WHAT IS THIS BLOCKCHAIN TECHNOLOGY? Why should we be concerned?

When I first heard of bitcoin, I did not give it a chance to make me believe that a digital currency would make an impact in this generation. Instinctually, I felt the online scammers are at it again, so I did not waste my time reading about it nor even had a second thought of ever having anything to do with it. It was because I believed this innovation by someone unknown called Satoshi Nakamoto is suspicious and can never affect my way of life, at least not in this lifetime; maybe it is for another generation yet unborn. So this was a settled case, then I went to ‘sleep’. However, I could not have a good sleep as I kept hearing the sound Bitcoin! Bitcoin! Bitcoin everywhere; from the media, academic publications, and in discussion forums. Why all this noise I asked myself, I think it is time to start listening so that I can scientifically argue my way through. At this time a young man (programmer/developer) whom I had been working with to design a software for a new business client, started talking to me again about bitcoin. Fortunately for him, I had already made up my mind to start listening and reading about bitcoin and what it is all about, so I listened carefully and asked all the questions that I needed to. The more I listened to him the more I needed to know and the more questions I asked. Then he started telling me about the technology that made bitcoin a valuable asset and a secured digital currency, but my interest was now more on the technology that secured this currency called bitcoin. When I learnt about how this technology applies to real business and how secured and inclusive it is, I decided to study more about it (not as a developer) as an enthusiast. This technology they called it BLOCKCHAIN. My curiosity was to know how this affects today’s business; then I came across a publication by Gupta, (2017) that addressed my concern about how Blockchain technology is revolutionising the traditional business network, this is his submission;

The blockchain architecture gives participants the ability to share a ledger that is updated, through peer-to-peer replication, every time a transaction occurs. Peer-to-peer replication means that each participant (node) in the network acts as both a publisher and a subscriber. Each node can receive or send transactions to other nodes, and the data is synchronised across the network as it is transferred. The blockchain network is economical and efficient because it eliminates duplication of effort and reduces the need for intermediaries, it is also less vulnerable because it uses consensus models to validate information. Transactions are secure, authenticated, and verifiable. The participants in both transaction systems are the same. What has changed is that the transaction record is now shared and available to all parties.

A blockchain network has the following key characteristics:

Consensus: For a transaction to be valid, all participants must agree on its validity.

Provenance: Participants know where the asset came from and how its ownership has changed over time.

Immutability: No participant can tamper with a transaction after it’s been recorded to the ledger. If a transaction is in error, a new transaction must be used to reverse the error, and both transactions are then visible.

Finality: A single, shared ledger provides one place to go to determine the ownership of an asset or the completion of a transaction.

Interesting, I thought, if this technology indeed has the characteristics of consensus, provenance, immutability, and finality, then its application is beyond the simple payment system, and it should be precious for both government and private investments. Then I began to wonder, if this technology has these qualities, then it is a tool for fighting corruption, injustice, and all the ills that come with capitalism, I do not mean that the technology in itself would solve all these problems. What I am saying is that all those that have chosen to transact or operate within the blockchain network irrespective of their moral standing, would have no choice but to abide by the principles/characteristics of the technology (consensus, provenance, immutability, and finality) meaning the blockchain technology is in itself a ‘just system’. The implication of adopting this technology is an adaptation to it, adaptation to it implies getting used to being transparent, and subjecting your activities to public scrutiny, non-tampering with transaction, once on blockchain, therefore, you have to be honest because dishonesty can easily be exposed as there is easy access to confirmation of all transactions/activities done on the blockchain. Over time, attitudes would begin to change unconsciously, and sanity would start to return to societies. If the Blockchain can lead to a change in attitude by adaptation, then it can be called the silent enforcer of agreed societal values, rules and regulations. If you agree with me, we have found the missing link that can replace through enforcement the undesirable for the desirable differences between the capitalism proposed by Adam Smith and the Capitalism we practice today.

 Consider this statement by Naz, (2014 pp.71);

“Modern Capitalism has been criticised on many different grounds, especially for the genuine imperfections of actual forms of capitalist organisation and the difference that it has created between rich and poor. There is one more front where capitalism has come under severe attack, i.e. the ethics of the capitalist system. Neoclassical thinking has legitimised a narrow conception of capitalism that has largely excluded social and moral considerations from economic thinking. Such a narrow conception of capitalism that excluded wider moral motivations and institutions from their economic thinking has prevented capitalism from harnessing its full potential.”

