Bitcoin was created more than a decade ago, and technology whizzes have spent recent years trying to use its blockchain architecture for other applications in finance. But so far, despite high hopes, blockchain companies have produced more press releases than viable enterprises.
A key reason for that, according to DocuSign chief exec Daniel Springer, is that blockchain is still too expensive for the kinds of things his company does. Seventeen-year-old DocuSign runs encrypted e-signature technology and automates and manages agreements, from mortgages to healthcare, online. Springer says the pandemic has accelerated the shift away from paper contracts, and we won’t be going back to the old ways of doing things even when the virus is contained. The San Francisco-based firm’s shares have more than tripled this year, blowing away even the tech-heavy Nasdaq 100 index of stocks.
DocuSign’s services resemble (if the pitches in my inbox are any indication) the kinds of challenges the blockchain set has tried to tackle. Think of blockchain as a cryptographically protected database of records that is maintained by a bunch of separate computers. That ledger of transactions is widely distributed across multiple parties (not centralized) and is seen as being highly resistant to hacking and forgery. It underpins bitcoin, and has proven to be robust and enduring. But using that technology for other purposes, like supply chains, cross-border trade, or protecting healthcare records, hasn’t become the norm.
“We look at blockchain as an underlying technology that we think is actually quite intriguing,” Springer said at a conference in September. “There’s challenges with blockchain to date because it doesn’t have the scale to provide attractive economics.” The company started a partnership a few years ago with Ethereum, a blockchain system that provides programmable contracts, but the cost proved to be a serious disadvantage. Agreements using that system cost about $1 each. Whereas DocuSign, which is based in the cloud and protects its records with encryption, is able to handle digital signatures, identity checking, “just soup to nuts down through the agreement” for about 7 cents. “So to spend $1 just on the storage is a little bit crazy,” he said.
Tom Casey, senior vice-president of engineering at DocuSign, says part of the reason their systems are cheaper than blockchain-based architecture is because they’ve spent more than 15 years specializing in agreements and developing formats specifically for that task. When it comes to blockchain, costs spring up from having to maintain, manage, and operate the infrastructure; in Casey’s view, it still hasn’t seen the kind of widespread adoption that forces engineers to solve the tough problems that grind expenses lower.
Even so, Casey is optimistic about blockchain, especially for protecting identities online. Perhaps it could be used to share credentials in a secure way, for a specific transaction, and only as long as is needed for that transaction to take place. (Instead of third parties collecting and keeping that identity information, which could be exploited.) “That’s super promising for the world,” he said. “That’s one of the things I’m keeping an eye on and frankly pushing a little bit.”
In the meantime, there are some signs of blockchain progress. JPMorgan says it has used it commercially for the first time to send payments, according to CNBC. Executives at the biggest US bank by assets say those systems can grow in scale. Central banks around the world are researching digital currencies—but those projects aren’t necessarily decentralized, blockchain-style systems.
Casey says blockchain is no panacea, but there’s still scope for it to become more commoditized and cheaper so that it becomes more widely used. “You could see that drop by an order of magnitude plus, then it might become really interesting,” Casey said. ”But it’s not anywhere near that sort of threshold yet.”