Public permissionless blockchains, such as bitcoin and Ethereum have forever changed the way we think of our societies.
They have shown that random, anonymous humans can be brought together to co-operate not only by a legal framework, which institutionalises the fear of not complying (and triggers reflexes of avoidance), but also by the power of economic incentives.
However, as much as they have been embraced by people who were feeling repressed and under-represented in the previous world of laws and institutions, their progression has markedly slowed down, almost stalled. Interest in the topic in the general population has dwindled and a general "blockchain fatigue" seems to have set in.
Let bitcoin be bitcoin. Let Ethereum be Ethereum. We need to focus on recasting the underlying blockchain technology into new roles which are integrated in the fabric of old, law-based societies. And in order to do this, we have to truly understand what blockchain is about ...
Thus I argue that blockchain is not only, nor primarily about 'chaining blocks'.
Rather, blockchain technology allows us to design new systems that can tap the human inclination to "respond to incentives" in order to trigger productive interactions which were previously not taking place.
Out of runway at take-off
Just like a heavy airplane, bitcoin, Ethereum and other public blockchain have had a few good years of "runway" to gain speed before taking off. But now the smooth strip of tarmac has run out ...
Public, permissionless blockchains are not going to "take over"
I do not mean to extend the "airplane at take-off" analogy to saying that bitcoin and Ethereum face a catastrophic future.
Quite the contrary, I believe that public, permissionless blockchains, most notably bitcoin and Ethereum are here to stay.
Bitcoin alone provides a check on the natural tendencies of human societies to concentrate power into few hands (i.e. "centralize power"), hands who then invariably end up abusing their power.
By providing a "safety valve" for cases where the institutions would be "captured" for furthering the interests of the powerful-few against the many, bitcoin and Ethereum have made the world more resilient, more robust, more "antifragile".
Bitcoin-enthusiasts think that "we are only at the start of an ineluctable march toward a gradual but complete upending of society". They believe that bitcoin, Ethereum, and other such public, permissionless blockchains are going to replace the existing society, based on laws, institutions - and ultimately trusting 'others'' - with a new, "trustless" order based on "cryptography and code". To them I say: public, permissionless blockchains have "run out of runway".
That doesn't need to mean that public, permissionless blockchains are going to disappear or anything. But I believe that bitcoin and Ethereum will remain in the "niches" they have successfully crafted for themselves. Efforts spent on expanding their use by, for instance, building "second layer applications", might be better applied elsewhere.
The law abiding blockchain
I believe that the technological prowess on which pseudonymous bitcoin inventor Satoshi Nakamoto has opened the world's eyes, the blockchain, has scope to "polinating" our society, in order to turn it into a fruitful new form. And the faster we realize that we, blockchain professionals have to "reinvent blockchain", the greater the benefits.
At first, there was "The Law"
At first, human life was, in Thomas Hobbes' words, "nasty, brutish and short" a life of "war of every man against every other man". If human societies have progressed, it is thanks to "The Law" - the "rules of the (social) game". The Law has codified the usage of violence. Yet the Law would have been but empty words without Enforcement. Thus Institutions have emerged to enforce The Law.
People were more-or-less free to do whatever they pleased as long as they abode by The Law. And they knew that: were one to break the law, one risked punishment.
This simple rule allowed people to interact with each other and organize and engage in productive undertakings.
Bitcoin doesn't need "The Law"
Probably the biggest revelation of bitcoin was that there can be something else which allows people to interact with each other and organize and engage in productive undertakings. Something that didn't need help from "The Law" and its enforcer Institutions.
To be fair, "open source software" had opened the way in this respect. The "open source software" community had always had an arm-length relationship with the law - witness the never-ending Waltz of licensing terms - "GNU", "BSD", "Copyleft", "Apache", "MIT", etc. - whose main focus seemed to be rendering any type of copyright enforcement moot.
Yet the open-source community is fueled by altruism and pro-bono efforts. What bitcoin, Ethereum and any other token-carrying blockchains have brought to the table was a back-end accounting system with a sui generis unit of account. In so doing, blockchain-based systems have attracted the far larger share of people motivated by profit.
For the first time in history, it became possible to pursue profit outside the protective frame of The Law.
In other terms, mathematics, cryptography and running code offered an alternative to the frame of The Law for engaging in lucrative undertakings!
Blockchain is not (only) about chaining blocks
One of the reasons why I believe bitcoin and Ethereum have "run out of runway" and are not likely to "take off / over" is that, not only these systems do not need the law, they are in essence a law unto themselves and alternatives to The Law. They are imbued by a spirit of challenge to the existing established order (perceived as skewed in favor of the rich and powerful).
