Blockchain, an introduction.
Blockchain might just rock your world in the next decade, so focus!
Do you remember when the Internet came into our lives? That was pretty dramatic, right? So this new technology is huge and all but you’re probably thinking right now: ‘I don’t get all this digital talk. Let the techies deal with it; they’ve done a swell job up till now’. Well, the cool thing about these developments is that they are actually very understandable for non-tech digital geeks, such as me (and probably you).
I’m a philosopher so I was raised and educated by people who died ages ago (for some pretty stupid reasons sometimes). When diving into this digital adventure, the odds of understanding it were against me. But boy did I prove my invisible tech-nerd jury wrong! The more I read and the more I get involved in discussions about new developments the clearer it becomes. There is no clear border between digital-town and analog-village, no big gap between technology and society as you would suspect there to be and there is a very simple explanation for this too: Newly developed technologies, are in the end always trying to answer real societal, environmental, economical and above all human questions or needs.
These are your and my daily questions and needs, not just the ones from Stephen Hawking or Steve Jobs. Once I figured out this very simple equation, that technology is built by and for humans, I figured; I’m human, let’s see what we have here techies! Simply put, I decided to inform myself and I joined the conversation. My point being, you ought to do it too!
I wrote this post to help you take your first steps. It’s about this new paradigm shifting development called Blockchain. Seriously, expect Blockchain to rock your world in the next decade or so.
Today we live in a centralized world.
A world where wealth is kept in centralized banks and information is stored on centralized servers. Centralization means a lot of power for only a few people. Centralization only became so popular because, face it, we are a very suspicious bunch. We simply don’t trust each other. You trust your BFF you say? Sure you do, with your shoes (if they’re last season). But not with your savings, your diploma or the contract that proves the mortgage on your house.
Luckily we are equally genius as we are suspicious. Thus we invented 3rd party institutions that we do trust. What do I mean with 3th party institutions? An institution is a trusted mediator between people. For example a bank that transfers money from one account to another. We trust the bank with our money, and if someone says they want to buy our house, I check with the bank if they can in fact afford it. A government is a good example too. When they give you an identity, you can count on the fact it’s the right one and no one can take it away from you. That’s better than your neighbor swearing you’re you and not a complete stranger that pretends to be you (because he likes your life better perhaps.)
For a long time, this was a good system. The downside of the institution was however that after some time all the power was so centralized that certain people became too powerful and their institutions grew big, slow and non-transparant. They were no longer trustworthy and people lost the guarantee that the banks were good for money, or even governments for guarding your identity. Conclusion: extremely centralized power leads to power abuse. Quelle surprise!
Still, there was no need to despair because along came the Internet. And it made such beautiful promises about giving power back to the people, being an unlimited source of information for everyone to co-create and thrive off this new evolution.
A beautiful promise indeed, but what did reality show us? 1 huge booking.com, 1 gigantic Apple, 1 enormous Spotify and our banks hustling and trading like madmen, not to mention Lord Google. These guys are dividing the pie in very large slices that are not meant for sharing. And so history repeated itself, but this time something different was happening. (I’m getting to my point, I swear.)
Blockchain: The paradigm shift
A bunch of very (very) smart people found a way to make (trans)actions over the internet secure and information trusted. Sounds boring, but it’s not. With this new technology people can interact directly with each other and the need for a regulative institution disappears. You won’t even need a digital one like Airbnb.
This technology is called Blockchain. Blockchain is basically a database with a decentralized verification system of all the transactions you make. It’s like a ledger, where everything you want to register can be written down safely in un-erasable ink. This could be anything from a transaction of money to classified or vital information about your identity or persona and of course legal documents like a rental contract, your will, …
So if there is a way to transfer all this information in a secure way, why use the power-horny, slow and unreliable giants? No reason! Let’s stop doing that, okay? Thanks. We are going to be able to cut out the middle man, the ‘trusted’ party and interact in a secure way with each other. Compare it to what e-mails did to the postal service.
I hope you’re starting to get the main idea: that we have a technology at hand which will enable us to move from a highly centralized society to a decentralized or even distributed one. Hold that thought.
Let’s have a look at nature, how cells are built up to create organisms, how our neurons are all interconnected to create a neural network. This is done in a distributed way. We don’t have a big boss behind a mahogany desk with a glass of bourbon in his hand telling our arms and legs what to do. Our natural universe is entirely built up by distributed networks of cells, neurons, protons, … and much smaller bits and pieces that all work together in harmony to grow and manifest themselves.
