Money . . . ? in a voice that rustled.
— J.R., William Gaddis
Fifty years ago, nobody used the term “use case.” Google says that “use case” means “a list of actions or event steps typically defining the interactions between a role and a system to achieve a goal. The actor can be a human or other external system.”
It’s a software term, and even if it has been around for 30 or 40 years, the reason I’ve heard about it (since I know nothing of software) and am writing about it is because people started using it in everyday parlance. Is this a new idea? It looks that way from this chart. (This tool is really fun by the way. Look at “meme.” It’s shocking.)
But is this really new? Of course not. It’s lingo that’s gone mainstream. It means the application of an idea to some real world problem, doesn’t it? When you ask about “use cases,” you are really just asking (1) why would anybody want this and (2) will they eventually pay for it?
So why use an abstract software term when you’re really asking how you’re gonna get paid? I think there are three reasons.
First, people like to use terms that signal complexity and knowledge of current events and trends. This how business buzzwords get created. One of my favorites is “level-set.” I hear it all the time on conference calls. I had a client ask me for a “whitepaper” summary of a compliance issue the other day. I submit this would have never happened ten years ago. I instantly knew what he wanted too, more or less. “Use-case” is an excellent “with-it” signaller.
Second, it is shorthand for what is really a complex set of questions that are particular to the idea. Let’s say that the idea is a token for food delivery. This one phrase–”token for food delivery”–should prompt a host of questions. How is it issued? Who uses it? Why? What is the incentive for the user over actual cash? Isn’t it just a coupon? Etc. Or you could just say: what is the use-case for the token? See, much easier, and you didn’t have to try to understand the concept. This question always works.
Third, it might still have legal significance. It is assuredly code for “is this going to get me sent to jail for participating in an unregulated securities offering”? That’s more utility than use-case but they are often conflated. And utility, well, probably doesn’t matter too much anyway.
If I sound too much like Andy Rooney, let me know in the comments.
In any event, talking all too seriously about “use-cases” has become de rigeur in cryptocurrency circles. The excited buzz of ICOs and investment millions flying through the internet has given way to dull cynicism and a savvy acknowledgment that the space is an overheated cauldron of frenzied irrationality and most of these coins are garbage because (wait for it) they don’t have use cases. It has become fashionable of late to simply crap all over the space generally, so being the utter contrarian that I am, I think it’s time for some optimism.
Let’s get something out of the way first. Yes, blockchains can be (and usually are) woefully inefficient databases. True, most of the coins, at least 9 out of 10, make no sense, and are stupid ideas shrouded in the magical patina of decentralization, or worse, ideas people already had in established industries that have no need of the concept at all. I get it. It won’t take over the world, and I’m not going to try to respond to every objection.
But the concept is transformational in the right spots. Without further ado, here are my top four crypto use-cases:
Money or My Bitcoin Apology
Money. It is a magical word. The subject of the best first line of a novel ever written, in Gaddis’s J.R., which I quote above (if you are going to write “it was the best of time it was the worst of times” in the comments, just realize we will probably never agree on anything).
I think Bitcoin’s single greatest achievement is that it has forced everyone to think about what money is, and what it is not. I certainly have thought quite a bit about this issue, and only very recently. I’ve realized, by the way, that I still don’t know what money is. Fundamentally, I still don’t get how consensus develops around a particular object as having value, which apparently doesn’t stop me from writing about it.
Bitcoin has forced, forced, the recognition and adoption of a private (i.e. non-state sanctioned) currency at a level completely unheard of in recorded history. Nothing, not pre-civil war bank bonds, or Florentine letters of credit, not gold or silver (which while universally acknowledged were only possessed by the very few) or any other instrument in history has come close to this level of success in terms of acknowledgment and proliferation without backing by the state.
Bitcoin is now being traded all over the world. It is being mined by massive collectives, small-scale hobbyists, North Korean dictators and three of the ten smartest people I know. Those who claim that Bitcoin will fade away ignore the raw significance of this level of universality. Until just recently, the only real international money was gold, silver, diamonds. These have been supplanted in a meaningful way by code, which allows storage and transfer of value to be more convenient, yet more secure at the same time, without an intermediary.