In blockchain systems like bitcoin and Ethereum there are no written contracts and no enforcement agencies. Participants do not need to "show ID" in order to enter, do business, and exit at any time and without asking permission.
By design, the only thing bitcoin and Ethereum rely on is the assumption that participants will act in their own best (economic) interest, that they will act rationally, trying to preserve the system and further their own personal interest.
It is the technology itself (based on mathematics and cryptography) which both:
- makes plain the rules, and
- ensures their enforcement
bitcoin and Ethereum have been successful in supporting and automatizing productive human interactions without the need for an externally-enforced system of rules, without the need for The Law.
This ability to "function with little need for The Law" is the revolutionary feature of blockchain technology. Not the "chaining of blocks".
For the past three years or so, I have heard about and come across many corporate projects labelled as "blockchain projects". Most, if not all "blockchain"-labelled applications I saw in the law-based society were missing the point of blockchain though.
They were "chaining blocks" of data all right, in a secure and more-or-less transparent manner. Important, but hardly revolutionary. Control was exclusively based on written contracts and the assumption that external law agencies will arbitrate in case of need. They were completely ignoring the power of incentives. Either they did not include a token at all or, if a token was present, they were ignoring its presence in the system design and assigned it no role at all.
Blockchain can be law abiding
What I have depicted above might be seen as a dichotomy, but needs not be.
At one end, we have the current world of "The Law" where very little (of importance) happens without a written contract and the explicit (or implicit) reference to external enforcement mechanisms and agencies.
At the other end, bitcoin and Ethereum are emphatically insisting on doing away with any form of written contract. "Code is law". Participants do not even need to identify themselves, so assigning responsibility becomes arduous. No enforcement agency exists in these systems, aside perhaps the "moral authority" of the core developers.
Yet a continuum stretches between the two ends. A law-based society like the one we live in can very well benefit from the helping-hand of "law-like" code. The two are not mutually exclusive.
By adding the powerful math and cryptography which have been used in bitcoin and Ethereum to well-designed systems, we can bridge the gap that seems to separate the two ends.
Indeed, in certain situations The Law seems to struggle to trigger productive interactions.
This is the kind of situation, the type of project that blockchain specialists need to focus on: inside the law-based society, designing systems that tap the human tendency to respond to incentives and act in their own best interest in order to trigger interactions which were not taking place without those systems.
Yes, it goes without saying: transacting securely and with a configurable level of transparency are essential technical features. They are necessary, but not sufficient.
What makes blockchain "an innovation that Europe cannot afford to miss" - in the words of European Commissioner Mariya Gabriel, is the ability of well-designed blockchain systems to tap the power of economic incentives in order to trigger novel, productive interactions. Interactions which would not have taken place without it.
Blockchain technology provides a shared, secure accounting system for participants to be able to trust each other. Bitcoin, Ethereum, steem and other successful public permissionless blockchains have proven that such systems, when well designed, can increase the trust level just enough for new, productive interactions to begin.
The European Financial Transparency Gateway is, to my knowledge, the first real-world application of the principles successfully proven by bitcoin and Ethereum. Not only "securely chaining blocks" but also the power of incentives to make people engage in productive undertakings for which The Law was not enough.
I believe this is the type of project Europe and the world need more of: designing novel systems with the ability to spark new, mutually-beneficial collaborations.
- The Exit machine
- Impact of Distributed Ledger Technology on European Policy-making
- A Political Breakthrough
- Understanding blockchain's social impact
- Game Theory 102 - Blockchain and Cooperative Games
Blockchain and Europe
- Incentive-based regulation - Blockchain opens up a new era of European integration
- [VIDEO] European Financial Transparency Gateway
- EU Blockchain goes mobile: 2 Watts is all it needs
- Europe, I love you! - Europe, je t'aime!
- The Blockchain Competence Center (BLKCC)
- Toward a pan-EU blockchain infrastructure
- Blockchain and Data Virtualisation
- Blockchain, Credentials and Connected Learning Conference
- Decentralized Learning: The Future of Student Mobility in Europe
Blockchain, Crypto and Society
- Why Blockchain Is a Revolution
- What's Bitcoin's Value?
- A New Hope
- The Holy Blockchain
- Blockchain revolution: Money and Credit
- Small worlds
- The Press needs to be Freed from the Tyranny of Money
- Blockchain in large organizations
- Blockchain and the End of the Western Civilization
- The Church of Bitcoin
- Steem crypto-economics
- Game Theory 101 - Schelling point or "Why Steemit.com is important"
- My blockchain memory
- Steem $10Bln!
- Steemit and the Fractal Society
You might also want to check out