 Live from Las Vegas, it's theCUBE, covering IBM Think 2018, brought to you by IBM. Hello everyone, welcome to the third day of live coverage here at IBM Think in Las Vegas. This is theCUBE, our flagship program. We go out to the events and extract the signal noise, the leader in live technology coverage. I'm John Furrier with my co-host Dave Vellante. Our seventh or eighth year covering a bunch of IBM shows, but all now six of them rolled into one IBM Think. They're big tent event Dave. Day three, keynotes just finished. It's blockchain day here at IBM. And as we said on the opening on Tuesday, this is like the innovation sandwich. In the middle of the meat is data and then the bread is blockchain and AI. And really that is the architecture of IBM's future strategy, foundationally set up by cloud computing and a variety of other applications and whatnot. But really the future is about data with blockchain and AI surrounding it. Today's blockchain day, your thoughts on the keynote. Keynote, speeches, IBM, blockchain. Certainly we've seen a lot of advertising on TV. Your thoughts and reaction to the keynote. Yeah, and I like your innovation sandwich. I want to add that the substrate of all this is cloud, it's critical. You've got to get network effects, you've got to have the cloud. Today, yeah, it was blockchain day. We heard from Marie Wieck, who's the general manager of IBM blockchain. IBM has a tendency, as you know, John, to identify a hot trend, especially some in open source. They did this with Linux and they did this with Spark and they kind of elbow their way in. Maybe that's the pejorative, but they do that and they say, here's some code, here's some resources, they spend money on it and they give credibility to that open source effort. The Hyperledger project is the one they targeted here. It's the fastest growing project in the history of the Linux foundation. IBM contributed lines of code, people, they got 1500 blockchain experts on this and they are going all in on blockchain, which I think John is really positive for the blockchain and even the crypto community because it brings the credibility of a Fortune 100 company to that world. They've announced a blockchain starter kit, all this stuff is available in the IBM cloud. They announced today PWC as an audit partner, which again brings credibility to the table, although I think as you and I know, and we're going to have some guests on later today, there's some other tech emerging that is going to maybe complement that. And we heard from David Katz, he's the CEO of Plastic Bank, he's a company that's essentially creating currency out of plastic, allowing disadvantaged people to turn collecting plastic into money and at the same time help save the planet. I mean, this is a great example of blockchain as an enabling technology, new ways to do business. As you know, we've been hot on blockchain for the audience watching. We've been covering big data and AI, so that's in our wheelhouse, do all those shows and events, cover that territory with our journalism and TV and research, but blockchain is an adjacency to storage and infrastructure and also decentralized applications. The fundamental thing that we're seeing and we talked to Brian Bellendorf, who's with the Hyperledger Project at the Open Source Summit at the Apache Foundation, which IBM is a big sponsor of. And IBM needs to do well here because they're, again, innovation centers are betting on blockchain, but it's not just the developers and Open Source, the business users are the ones that are going to create the value. And what I mean by that is, if you look at the blockchain world and cryptocurrency and decentralized applications, that's essentially the three components to this market. The blockchain is infrastructure, ledger, storage of data, et cetera, and we're simplified. But the cryptocurrency is around protocols and infrastructure that power that, and then the application's going to sit on top. We've reported and observed that the secret of success in this new world is nailing the business logic and the business model, efficiencies that take advantage of the underlying technology, and that the risk factors in making that success happen is that business model, not the technology. Although the technology is super important, the technology can be switched out at a reduced risk. So the real risk in blockchain and cryptocurrency and decentralized applications is nailing the business model disruption. This is different than the old way of tech, which was the risk was technology selection. This is a big deal. IBM needs to up their game on that piece of it. I've heard a lot of tech. I got some nice use cases, but on the outreach basis, they got to go to the business users and saying, this is an opportunity to leverage the data, leverage the software and AI with Watson and other things, and then leverage the underlying technology, software defined storage, software systems that move to the blockchain in a decentralized and distributed way. Distributed and decentralized is the future of infrastructure. This is the secret of success. This is where the winners are establishing the clear line of sight. Well, one of the things that you're hearing at this conference, and Ginny set this up yesterday, was incumbent disruptors. And I was sort of having fun at the open yesterday, but I think it's really smart for IBM. You know me, John, I'm a big fan of saying your, most of your business is going to come from your existing customers. And if you're chasing all this new business and startups and developers, you're not going to be as productive as if you go to your core. And I think that's your seeing this. IBM back to the core and they're bringing blockchain to that core as a way to disrupt existing business models, defend against disruptors. And so you're absolutely right. Companies need to look for inefficiencies where there's a third party taking a toll and then attack it hard with blockchain. I actually think, well, so IBM is really talking business. How do we bring blockchain to the business? They're not really talking about this. We talk about a lot. There's crypto economy and this whole other mission-driven initiative. Well, but I mean, if they want to talk business, they got to talk token economics. That's where the business model efficiencies will be rendered on the app side and the money side. The killer app in blockchain and crypto is money and marketplaces. IBM's got a great marketplace, but it's not just about the developers. That's an organic one stakeholder. The stakeholders that matter is the business guys and the developers coming together. That