Try to bring three bars of gold through customs. Try to store them in pirate-infested waters. Try to mine them in a warehouse in Detroit. And yes, try to sell them anonymously. Bitcoin is better gold. The bear case for Bitcoin is not that it is a dumb trend that will expire like bell-bottom jeans; the bear case is that it will become too popular and will be seen as a threat to the ability of governments to control their money supply and project policy.
So money is a fantastic use case for distributed ledger technology, especially if you have a healthy distrust of central banking or fear runaway inflation in your reserve currency. In America the whole idea can look stupid and faddish, less so in Venezuela.
Our identity is deeply and profoundly fragmented. Information about us is everywhere, owned by multiple entities at the same time, and often is not curated and abridged for intended audiences. It can be. Think about the problem of a medical record.
I don’t have one. I have, conservatively, thirty.
I have medical records at our local hospital, which suggest allergies to shellfish due to a losing battle I had with a lobster bisque in 2015. Anaphylaxis is not fun, but it is a million points in Scrabble.
Who knows about this trip to the emergency room? Not my primary care physician. I have to tell him the next time I see him. Not my dermatologist. He has a separate record. He keeps asking me if I have allergies though. In fact, every time I have any medical encounter (or these days order food), I get to answer the same question right? Again and again.
There are other records at the ambulatory care place in my area where I went after I got strep throat. I took a blood test for my health insurer because they paid me to do so. Only they have this data. I have very different, much older records at a bunch of places around Detroit where I grew up, etc.
The point is that I don’t have one dispositive record set because all of these medical professionals are writing data to different places. There are a ton of restrictions concerning medical data and privacy so, basically, they only trust their own systems. And the information is valuable in its own way. I’m more likely to return to doctors that already know me and have my data so it has its own independent value. But wouldn’t it be wonderful if they all wrote data to the same place? A trusted, encrypted, decentralized ledger that records all changes? What about an emergency protocol that allows this data to be unlocked with my DNA, or a code on my wrist?
But it won’t scale, right? Or the database is inefficient. With this one though, we don’t need it to scale and the database doesn’t have to be efficient. It just has to be secure, and encrypted and trusted by all these separate institutions to store, receive and transmit accurate records. This looks like a real use case. There are lots of players in this space too: Civic, Sovrin, Everynym, Alastria to name a few. Very smart people who see clearly on this issue.
Maybe instead I mean provenance. How do we authenticate a painting or the value or provenance of a diamond? I can’t do it, only experts can. These are things worth faking because they are so valuable. We can authenticate these things with private signatures that cannot be forged or replicated. We can guarantee that a painting is a Picasso and a diamond is real, in the moment, without recourse again and again to authenticating experts (although we do need at least one).
Finally, there is supply chains, my personal favorite. There are lots of supply chains, and not all of them will grow up to become blockchains. But some of them are absolutely ripe for the concept and in fact I believe there are certain preconditions. The best supply chains for blockchain are those that have (i) siloed distribution systems either as a regulatory matter or as an accident of history, (ii) absence of trust between parties, (iii) high transaction volume, and (iv) commoditized transactions.
I can think of a few examples: pharmaceutical drug supply, for instance, checks all of these boxes. Imagine a permissioned blockchain that tracked a pill from Abbott to the patient, and only paid for that pill if the entire path could be authenticated. It’s something like an instant audit. That would go a long way toward eliminating counterfeit drugs, which is an enormous worldwide problem.
I know what you’re going to say: it won’t scale. Transactions will be too slow. This is where we have to discuss (at a later time) the relative advantages of permissioned blockchains. Part of the reason bitcoin is so “inefficient” is because it is truly decentralized on a worldwide basis. We don’t need that here, and having dramatically fewer participants speeds things up.
As an aside, it is really interesting to me is that “supply chains” and “authenticity” are, in a way, at the opposite ends of a uniqueness continuum. “Authenticity” governs transactions in a good (or record) that is one-of-a-kind, so rare and valuable it might be forged and so must be authenticated. “Supply chain” is the opposite. These are systems of transactions so numerous, commoditized, and rote that fraud is easy to hide, and so a method must be devised to prevent it (or to make it easily auditable or more efficient, etc.).
I think if we take a hard look at it, the clearest use-cases will ultimately be at these margins, and we will find that the market deals pretty well with the middle cases already.
This one took me a while. The next post will be catch-up on the biggest legal stories of the month, and boy are there a lot of them. If you enjoyed this post, please be sure to signup for the newsletter to receive it in your inbox. Thanks for reading.