Ideas & Insights: Blockchain Technology

In a previous article, I examined the concept of “innovation” and how it may find ways to manifest itself within the fringe. In that article, I briefly mentioned the origins of Blockchain technology and Bitcoin within the decentralized economies of the dark net, and I would like to take some time here to create a brief re-examination of the potential of this technology.

As most people intimate with business are aware of- the emergence of Blockchain technology is seemingly geared towards revolutionizing the way we do business. While we may not necessarily feel the immediate effects of Blockchain today, the ramifications of this technology are coming, will radically change the way we structure our economies, and in the near future will be definitive in how we do business with each other.

With that in mind, what is Blockchain technology?

Essentially, a Blockchain is a digital ledger. It is a way to track the validity of asset ownership, to view transaction history, and to decentralize this process in an immediate way away from banks or other facilitators. Blockchain is a digital ledger accessible through a decentralized database across a P2P network, secured through cryptography, and through blocks of data linked across a neutral network. It creates an immutable trail of information that cannot be hacked or edited from a centralized source.

Blockchains are indestructible and immutable collections of data, which are replicated in blocks on every computer utilizing a network.

For perhaps some allegory, picture Wikipedia, with the ability to track changes (who edited what, what kind of edits were made- a digital ledger or history), with data stored not on a single centralized server (unlike Wikipedia), but across a network in chained blocks. Custodianship of data transferred from a single company, to an entire network of users. Ownership of data traceable by everyone on that network as need demands. The location and status of items, traceable by anyone in that network at that same appropriate discretion.

Essentially, what we are talking about with this technology is a shared reality, across a decentralized database, with the same potential power as any monopoly or bank.

With Blockchain technology, and as highlighted in my article on innovations from the fringe, because of the nature of decentralized economies, we no longer need management or the middle men. We can essentially collapse mitigation structures and human activity in management. The enforcement of contract- transactions become as simple as procuring and item for money and mutually confirming the validity of the transaction on both ends, then automatically updating the network ledger. Once money gets sent across the network, that’s it, no need to jump through a Rube Goldberg machine to commit to a transaction.

Recognizing if information has been tampered with is relatively easily to follow within all this. If someone decides to tamper with the information on the ledger (very difficult to cryptography), guess what happens when they have a different ledger from the rest of the network?

Hay man, you’re the odd one out- what are you trying to pull?

Blockchain allows us to move beyond transaction or wiring fees as well. That 10% fee to wire money across the globe (something I have had to deal with myself in transferring money from Korea to Canada) and additional slow confirmation time to confirm the wiring? That fee and time is gone.

On the subject of transaction and bank fees, the concept of DAOs (distributive anonymous organizations) is becoming a very real possibility. Could you possibly entertain the idea of an ownerless business? It may be closer than you imagine. Within cryptocurrency communities, it is quickly finding application in replacing centralized banking. With 0 fees, and little to no central management, we can see some of the existential issue which directly affects how we do currently have built up our financial industries.

What about Intermediaries capturing our data through our interactions and threatening our privacy? As Blockchain applications largely come from the dark web, they put power into our hands to get rid of central companies managing our transaction history and data- allowing us to recapture our own data and the virtual “you”. From this, we can even apply parameters to our network on viewing status, while having the blocks still there, though hidden to users until requested. Sellers don’t need to know who we are, but if they do, there is always that option to access to this data that can be accessed via the network with the right protocol, but which still remains immutable within the network.

The ability of Blockchain to transform the economy verges on the fantastic. It can even be used to solve economic problems once thought impossible to track. Near 15 years ago, with applications such as Napster or Limewire, the power of artists over their own product was greatly diminished. Content creators today, even of images, lose out in the control of their content because the ability to trace the source of the content previously had no adequate controls. I recall awhile back that there was a case where Madonna came under flak because she utilized an online artists artwork on one of her promotional tours, while giving the original artist no credits or royalties. Guess what happens when we upload content and apply ownership or usage history through Blockchain technology? The tracing of intellectual property rights becomes that much easier. Musicians and artists can, and have, uploaded albums using Blockchain technology (one such artist to do so was Aphex Twin recently). Individuals are able to trace and better empowered to track the fair usage of their content, and this technology is only in its infancy.

So does all this truly qualify as “revolutionary”?

I think to fully appreciate the magnitude of this technology; one has to look briefly at a history of technological revolutions.

Technological revolutions typically emerge to address a gap in technology. With the printing press, it was a gap in the availability of knowledge. With the advent of the engine & industrial revolution, it was a gap in power and the ability to store and utilize power (giving us new alternatives to manual labor). With the advent of the computer, it was the ability to compute large quantities of knowledge in an accurate manner. With the current communication age, the gap answered was found in our ability to communicate information across great expanses.

The current gap, which Blockchain technology addresses directly, is the gap of trust- a key economic principal.