So why don’t we work like that in governance, in finance, in all our inter-subjective relations? It has proven to be quite effective, I believe. Well Blockchain can make that possible. Who knew technology could be so natural.
The Technology behind it
Now how does it work? Blockchain is a technology that lets two unknown parties transfer a unique piece of digital property in a safe and guaranteed way. This transfer can be trusted because all the information shared is encrypted in a sequential database. You can add information, but never change it. So this ledger or database contains all the transactions and all information ever added or made and can never be erased. Now how do we know the information people put in there is correct in the first place?
This ledger is open for all to see and verify. Before it’s confirmed, stored into blocks and added to the chain, every bit of inputted information is checked by at least 6 other people (we call them miners). This might sound very complicated and not all too dummy-proof but in the future you will rarely notice you are using Blockchain anyway. So no worries there.
Blockchain is a technology, not a program. Basically it’s code, with a new set of rules, libraries and algorithms. The programs or applications that use Blockchain need to be built on top of this technology, and it’s this layer that you will be in contact with. These are called dApps, decentralized Apps.
It’s like when you surf to a website: you don’t have a clue what sort of code it’s written in, or what code even is, but that doesn’t stop you from surfin’ away!
MONEY in the bank
Seeing as banks are the best example of bad practice, Blockchain applications don’t work with dollars or euros. They work with tokens and smart contracts. On a Blockchain application you will use cryptographic tokens. These are encrypted vouchers that have a certain value. This value is defined and created by all people on the platform. Tokens can be used for example to exchange goods, services or assets on the platform. Bitcoin is a good example, although it has the reputation of being kind of dodgy.
Since a year or so there is a better example than Bitcoin. A new platform was created by scary smart people and it’s called Ethereum. Ethereum works with ethers or ETH as tokens. Their mission is to reinstall the internet to its initial mission, to do what it was invented to do: to be a source of information for all. The Ethereal platform is, obviously, decentralized and runs applications that are programmed on the Blockchain technology. The Blockchain Ethereum uses is custom-built and has big promises for all developers or entrepreneurs that want to try their luck in this new paradigm.
If you want to read more about this (and you should) you can find a white paper and their manifesto on www.ethereum.org.
(You see, that’s the cool thing, you can find out everything there is to know about this organization. They’re super transparent. I don’t think there’s a lot of banks that are super honest about their motives or internal policy.)
Aside from tokens (like Ethers or bitcoins) another thing is very specific for a Blockchain platform: it needs a peer-to-peer network. The whole database and all the lines of code need to be stored on the computers of all its users. Why not put it on AWS? Honestly, you can’t have decentralized data being all centralized on just one server, now can you? No, so the weight needs to be distributed over all users and their hard drives.
Now that I’ve told you about Ethereum, you need to know this is not the only big player in this new game. You may or may not have heard, but a week or two ago the biggest crowdfunding in the history of mankind was closed at $164,400,000. That money was raised by The DAO, The Decentralized Autonomous Organization, entirely built on Ethereum. The DAO is operated entirely by its members and uses DAO tokens, which you can obtain with Ethers.
The four pillars The DAO swears by are: Inclusion, Flexibility, Profitability and Growth. How they do that, is a bit too technical for this introduction, but just like the Ethereum platform The DAO publishes everything online for everyone to consult and comment on. But why in God’s name did they collect this much money? The DAO is comparable with an investor group, people who have money to spend come together to discuss what they should spend it on. A startup for instance could submit a proposal to get funding from this investor group. The same goes for the DAO.
For a certain timeframe you could exchange Ethers for DAO tokens and after that no more can be made. Ever. So now all the tokens are created and distributed, what to do with them? People can start sending in proposals for the DAO to back. These can be focussed on profit, social impact or the wellbeing of the DAO itself. The token holders can vote Yes or No for all proposals and the outcome will decide where the investments go. How the voting exactly works and what kind of proposals are sent in is too much to go into right now, but again, you can find an enormous amount of information on the interwebs. After all, that’s what it was originally designed for!
If you got lost in my explanation about DAO’s and tokens, these examples of dApps, or applications using Blockchain technology, will help.
