Is Blockchain Technology Really  Disruptive?

Definitely, Bitcoin is not!

(This is not an academic article. It is an attempt to check if blockchains and their solutions are really disruptive or not. I present here unpopular findings and another version of the story that, as far as I am concerned, has not been told before!

I have read several articles and watched a number of videos which address the disruptive nature of blockchain technology. Apart from a handful of reputable academic articles, the available material suffers from three main shortcomings, which can be summarized as follows:

First, the authors lack a deep understanding of blockchain technology, it’s stack, ecosystem, and the different types of blockchains.

Second, it is rather obvious that some of the authors haven’t researched the theory of Disruptive Innovation (DI) to the required depth, which enables them to understand its applicability to blockchain technology and its ecosystem.

Third, some authors fail to differentiate between blockchain technology and the products built on it such as bitcoin and other cryptocurrencies, platform-as-a-service (Paas), software-as-a-service (SaaS), or Dapps.

This has led, almost always, these authors to reach to a common conclusion, that blockchain technology is a disruptive technology. But, is this always true?

To be able to examine whether blockchain is disruptive or not, it is important to understand the architecture of blockchain and its entire ecosystem. This understanding would assist in avoiding the common mistake of confusing bitcoin as a product with the technology that underpins it, for example.

Further, it is equally important to take into consideration which type of blockchain we are referring to because each type has its specific characteristics, permission features, unique modus-operandi, and best utility domain.

It is worth noting that blockchain is divided vertically based on a stack of layers or tiers and horizontally based on the blockchain type.

Blockchain technology: vertical and horizontal dimensions.


Vertical Blockchain stack


Blockchain stack is mainly divided into 3 tiers or layers. For example, Swan (2015) speaks of an infrastructure layer that hosts the technology, the blockchain and its ledger. The middle layer is the protocol layer or the software system which is used to transfer the money. Finally, at the top of the stack is the currency whether it be bitcoin or any other cryptocurrency.

Another module which provides a holistic approach to blockchain and its ecosystem is the one provided by the University of Oxford.

The ecosystem in this model encompasses numerous actors, structures, functions and programs. They are dynamic and create synergy by interacting with each other, and thus provide vitality for the ecosystem.


Horizontal Blockchain type


When the world woke up to the blockchain in 2008, it was the open-public-permissionless blockchain, which allows, theoretically, anyone to read, and write transactions, as well as to plug in to the network as a node and participate in the making of what would be termed as the 5th industrial revolution. The main four types of blockchain are shown below. (Reproduced from Hileman & Michel Rauchs, 2017).


What is Disruptive Innovation (DI)


This term is first coined by Clayton Christensen and represents a theory which is rooted in Schumpeter’s theory of “creative destruction”.

Despite the numerous critiques of the theory for its lack of a clear definition of DI, the crux of the theory lies in its framework, which places a great emphasis on creating the right business model, in order to make the best use of the technology, create and capture value, and, eventually, becomes disruptive.

There are two types of DI:

First, new market disruptions. This type aims at creating a new market and value network. The new product operates at the fringes of the market. This type tackles the issue of non-consumption by attempting to convert groups of non-users into users through offering them a product or service which is simpler to use and more affordable to own.

Secondlow-end disruption. Successful companies invest huge resources on sustaining innovation in order to appeal to and serve high-end market customers who continuously demand higher quality products and are willing to pay for it.

However, companies sometimes overshoot their products in their chase to appeal to more profitable segments of the market. In doing so, these companies move to a higher end of the market, yet simultaneously ignore the needs of low-end market customers who are less demanding. Consequently, leaving an opening for disruptive products to get foothold in the less-profitable market. Then the new entrant starts to move up the market as they improve the quality of their product, causing a disruption, eventually. This process is depicted in figure 3 below.