It would be more informed if you read the two books by Adam Smith;

1. The Theory of Moral Sentiments’ and
2. ‘An Inquiry into the nature and causes of the wealth of Nations’.

These books complement each other, to my thinking the modern capitalism is an extract from the wealth of nations and distortion of Adam Smiths’ recommendations. I read an interesting piece of article by Paganelli, (2017) it is titled 240 years of The Wealth of Nations. It just captured my thought nicely. As I read the article, I see clearly how blockchain technology can impact on achieving what Adam Smith recommended for an egalitarian society. Paganelli wrote this article to show the relevance of a 240-year-old book in the 21st century and possibly for the future.

Please read this exciting extracts from Paganelli, (2017); But as you understand it, remember the essential characteristics of the Blockchain technology (consensus, provenance, immutability, and finality). Imagine the application of the technology in dealing with the issues raised by Smith, then ask yourself if the proper use of Blockchain Technology can significantly fill the gap between Adam Smith's Capitalism and Modern Capitalism.

Armed with this thought in your mind please examine the following extracts:

1.    What is Smith asking in this book are huge questions: how would a just system which also promotes the well-being of humankind look like, given the imperfect and non-perfectible nature of humanity? How do we get there? How can we preserve it? The questions Smith asks are questions that are of interest to us too, and will be of interest in the future as well.”

(Imagine a system that is based on consensus, provenance, immutability, and finality see how this applies to 1-10). 

2.    A nation can grow wealthy only if justice accompanies its growth. 

3.    Poverty brings suffering and kills unjustly the weakest of society. How can we get out of it? For Smith, wealth is the answer.

4.    According to Paganelli (2017) To try to answer his big questions, to inquire into the nature and causes of the wealth of nations, Smith also inquires into the nature and causes of justice, and into nature of humankind. For him, by understanding and accepting human nature, we can understand how to evaluate the different institutional settings in which we live and which are more or less suitable for the development and maintenance of wealth.

5.    Moreover, if human nature, in its complexity, is immutable, as Smith believes, what we can do is to channel it into ways that are more productive so that we are all better off both as individuals and as a society.

6.    Feudal societies are not only inadequate but also unjust. The majority of the people are stuck in “servile dependency” to their masters (WN III.iv.4, p.412). However, our natural propensity to truck, barter, and exchange, the division of labour that goes along with it (and some luck), and “the silent and insensible operations of foreign commerce” break these chains and offer the majority of people more equalitarian interdependence. Having a thousand masters is better than having only one because with a thousand masters you are no longer dependent on any one of them (WN III.iv.10-12, p. 418- 420). Commerce brings more wealth, more liberty, and more justice.

7.    The wealth of nations can be read therefore as a substantial anti-colonialist and anti-imperialist tract. Smith himself sees his work as a “violent attack against the whole commercial system of Great Britain.” His question is relevant for us too: if we manage to get a wealthy society, how do we preserve it? His solution against what today we would call lobbyists and crony capitalism, whether we agree with it or not, is competition.

8.    Smith wants to understand a “system of natural liberty”, which for him may be what allows nations to grow wealthier, and therefore with more “order and good government, and with them, the liberty and security of individuals” (WN III.iv.4, p. 412). So commerce brings about good government and liberty. What is, then, the role of the government in a nation that grows wealthier?

9.    According to Smith, as a nation grows wealthier, its institutions become more complex, and the protection of justice also becomes more complicated.

10.  So Smith helps us think about wealth, about commerce, about the justice and the effectiveness of different institutions, about competition, about the relationship between the state and the economy. They are all topics that appeal to all generations of scholars (and beyond) and that most likely will continue to appeal to all ages of scholars (and beyond). Smith also helps us answer these big questions by paying attention to our local context, just like he paid attention to his local background.

Imagine a system that is based on consensus, provenance, immutability, and finality guiding today's Capitalism-where do you think the world would have been?

At this point we are beginning to examine the technology philosophically, it is not the technology in itself but in what its application can lead to that deserves the philosophical examination.

What then is the ontological stance here (reality worth knowing)? I think the ‘reality’ here is to begin to examine if Blockchain Technology can impact positively on bringing about a “just system” as proposed by Adam Smith towards achieving an egalitarian society. Also the epistemological stance (the best approach of acquiring this knowledge?) I believe can define how we can best acquire this knowledge. Which would be by adopting both positivists (through objective measurement of the activities of the existing blockchain companies, organisations and public sector in addition to the Interpretivist approach which would examine the unquantifiable and subjective outcomes of the actions of these organisations and government. The methodology to adopt would depend on the epistemological stance.