Blockchain is not meant to be an alternative monetary system. It goes further than that. Money normally always represents something else of value: your time, a house, food, a service,… In some cases, once Blockchain enters the stage, money can be left out of the equation, without even a need for tokens. Sometimes Blockchain’s used just to store information and exchange this when needed, no transactions at all.
A nice example of a non-monetary application is PreScrypt. This project was launched as a Proof of Concept in the Health industry using Blockchain. To put it simply, patient data, pharmacists and medicinal prescriptions get connected over Blockchain. For people with a prolonged illness getting the right medication is crucial yet often a logistic struggle. What if their medical profile was securely stored in the Blockchain so that doctors could grant prescriptions based on this info? This prescription could be renewed every time a pharmacist puts into Blockchain that they have provided a certain dose of that medication to the patient. No room for fraud, no room for misunderstanding, no need for hassle and overhead costs.
You can read more about it here
One of the best-known examples and one of the first proposals for funding sent to The DAO is Slock.it. Slock.it wants to draw a line between smart locks and Blockchain technology. Imagine the following scenario. You’ve bought an apartment by the sea to spend your summers in, while you spend the rest of the year in a house in the city, at a 5 hour drive. You want to rent out the place by the sea (via Airbnb for example) while you are in the city to earn some extra moneys. Good thinking! Now wouldn’t it be handy if the doorlock was a smart one, that could be opened via bluetooth so you don’t have to go there every time it’s rented. This is already possible, it exists. Now wouldn’t it be extra nice if the lock opens only when the correct amount of money is transferred by the people who want to stay at your place. That’s what Slock.it wants to do, but for all possible applications with a smart lock involved (think bikes, safes, holidays houses, rental cars, …) No middleman needed, no hassle. Blockchain opens the lock the moment the payment is received. This is a nice example where The Internet of Things is combined with Blockchain and it opens up an exponential amount of possibilities. Find out more here.
We have a soft spot for anything that disrupts the classic energy market (take a look at meetlucie.com) so this specific application might be our favorite. In Brooklyn a group of people of whom some have a private green power source (solar panels, windmills,…) joined forces to equally distribute the energy over their households. They made a distributed grid where everybody always knows exactly how much energy they put in the system, how much energy they use, how much left-over energy they can sell, who buys it from them and so forth. They just cut out the energy giants all together! Read more here.
Other applications range from digital voting systems (which can eliminate corruption!) to ways to store people’s identity and legal documents. Documents such as diplomas and wedding certificates would be safely stored when they are in a life or identity threatening situation, e.g. refugees. There are even startups setting up Blockchain platforms linked to smart guns. If your profile doesn’t check out, you are too young, have a criminal record or you are not the owner of the gun you are holding, the safety can’t be turned off. This is a very vibrant and viral topic that could literally save lives. A better gun law could do that too of course, but for now this is a start.
To wrap it up
Blockchain technology isn’t very new anymore. Its applications on the other hand are. The need for this technology is very high. It’s time to give the power back to the people, because that’s what the internet was built for in the first place, not to confirm rigid old monopolies. There is still a long way to go in fine-tuning the applications, rules and standards. I also have a lot of questions that still need an answer:
How democratic is Blockchain when only developers can understand it? How do you combine the anonymity of the user with the transparency of the platform? How do we link the cumbersome but safe character of democracy with the speed and agility of digital development and the high demands of consumers in today’s economy?
Answering these questions and more is a serious (and exciting!) job. It shouldn’t be done only by developers. We need politicians, philosophers (of course) and legal profiles looking into this and co-creating the future of the Web. The change this technology will bring about is both economic and societal. It’s disrupting traditional forces and bringing an era of opportunities, rights and responsibilities to those who didn’t have them before. I hope you feel enlightened.
I couldn’t put it better than this quote I found on the internet (it’s claimed by like 20 authors, so I’ll leave the copyrights in the middle)
“Everything changes. Everything is connected. Pay attention.”
Since I put this post online a lot has been happening in blockchain-world.
A major, strategic hack drained almost 50 million euros from the DAO fund. The community reacted very strongly and a heavy debate is being kept about the future steps of the DAO. The hacker has send an open letter to the community explaining the bug he found and how his actions are supposedly legal. The discussions are very interesting, it's a crossroads of interests like money, ethics, the decentralization philosophy,...
You can read a lot on the DAO slack-channel, DAO website and some posts on medium are worth reading as well. You can check our twitter account for links.