1. The technology


Open — permissionless blockchain


In its purest forms — the public, open and permissionless blockchain, definitely, as presented by Satoshi Nakamoto is a revolutionary innovation. Disruptive innovations are often the outcome of unleashing new product architectures that deviate radically from existing product lines by incorporating novel and unprecedented architectural principles.

The open-permissionless blockchain provides a completely new perspective on how an alternative payment and digital commerce system at a global level could be reconstructed at infrastructure level.

In their important article “The Truth About Blockchain” Iansiti and Lakhani, states that blockchain is not a disruptive technology. They rather describe it as a “foundational technology” because it is novel and encompasses a sophisticated ecosystem. It may be capable of radical change, but it is not necessarily a driver of instantaneous change, as described by White (2017).

Yet, the characteristics of the open-permissionless blockchain hinder its move to the mainstream market. Businesses, governments, and financial institutions are not open to such architecture which exposes all sensitive data to the public, or allow the processing and storing of the data to take place in a certain legal jurisdiction beyond their control, regardless of any cryptographic hashing or public keys used to secure the information and the blocks.


Type 1: New market disruption


It is difficult to measure if the open-permissionless blockchain has really created new markets and value network or not.

However, through observing how the ecosystem around the technology and its products, especially cryptocurrencies, has evolved, one can confidently argue that a new market of historically non-users was formed. Observers of the open-permissionless blockchain ecosystem have read anecdotes and articles, and watched videos about people and businesses; or met people and business leaders with varied backgrounds and from different sectors that don’t relate to the technology, but they all have become fascinated by the technology and its capabilities as well as cryptocurrencies.

In the new market disruption model, the DI occupies the fringes of a market and continues to expand its user base as the quality and the performance of the innovation improves. In the case of the open-permissionless blockchain, this is a very challenging endeavor.

This boils down to several factors such as lack of technical capacity by the aforementioned groups, lack of understanding of the technology, lack of a mature ecosystem around the open-permissionless blockchain, unreliable or lack of proper governance in certain countries, and, most importantly, lack of a comprehensive business solution which can be presented as a complete package to drastically and fundamentally solve financial and organizational problems these groups face.


Type 2: Low market disruption


In this type DI gains a foothold at the bottom of the market and attract customers who are less demanding and represent less profitable segments of the market. This DI is characterized by being easy to access, relatively cheap, good enough, and easy to use.

Open-permissionless blockchain would fail this for the obvious reason that it is not a product or service that ordinary people can buy or access. It is a pure technology, which requires an innovative business model, a product, a utility case, or a service to be built on it and around it in order to facilitate its use and expedite its adoption.

This type of blockchain exhibits several drawbacks with regard to PoW, throughput, confirmation time, and scalability. Despite being portrayed as a simple peer-to-peer system, it is still a sophisticated and expensive technology.

There is still a “technological psychological barrier”, preventing many start-ups or entrepreneurs from entering the field. 45% of businesses state that they are not sure where or how to start implementing blockchain, according to a survey by PWC in 2018.

Christensen presents a Litmus test which addresses the following question: Is the innovation disruptive to all of the significant incumbent firms in the industry? If the innovation fails the Litmus test then it is a sustaining innovation.

The open-permissionless blockchain wouldn’t pass the Litmus test if it aims to disrupt an entire sector, as the case with the financial sector.

Assuming that the open-permissionless blockchain is aimed at banks, it’s highly unlikely it would succeed in disrupting all the industry. The banking industry has more complex operations, services, and products which may be beyond the rubric of blockchain. At best scenario, banks may make a good use of the other blockchains as we will see later in this article.

It is worth noting that the open-permissionless blockchain has reached the stage of stagnation. There are no innovative business modules built on the blockchain.

The ecosystem around it hasn’t evolved since the hype phase which surrounded its initial discovery by the world. Its problems, especially the PoW has turned into a chronic illness which attracted greedy businessmen and enterprises, leeching on it rather than helping to find a remedy to the high energy consumption.

