Blockchain Ideology 101

An Ideological-Technological Exploration of Blockchain

May 2016

In this Year of Blockchain, we see the technology attracting nearly 10% of fintech venture funding (fintech itself approaching $19 billion this year).  The bitcoin blockchain is only one flavor of a proliferation of coins (by one count over 700), and “colored coins” are only one flavor of blockchain.  It’s helpful to have a reliable taxonomy when seeking to classify these distributed cryptographic ledgers.  In this post, we will explore a new model for thinking about blockchain variations.

Most blockchain taxonomies focus on the functional architecture (is it permissioned or permissionless?  Is it public or private?).  We are not going to dwell on these models here, and direct readers to the division proposed by ArthurB (although it has been pointed out that his statement “Applications which do not attempt to evade oppressive governments have little or no reasons to use decentralized systems” isn’t precisely true.  There are numerous examples of a need for trust technologies when absolute trust in a third party is absent, having nothing to do with governments – eBay selling is the most trivial example, but equities security trading would be another.)

Instead, in our view, understanding implementation of blockchain requires understanding implementers, users, and their respective objectives.  This context-based analysis of blockchain provides a novel lens on selecting a platform and allocating resources to it.  Broadly speaking, when we incorporate ideology into the technological analysis, we see three categories:

• Libertarians: A substantial number of bitcoiners believe that government has no role in regulating society, and bitcoin usage is an expression of political belief. AML/KYC is anathema to their belief systems.  This isn’t to say that all bitcoin users and companies feel this way – to the contrary, a large number of bitcoin companies employ or developed policies based on the Windhover Principles that MIT helped shepherd.  Rather, a vocal segment of bitcoin miners and developers assert a proprietary ownership of the technology, and vigorously reject anything that compromises their idealized view of how it should be used.  To quote a recent post on Reddit: “if you aren't working to make Bitcoin better (read: more private, more fungible, more scalable) than you should keep your dirty, groveling sycophant paws off of it.”[i]  It’s a vigorously-expressed point of view but one shared by a number of users who engage each other regularly in self-reinforcement.
• Technocrats: A broad middle of technocrats don’t automatically assume either government regulation or total freedom from regulation, but rather see blockchain as a flexible technology without ideology. Ethereum would fall clearly into this category.  A host of “smart contract” and other applications are being built on top of the Ethereum platform, which has a substantially shallower learning curve than the notoriously complex bitcoin blockchain. 
• Rules Followers: The industry-led consortia such as R3 and Hyperledger accept, a priori, that regulation applies to blockchain (for example with respect to AML/KYC as it applies to currency and other financial-related matters). While perhaps not as passionate in espousing their views as the Libertarians, these Rules Followers are making an ideological choice embedded into the fabric of their chosen technology platform.  (Corda doesn’t technically use “blocks” but we are describing all distributed ledger technologies as blockchain for convenience).

The AML/KYC debate in cryptocurrency is fiercely contested.  Anecdotally, friends who have worked in the backoffice of large financial institutions indicate that the AML systems only seem to generate false positives.  Are they even worth the effort?  Joi Ito has written cogently on the need for AML/KYC reform.

Longer-term adoption of blockchain at scale will likely come through the efforts of Technocrats or Rules Followers.  At same time, the passion that the Libertarians feel has caused them to think “outside the box” and question assumptions, resulting in a new way of transacting that is transparent, open and decentralized.  In fact, blockchain as such would not exist with those passionate Libertarians driving its creation and adoption. 

Given the attitudes of some of the Libertarians, how can the creative energy of the innovators behind the bitcoin blockchain be accessed to support a broader technology revolution? 

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More on the blockchain revolution is covered in our white paper series:

• Blockchain & Financial Services: 5th Horizon of Networked Innovation: May 3
• Blockchain & Transactions, Markets & Marketplaces: May 10
• Blockchain & Infrastructure (Identity, Data Security): May 17
• Blockchain & Policy: May 24

Email me at [email protected] for a copy.

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To build your own disruptive blockchain company, join our Future Commerce: Fintech Innovation global classroom at getsmarter.mit.edu

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[i] /u/throw_awa5 posted 27 April 2016 https://www.reddit.com/r/Bitcoin/comments/4givro/upcoming_ama_mit_connection_science_team_will/d2jig1r accessed 30 April 2016.