Therefore for me, I see the blockchain technology as a facilitator for the adoption of Adam Smiths’ Moral sentiment and a bridging facility between Modern Capitalism and Adams Smiths Capitalist. While this may not be a scientific definition, it helps to see the soft part of the technology for a better description.

However, find below general definitions of the Blockchain Technology as knowledge in this area grows stronger conceptual definitions would emerge:

1.    Blockchain serves as an immutable ledger which allows transactions take place in a decentralised manner. (Zheng, Xie, Dai, Chen, & Wan, 2017)

2.    Introduced in 2009 as the core mechanism for the Bitcoin, Blockchain technology enables the creation of a decentralised environment, where transactions and data are not under the control of any third party organisation. Any transaction ever completed is recorded in a public ledger in a verifiable, secure, transparent and permanent way, with a timestamp and other details. (Holotescu, 2018)

3.    A blockchain is a decentralised, distributed database that is used to maintain a continuously growing list of records, called blocks. Each block contains a timestamp and a link to a previous block. By design and by purpose blockchains are inherently resistant to modification of the data. Functionally, a blockchain can serve as ‘an open, distributed ledger that can record transactions between two parties efficiently and verifiably and permanently. (BlockchainWikipediahttps://en.wikipedia.org/wiki/Blockchain).

4.    A blockchain is a decentralised ledger of all transactions in a network. Using blockchain technology, participants in the network can confirm transactions without the need for a trusted third party intermediary. Powerful applications include fund transfers, voting, and many other uses. (Pricewater house Coopers LLP, 2016) www.pwc.com

5.    Blockchains are tamper evident and tamper resistant digital ledgers implemented in a distributed fashion (i.e., without a central repository) and usually without a central authority (i.e., a bank, company, or government). At their basic level, they enable a community of users to record transactions in a shared ledger within that community, such that under normal operation of the blockchain network no transaction can be changed once published. In 2008, the blockchain idea was combined with several other technologies and computing concepts to create modern cryptocurrencies: electronic cash protected through cryptographic mechanisms instead of a central repository or authority. The first such blockchain based cryptocurrency was Bitcoin National Institute of Standards and Technology Internal Report 8202 (October 2018) https://doi.org/10.6028/NIST.IR.8202

6.    When people talk about blockchain, at the broadest level, they mean a network of databases spread across multiple entities that are kept in sync, where there is no single owner or controller of the data. The databases tend to be append-only, that is they can be written to, but historical data can’t be altered without broad agreement from the participants of the network. This means that a user or system administrator in one entity can’t modify data held on a blockchain without approval from the other participants. DBS Group Research ? February 2016 www.dbs.com

Given the above submissions does Blockchain Technology Matter?

For further considerations, think of the application of Blockchain Technology to Robotics, Artificial Intelligence, Internet of things and the likes then you may see that the ways we live and transact are changing faster than anticipated and in this lifetime we are likely to experience what could only be imagined to happen in a 100years.

References

Gupta, M. (2017). Blockchain for Dummies. Hoboken, NJ: John Wiley & Sons, Inc.

Holotescu, C. (2018). UNDERSTANDING BLOCKCHAIN TECHNOLOGY AND HOW TO GET INVOLVED. The 14th International Scientific Conference eLearning and Software for Education. Bucharest, https://www.researchgate.net/publication/324209739.

Naz, F. (2014). Adam Smith's Model of Capitalism and its Relevance Today. Filosofía de la Economía, Vol. 3, 71-85.

Paganelli, M. (2017). 240 years of the wealth of nations. NovaEconomia DOI: https://dx.doi.org/10.1590/0103-6351/3743, 7-19.

Zheng, Z., Xie, S., Dai, S., Chen, X., & Wan, H. (2017). An Overview of Blockchain Technology: Architecture, Consensus, and Future Trends. Research Gate, 557-564.

February 2016 www.dbs.com

Internal Report 8202 (October 2018) https://doi.org/10.6028/NIST.IR.8202

(Pricewater house Coopers LLP, 2016) www.pwc.com

(BlockchainWikipediahttps://en.wikipedia.org/wiki/Blockchain).