Those pools of mining could be detrimental to the future of the blockchain and, subsequently, Bitcoin. The pools are driven by profit. Once it is no more profitable to mine Bitcoin they will either switch to another currency, support another new emerging technology, or shutdown operations altogether as we have seen. Governments, furthermore, may order the shutdown of the pools as the case in China.

Finally, if the open-permissionless blockchain has the potential to be a disruptive innovation, it hasn’t got the chance to exemplify this to its maximum capability.

Permissioned blockchains


The open-permissionless blockchain has acted as a blue print to other projects such as ethereum[1], Hyperledger projects, corda, Ripple, and many other blockchains.

The second generation blockchains — as they have emerged after the open-permissionless blockchain — have attempted to address what businesses and enterprises consider pitfalls of the open blockchain in terms of being widely and wildly distributed, decentralized, open to anyone and everyone to access it, use it, and contribute to it as long as they have the necessary means and know-how.

Businesses are driven by profit, geared towards competition, and disposed to favor privacy and confidentiality, rather than supporting a revolutionary technology which aims to impose a relatively level playing field among all stakeholders, maximum transparency and auditability.

As each blockchain of the above prides itself on having the fastest, frictionless, most secure, best architecture blockchain, it will not be possible to examine each blockchain separately.

Therefore, it is more meaningful to look at the solutions they provide to customers and check if they are DI or not.

Business Solutions




Long Bitcoin, Short the Bankers! Yet, the truth is rarely pure.

Bitcoin is the product built on top of the blockchain. It is the innovation that would allow businesses, people and other stakeholder groups to conduct transactions and interact with the blockchain.


Type 1: New market disruption


We could, confidently, argue that there wasn’t at all a market for digital currencies before bitcoin. All previous attempts to create digital currencies failed and ceased to exist since long time ago.

Also, one could argue that bitcoin has attracted people from outside the financial sector. This of course doesn’t preclude the fact that some of the biggest investors in bitcoin are from the financial sector. However, it is difficult to glean any accurate information about market segmentation due to the privacy factor.

Based on observation of the market, we have learnt that many fortune hunters, entrepreneurs, and companies, have entered the field of cryptocurrency with the aim of making massive profits. They were dubbed as “newbies” as they lacked the knowledge and expertise. This was the case especially around the hype period which took place, more or less, between the last quarter of 2017 and the first quarter of 2018.

Once the hype was over and the market crashed, we heard of many stories how people have lost all their savings due to lack of experience. Let alone the losses occurred due to hacks of exchanges or wallets, or the mismanagement of funds by exchanges such as Mt. Gox.

Many investors or traders have lost their bitcoins due to the difficulty in using wallets. The task of installing and managing a wallet is still daunting to the majority of the people.

Even hard wallets are not easy to install. And the issue of the security and safety of storage is still a persistent hazard.

Any small mistake in the process of sending bitcoins meant that the coins have been lost forever. If an investor lost their password or didn’t manage to save their private keys, then their funds are locked out for good.

Market manipulation by whales and volatility of prices impacted negatively on investors and traders.

All the above factors have contributed to a severe slowdown — almost stagnation in adoption and market expansion. These factors, in contrary, have led to a reversal in new market creation and value capture, led by the bitcoin winter.


Type 2: Low-end disruption


Nicknamed as the “digital gold” due to its scarcity, bitcoin is far from being considered a low-end disruptive innovation which would occupy the bottom of the market and appeal to the masses who have a weaker purchasing power.

Currently, there are nearly 22.9M Bitcoin addresses, which hold some Bitcoin (as in, more than none). Nearly half contain less than 0.001 BTC ($3.40), and almost 90 percent hold less than one-tenth of a BTC ($340), according to research firm Delphi.



The Last hike in bitcoin price which occurred in the first week of April this year, was partially the result of accumulating $750M worth of bitcoin by the 100 biggest wallets.

The paradox in bitcoin case is that the main players have replaced banks with whales as per the table below.