Within economics, the concept of trust and the subsequent uncertainty which follows defines our relationship with trade. We want to ensure that we can trust in the remittance of a trade we partake in. We want to manage the uncertainty of transactions, and to this effect, we create economic institutions or methodologies to ensure and enforce trade. The grease which allowed trade to occur once upon a time was that of social repercussions or violence. You reign on our deal, guess what happens?

Now, saying that, we have largely moved on from this, with centralized management institutions in the form of facilitators (such as banks, to lower uncertainty), or through the creation of carefully managed monetary systems, which can help measure and ensure consistency in trade value.

Naturally, the wise assumption within trade is to be skeptical of the other party, and to try and find some way to better manufacture trust in the transaction, to ensure that it can take place. Trust is core to business, and without trust, it is safe to say that there could be no commerce or trade. So far, building trust through institutions, past the enforcement of violence, has been the prime model we have successfully utilized throughout history.

But what if uncertainty as a concept was rendered null? What if we could trade title, document and data, with absolute certainty? What if we could do this at a horizontal level without the possibility of violence or need for facilitators in trade, and without lowering our own personal control in the process?

Someone wants to reign on a deal on a Blockchain network? Our contracts and ledgers are bound within a network- you can’t get title to an item without the distribution of financial currency verified as legitimate within the network. You can’t switch goods without both parties receiving what’s theirs, otherwise the ledger will update an incomplete transaction, rendering ownership null.

With regards to our centralized tracing, auditing, and facilitation systems, with Blockchain technology gone is the potential for human error within certain companies and auditors. We can quickly look back at a transaction, and even with the possibility of a blip, it’s rather easy to trace where it occurred. Gone as well is the risk that central servers can be hacked and our information compromised (for example, JP Morgan or Sony, in recent years).

We assume financiers and managers will do the right thing with capital and will accurately track and look at the history of assets and asset history, but what of the 2008 financial crisis? Wouldn’t it be better to have a way to be able to better appraise the status of assets, people, or finances in a way which would allow information to be accessible and manageable by anyone throughout a network, as the need emerged?

If there is a way to build back trust in and across global economies after the 2008 crash, I do believe that investment and the integration of Blockchain technology networks is the method. As we are transacting even more things, over greater distances, the issue of trust is integral to all we do- it’s only natural that we find ways to build the networks we barter and trade on in more neutral ways, across national boundaries. The power to audit, trace, and authenticate what is going on within these networks is highly efficient.

Adding to all this and with regards to other applications of the technology outside of finances, with Blockchain technology, we have the power to revitalize the little guy’s fighting changes, in competition with bigger companies. We can essentially democratize the economy (something interesting, which is currently happening in Nigeria), and give smaller companies the change to compete with larger companies. Who needs to hire an accounting team when transaction ledgers are network based and instant? Who needs to manufacture trust, when our histories and reputations can be tracked via a Blockchain network?

Suppose you want to buy 19th century art from an antique store in New Orleans. How do you know it’s authentic? Surely there may be a label on the item you buy from a company managing in appraisals - but what if you could simply see the collective history of an item you wanted to buy across a network? Would you rather simply look up an items history within a Blockchain network, or have to go through an appraiser to authenticate its item details and history? I guarantee that businesses not worried about competing with Blockchain enabled versions of themselves are not looking towards a very near future.

Blockchain, frankly, is the future. It may not be the future today, or tomorrow, but it is coming. Much the same way the printing press may have taken some time to manifest itself within the economy, regardless of the speed by which we adapt to it, the inevitability of its usage is inevitable. While it may not be something we see in everyday life today, I do believe that it will be definitive technology for the economies of the future, and we will have to adapt our current trading platforms either to embrace, or compensate for it. Whether we use it to further enable virtual currencies, to create reputation ranking systems (like perhaps Elon Musk has mentioned) or better utilized smart contracts, the scale by which it is usable is ever-present throughout our tech driven societies.

In conclusion, is Blockchain something we should all look into and study in depth? I would very much advise so. Is it something to be adopted by any person or company reading this piece? Debatable. I think the application of Blockchain technology and Blockchain networks will become more and more commonplace as time progresses, but it’s hard to say if your company can immediately benefit from it in a material way (so don’t necessarily get caught on the hype and invest in it as a life-saver just yet). Blockchain is not a miracle cure for a company’s endemic problems. What it is, is a way to address the trust gap in a very unique, and frankly revolutionary, manner. Much the same way the printing press was a technological innovation at its inception, someone in the 17th century trying to use it to print off Twilight fan-fictions may not have been utilizing the technology to its full capabilities. You can’t just toss technology wherever you can and in whatever way you can and expect it to generate value for you. While people are enthusiastic to jump onto Blockchain technology, the position it will have in your chosen field is yet to be defined- though the future is present and coming for us all.

What we really should be asking ourselves is “What is my role going to be in the oncoming Blockchain economy?”