The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology - William Mougayar, Vitalik Buterin (2016)
IF THE BLOCKCHAIN has not shocked you yet, I guarantee it will shake you soon.
I have not seen anything like this since the start of the Internet, in terms of capturing the imagination of people, a small number first, but then spreading rapidly.
Welcome to the new world of the blockchain and blockchains.
At its core, the blockchain is a technology that permanently records transactions in a way that cannot be later erased but can only be sequentially updated, in essence keeping a never-ending historical trail. This seemingly simple functional description has gargantuan implications. It is making us rethink the old ways of creating transactions, storing data, and moving assets, and that's only the beginning.
The blockchain cannot be described just as a revolution. It is a marching phenomenon, slowly advancing like a tsunami, and gradually enveloping everything along its way by the force of its progression. Plainly, it is the second significant overlay on top of the Internet, just as the Web was that first layer back in 1990. That new layer is mostly about trust, so we could call it the trust layer.
Blockchains are enormous catalysts for change that hit at governance, ways of life, traditional corporate models, society and global institutions. Blockchain infiltration will be met with resistance, because it is an extreme change.
Blockchains defy old ideas that are locked in our minds for decades, if not centuries. Blockchains will challenge governance and centrally controlled ways of enforcing transactions. For example, why pay an escrow to clear a title insurance if the blockchain can automatically check it in an irrefutable way?
Blockchains loosen up trust, which has been in the hands of central institutions (e.g., banks, policy makers, clearinghouses, governments, large corporations), and allows it to evade these old control points. For example, what if counterparty validation can be done on the blockchain, instead of by a clearinghouse?
An analogy would be when, in the 16th century, medieval guilds helped to maintain monopolies on certain crafts against outsiders, by controlling the printing of knowledge that would explain how to copy their work. They accomplished that type of censorship by being in cahoots with the Catholic Church and governments in most European countries that regulated and controlled printing by requiring licenses. That type of central control and monopoly didn't last too long, and soon enough, knowledge was free to travel after an explosion in printing. To think of printing knowledge as an illegal activity would be unfathomable today. We could think of the traditional holders of central trust as today's guilds, and we could question why they should continue holding that trust, if technology (the blockchain) performed that function as well or even better.
Blockchains liberate the trust function from outside existing boundaries, in the same way as medieval institutions were forced to cede control of printing.
It is deceptive to view the blockchain primarily as a distributed ledger, because it represents only one of its many dimensions. It's like describing the Internet as a network only, or as just a publishing platform. These are necessary but not sufficient conditions or properties; blockchains are also greater than the sum of their parts.
Blockchain proponents believe that trust should be free, and not in the hands of central forces that tax it, or control it in one form or another (e.g., fees, access rights, or permissions). They believe that trust can be and should be part of peer-to-peer relationships, facilitated by technology that can enforce it. Trust can be coded up, and it can be computed to be true or false by way of mathematically-backed certainty, that is enforced by powerful encryption to cement it. In essence, trust is replaced by cryptographic proofs, and trust is maintained by a network of trusted computers (honest nodes) that ensure its security, as contrasted with single entities who create overhead or unnecessary bureaucracy around it.
If blockchains are a new way to implement trusted transactions without trusted intermediaries, soon we'll end up with intermediary-less trust. Policy makers who regulated “trusted” institutions like banks will face a dilemma. How can you regulate something that is evaporating? They will need to update their old regulations.
Intermediary-controlled trust came with some friction, but now, with the blockchain, we can have frictionless trust. So, when trust is “free” (even if it still needs to be earned), what happens next? Naturally, trust will follow the path of least resistance, and will become gradually decentralized towards the edges of the network.
Blockchains also enable assets and value to be exchanged, providing a new, speedy rail for moving value of all kinds without unnecessary intermediaries.
As back-end infrastructure, blockchains are metaphorically the ultimate, non-stop computers. Once launched, they never go down, because of the incredible amount of resiliency they offer. There is no single point of failure unlike how bank systems have gone down, cloud-based services have gone down, but bona fide blockchains keep computing.
The Internet was about replacing some intermediaries. Now the blockchain is about replacing other intermediaries once again. But it's also about creating new ones. And so was the Web. Current intermediaries will need to figure out how their roles will be affected, while others are angling to take a piece of the new pie in the race to “decentralize everything.”
The world is preoccupied with dissecting, analyzing and prognosticating on the blockchain's future; technologists, entrepreneurs, and enterprises are wondering if it is to be considered vitamin or poison.
Today, we're saying blockchain does this or that, but tomorrow blockchains will be rather invisible; we will talk more about what they enable. Just like the Internet or the Web, and just like databases, the blockchain brings with it a new language.
From the mid-1950s forward, as IT evolved, we became accustomed to a new language: mainframes, databases, networks, servers, software, operating systems, and programming languages. Since the early 1990s, the Internet ushered in another lexicon: browsing, website, Java, blogging, TCP/IP, SMTP, HTTP, URLs, and HTML. Today, the blockchain brings with it yet another new repertoire: consensus algorithms, smart contracts, distributed ledgers, oracles, digital wallets, and transaction blocks.
Block by block, we will accumulate our own chains of knowledge, and we will learn and understand the blockchain, what it changes, and the implications of such change.
Today, we google for everything, mostly information or products.
Tomorrow, we will perform the equivalent of “googling” to verify records, identities, authenticity, rights, work done, titles, contracts, and other valuable asset-related processes. There will be digital ownership certificates for everything. Just like we cannot double spend digital money anymore (thanks to Satoshi Nakamoto's invention), we will not be able to double copy or forge official certificates once they are certified on a blockchain. That was a missing piece of the information revolution, which the blockchain fixes.
I still remember the initial excitement around being able to track a shipped package on the Web when FedEx introduced this capability for the first time in 1994. Today, we take that type of service for granted, but this particular feature was a watershed use case that demonstrated what we could do on the early Web. The underlying message was that a previously enclosed private service could become openly accessible by anyone with Internet access. A whole host of services followed: online banking, filing taxes, buying products, trading stocks, checking on orders, and many others. Just as we access services that search public databases, we will search a new class of services that will check blockchains to confirm the veracity of information. Information access will not be enough. We will also want to ask for truth access, and we will ask if modifications were made to particular records, expecting the utmost transparency from those who hold them. The blockchain promises to serve up and expose transparency in its rawest forms.
The old adage “Is it in the database?” will be replaced by “Is it on the blockchain?”
Is the blockchain more complicated than the Web? Most definitely.
Allow me to take you on this journey to decipher it.