The slogan “Long Bitcoin, Short the Bankers”, is nothing more than a façade used by whales and their representatives in order to give a false impression of war of ethics and ethos between the both sides, and thus the wealth that can’t be harvested by banks is then harvested by the whales.

With these facts in mind, bitcoin, definitely, is not a case for low-end disruption, unless we see a fairer redistribution of wealth.




Type 1: New market disruption


Ripple, is clearly a B2B solution. The theory of DI describes, mainly, B2C dynamics.

Ripple, targets one of the wealthiest sectors of any economy, the financial sector. Therefore, Ripple hasn’t created a new market, neither appealed to non-consumers nor converted them to consumers. Banks were already using payment transfer services. Further, Ripple has targeted a well–established banking sector across the globe and offered to integrate its solutions into the existing modus-operandi of these institutions.

The argument presented frequently that Ripple has disrupted the banking sector by eliminating corresponding banks and expediting the payment transfer process by making it frictionless, doesn’t constitute a disruption, based on Christensen’s theory. It is rather what Christensen terms as “sustaining innovation”.

Sustaining innovation is different from disruptive innovation. The former makes the product or the service better for the incumbent’s user base. Sustaining innovation improves work processes by decreasing internal inefficiencies.

By eliminating corresponding banks, Ripple has increased system efficiencies and reduced the time and cost needed by the bank to make a transfer. Similarly, it has reinforced the status of banks as intermediaries or gatekeepers through enhancing their business model.


Type 2: Low-end Disruption


Though this type would not fit neatly a B2B setting, yet for the sake of the argument, Ripple is definitely not a disruptor. It has started from the top of the market by offering its blockchain solutions to high-end banks, charging them hefty prices.

For these reasons one can’t make the claim that Ripple is a disruptive innovation.

Even the claim that Ripple will disrupt SWIFT is not sustainable. Simply because the consortium is looking at solutions provided by Corda 3, in order to sustain its growth and gain a competitive advantage based on blockchain technology and supported by a huge network of banks and other financial institutions.

Corda as a DLT/blockchain solution also can’t be considered a disruptive innovation for the same reasons that disqualify Ripple.

Hyperledger Fabric


IBM (Hyperledger Fabric) is working with major retailers such as Unilever, Walmart, Nestle and others, in order to enhance their supply chain operations. They have also partnered with MAERSK, linking so far 92 global entities on the blockchain.




Type 1: New market disruption


According to DI theory, IBM has not disrupted the supply chain sector, rather it has made it more efficient. For example, Walmart CEO states that it typically took approximately 7 days to trace the source of food. With the blockchain, the process has been reduced to 2.2 seconds. This is an astonishing amount of time saved and efficiency attained.

Using Hyperledger Fabric to cut down on resources consumption and improve existing service is, clearly, a sustaining innovation.

IBM hasn’t created new markets buy discovering new customers who has, historically, never used supply chain systems, neither has created a parallel unknown market with its blockchain solutions.

Further, it has not created a new value network. In contrary, the value or business network already exists and in full operation. What IBM has done, basically, is that it has offered supply chain giants a new technology-based solution to integrate into their business model in order to improve performance, sustain growth, and raise quality and productivity levels.


Type 2: Low-end disruption


IBM is a blue-chip company which provides sophisticated solutions in response to customers’ needs. Hyperledger Fabric is modular in order to fit different deployment models. Therefore, its customer-base is not located at the bottom of the market. In contrary, they are high-end enterprises, demanding, have high expectations, and high profit margin.

IBM blockchain solution is not a low-cost product that is aimed to capture the least attractive customers of another blockchain provider. IBM, similar to Ripple and Corda, offers its solution at the high-end of the market for the most profitable customers.

Which Disruptive Innovations are out there?


I am sure there are many disruptive innovations in the field of blockchain in the market, but I have chosen Stellar and a hypothetical business model in the supply chain in order to illustrate how DI might happen.



