has been a key business issue for all retailers and distributors since the internet emerged, reducing the roles or value of distributors of all types and increasing the ability of suppliers to go straight to their customers for fulfillment of sales. 


Disintermediation also has affected the connectivity business. Consider only the role of applications in creating messaging apps that directly displace carrier text messaging and voice services. Email had a similar impact prior to the emergence of messaging. 


Now 5G private networks are being evaluated and deployed to replace some parts of the public mobile network. 

source: WallStreetMojo 


Blockchain is a distributed ledger (database) system where details of transactions are stored across a distributed network of servers with no centralized repository of those transactions. The chain of records are indelible: once created they cannot be changed, which is how the integrity  of the information on transactions is maintained. 


Blockchains store data in blocks that are then linked together in series, which is where the name comes from. For that reason a sort of time stamp is created, as the chains form sequentially. 


As new data comes in, it is recorded in part of a fresh block. Once the block is filled with data, it is chained onto the previous block.\


Decentralized finance (DeFi) is an emerging financial technology based on blockchain that allows parties to conduct transactions directly, without the use of an intermediary bank, broker or institution.


A distributed autonomous organization is an online-only group of people who have entered into a contract with one another to reach a coordinated goal. The contract is enforced by the use of blockchain, so that if any member who violates the terms of the contract, their access to owned tokens is revoked automatically by the blockchain itself. 


The promise for users and peril for incumbents is clear enough. As always, disintermediation flattens hierarchies; removes middlemen from a value chain; reduces costs and enables more-direct transactions between buyers and sellers; creators and users. 


What blockchain, DeFi or DAOs could affect, in the connectivity and computing business, is settlements, transaction clearing, ordering and fulfillment, the way sales are handled, bad debt protection and fraud prevention. 


And that should mean the potential for lower operating costs and higher potential margins, partly because sales effort is automated, partly because cost of sales could drop, partly because bad debt is avoided, partly because cash float is improved. 


Other possibilities seem less likely, in large part because vested government interests are involved. DAOs have been used to raise large pools of money to buy assets, for example. Would any regulator ever allow a perceived national connectivity asset to be purchased by a DAO?


Could “service providers” emerge that use DeFi to allow customers to purchase access to computing or connectivity capabilities without directly engaging a facilities-based provider on a longer-term basis? 


Organizations already buy compute cycles “as a service,” typically with a quota of cycles purchased upfront. Could DeFi allow purchasing on a full on-demand basis, with no “bucket of usage?”


Disintermediation is a powerful process that reshapes industries and creates winners and losers. It virtually always leads to lower prices and efficiencies in supply chains. 


We have already seen a first wave of disintermediation in the connectivity and computing businesses. Will we see additional waves as blockchain-based business processes arrive? Probably. But we will see the first impact in settlements, then in sales. 


The other possible changes will involve broader changes that involve additional stakeholders, so would take longer, if they happen at all.


No comments:

Post a Comment