is absolutely fundamental. If they don't understand that, it's going to be hard to be successful. You can't just throw money at developer programs and saying, oh, we're going to win the developers, we win the day. Cloud was kind of that playbook, but this world is so fast and accelerated in its value creation that the business users are fundamental in actually groping what the capabilities are and putting that into motion quickly. And the proof points is pilots converting to production. That's going to come from the business units. That's where the intellectual property is, is looking at the technology innovations that are possible on the business logic. Business logic is the new IP. This is where the action is. And I haven't heard IBM talk at all about token economics. They kind of talk about it, but that really is the business impact. Well, I mean, you sort of heard that today from Plastic Bank. Although they didn't talk about a token. They didn't talk about coins. They did talk about monetizing plastic, but in using blockchain to do that, I assume there's tokens behind that, but maybe not. Maybe it's just fiat currency. It's unclear to me, but I think you're right. The killer app is money. Look, this is simple. The equation in crypto and not blockchain is value creators create value and they can capture the value. Capturing the value is where the money is. The creating the values where the technology can happen. So you've got to nail both of those areas and money is the killer app. So that's going to come from the business side. So the real benefit of decentralization is offering the value capture equation to look different and be different. That's token economics. That's where the action is going to be. So it's not mutually exclusive. They're both things. Well, I think that what you're hearing so value comes from two places. It's the simplest form. Increase revenue, cut costs. I've been hearing a lot from IBM of cut costs. Now again, the Plastic Bank this morning was a really interesting example. I'm glad IBM used it, but the vast majority of things you're hearing from IBM like the IBM-MERSC of relationship, et cetera, are about cutting costs. Well, I mean, taking out inefficiencies in the marketplace. The bank thing is easy to look at it in your mind, but it's any supply chain. The ICO market that has a massive bubble right now is because the supply chain of get funding startups and growth used to become from private equity and venture capital. That is being disrupted because it's certainly hyped up, but that's a supply chain. Any supply chain activities, set of activities that make up a supply chain can and will be disrupted by blockchain, crypto, and token economics. Yeah, but so let's talk about that because again, you're not hearing a lot of that from IBM, but I think we have a perspective there. You know, kind of, you know, the 1.0 was the Wild West, a bunch of developers, blockchain developers, Ethereum developers doing stuff, building up protocols, making a lot of money, and disintermediating the VCs, right? A new form of raising capital. The VCs are now all in, right? We saw this in Bahamas. You saw this in Puerto Rico at the two conferences of four conferences that we covered, so explain that. Well, that's just one application. The VCs and these guys are inefficient in some way, but what's happening with cryptocurrency about access to capital. Now, there's a lot of capital being thrown out there. That's mainly because of the hype and the bubble aspect of it, but the real disruption is access to capital, that value chain, value activities, are being disrupted and being more efficient. That's a global phenomenon and that's happening in financing of startups. Anything with a supply chain, whether it's moving food from point A to point B, is what IBM also highlights as well. Anything that's structural incumbent is at risk. And so this is where, I mean, IBM has a ton of supply chain business. They've been doing this for generations in the computer industry. They connect systems together and create value and we're using technology. So this is not going to be, this is a great opportunity for IBM. Again, if they can convert that business value into the blockchain with the value capture, create capture model, they could run the table. But I want to come back to innovation equation and part of that innovation equation is being able to raise capital. And last I checked, which was last month, about 6.5 billion had been raised in crypto investments. And 60% of the project was failed. So it's for sure, but failure, Silicon Valley, failed fast. It's probably up to 10 billion now. Much more is being raised through crypto in startups and blockchain than there is in VC. The VC's realize this and they want a piece of the action, but we're seeing private equity. We're seeing hedge funds. We're seeing crypto billionaires. The path of risk for the entrepreneur is where the action is. They go right to the new money opportunity because they can raise more money. So here's the question. You take Filecoin, for example, smart guys trying to go after S3 with peer-to-peer storage. They raise $250 million in 30 minutes, okay? Is it too much too fast? Yes, I think so, but it's what the market is giving. I mean, Filecoin doesn't even have a product. They're on a roadmap. That's essentially a series A financing. Well, no, no, in terms of the evolution of startup, it's a series, it's a seed financing at a series C or D or F. That's D, right? F, 250 million. I mean, it's insane. David Scott told us that he needed 85 to start 3PAR. I mean, this is a storage company 10 years ago, 20 years ago. What a change, 250 million. Look, it's a bubble, but the reality is it's a bubble that's not going to pop and destroy the sector. It's just a proof point that the efficiencies of funding is going to be disrupted. It is being disrupted. All right, David. We'll see if it's going to destroy the sector or not. That's good. Warren Buffett says it's going to end badly. Others are believers. No, I'm long on blockchain. Obviously you know that. I'm pretty biased, but anywhere there's inefficiencies, there's an opportunity for entrepreneurs and business leaders to put new business logic in place to capture that value. That's where the action will be. That's the innovation. And if IBM's innovation sandwich could work, you got blockchain and AI, data in the middle, everyone's going to be full and hungry and eat up everyone's lunch. So Dave, that's the Blockchain Day. I'm John Furrier with Dave Vellante. Day three, wall-to-wall coverage here at IBM Think in Las Vegas, more live coverage after this short break.