Stellar could be considered a hybrid disruptor, in that it could create new markets in non-consumption domains and pull out incumbent’s customers at the same time. The not-for-profit organization aims at financial inclusion and provides low cost financial services to fight poverty, as claimed on their website.

The project targets low income countries and the 2 billion unbanked persons around the global South and parts of Europe. In this way, Stellar is creating a new market and value network by converting the historically non-consumers of financial services into consumers. In order to achieve this, Stellar has distributed around 8.65B XLM in several rounds of airdrop, believing that this would encourage entrepreneurs building low-cost solutions on the network.

By targeting the unbanked, farmers, fishermen and the like in the global South, Stellar is striving to gain a foothold at the bottom of the market by appealing to segments of customers who either can’t access financial services at all (new market), find the financial system overly complicated to deal with, or can’t access certain financial services as they are not designed to respond to their needs. Therefore, they were left behind as banks don’t find these customers attractive because they don’t yield high profit margin for the banks.

Stellar is facing many challenges at different level as a potential disruptor.

First, to offer a business model which would guarantee simplicity, convenient, low-cost, ease of use and profitability, as well as competitive advantage. Stellar’s airdrop is an important step which should be harnessed by an innovative business model that will enable customers from using XLM in the real world as a method of payment or remittance transfer.

Second, it is not enough to airdrop XLM. Stellar needs to ensure that there is maximum out-reach to the most marginalized groups. This means, Stellar needs to ensure that there is a fair distribution of the currency and that no single party is hoarding it by using different techniques to do so.

Third, a lot of effort is needed to educate these segments of users, especially the non-users, and train them on the new technology. It is noted that the more the innovation is novel, the more the effort needed to educate people on using it. It is very crucial to overcome the digital divide not only between the North and South but also within the countries of the South.

Fourth, Stellar is faced with poor or total lack of governance in certain countries. This would, definitely, affect any implementation of their plans to disrupt the banking sector. The absence of a regulatory framework which fosters innovation, data protection, and proprietary rights is a major hurdle to the success of the project.

Supply Chain

IBM business model could create a gap for another smaller blockchain solutions provider to gain a foothold at the bottom of the market by offering a simpler, cheaper, lower quality but good enough, and more convenient solution to smaller suppliers and logistics companies.

This new entrant can make its way up, as per the DI model above, by designing a business model which allows it to create and capture value and make profits at a discounted rate, for example.

IBM will not be interested in fighting back with this small provider as the customer base it serves is not of any interest to IBM.

IBM will be better-off when this new entrant deals with the least profitable customers, while it focuses its resources on sustaining innovation and looking at ways of capturing even more profitable customers at higher levels of the market.

This is where the new entrant penetrates the market and move up to fill any gap left by IBM, and thus causing disruption at the end.



This is not an academic article. It is an attempt to test blockchain in general and its solutions against the Disruptive Innovation theory in order to find out if the claims made by authors in this field is valid or not.

One of the most important facts this article has highlighted is that a good business model is needed to capitalize on the strengths of the technology.

The open-permissionless blockchain and its bitcoin could have been good cases for disruptive innovation. Yet, the former is somehow being abandoned and is left to face its destiny as investors and businesses are more interested in private blockchains. The bitcoin, on the other hand, has been hijacked by the whales.

Ripple, Hyperledger Fabric, Corda, and other solutions based on private blockchains could be mainly considered to be sustaining innovations NOT disruptive innovations.

Stellar, through its XLM can act as a disruptor, if the platform carry-on on their plans which aim at fighting poverty and achieving social and economic inclusion in the global South.

Actually, XLM can be a perfect replacement for bitcoin in this regard!


PS. I DO NOT hold any XLM.

[1] Though in figure 2 Ethereum is classified as open-permissionless blockchain, I opted to add it to this group as it was developed after the open-permissionless blockchain, has centralized governance, it allows private channels, and it allows private blockchains to be deployed on the platform.