Blockchain is a technological revolution but first and foremost a socio-economic revolution, blockchain is a tool to bring us into a more decentralized world.
Why can we disrupt organizations with blockchain to understand this, we need to understand the history of the Internet, so if we look back the first-generation internet in the early 90s revolutionized information and this is why we called it the information data highway.
About ten years later we had the so-called web two, the internet became more mature more programmable and all of a sudden, we had on the one hand social media platforms and the other hand, a peer to peer economy where the consumer and the producer came closer to each other of information, of opinion, of goods and services, so the original vision of the internet was to be decentralized the world where everybody could put information online but in web two, it became very centralized with those platforms it brought us this peer to peer economy but with this huge man in the middle this platform in the middle who started to control all the data and dictates the rules of transactions of that platform so instead of the internet becoming more decentralized it became more centralized and what we are doing now with blockchain and IPF, and all these other technologies of the central web we are redesigning data structures given the fact that we are already living in the connected world and if we think of blockchain in the context of the internet it is the driving technology behind the decentralized web or also called the web 3 you could say that it is like a decentralized world computer it is a distributed network of computers is a peer to peer network the protocol could be seen as like the operating system where you can now run to realize applications or smart contracts on top of it, so we are reinventing not only the internet but also, computer it is very important to understand that this technology is very early on in its development it is kind of like 1990 when it comes to the Internet it is more or less 1960, when it comes to hardware.
Blockchain allows real peer to peer transactions without the middlemen, and it all started with Bitcoin to people who do not know and do not trust each other sending money from into each other without the trusted third party in the middle, so it all boils down to one question of trust it is a protocol that decentralizes trust and instead of a central party verifying transactions instead of one single bank server verifying transactions the transactions are verified peer-to-peer in a democratic way by consensus, and it is all done automatically the computers in the network do that automatically it is not people behind it, it is machine consensus.
This is highly disruptive this machine consensus allows us to have peer to peer transactions without the middlemen and the heart of this machine consensus is the smart contract, so the smart contract is just a piece of code running on top of the blockchain that codifies the rules of a transaction and when the rules of the transaction are met the transaction is automatically executed and that is highly disruptive because this reduces transaction costs of compliance and enforcement because compliance and enforcement happens on the fly, so if you think of chess game or a football game you always have rules of a game you have a chessboard manager a referee who makes sure that the players to a game can only make moves according to the predefined rules and this is the function of a smart contract so what smart contracts do they disinter mediate in a very radical way and allow us to have these peer-to-peer transactions we can use smart contracts for any industry, so it started with Bitcoin money without banks sending money from A to B, but you can have apartment sharing without Airbnb and window, you can have right sharing without Uber you can have selling books without Amazon, so you get rid of the platforms through these decentralized applications in the heart of those depths are smart contracts.
Decentralized autonomous organizations are nothing else than very complex smart contracts that define the bylaws of an organization into the smart contracts, if we look at Bitcoin as the first decentralized autonomous organization it is not only money without banks, but it is also money without bank managers, there is no central Bitcoin Authority there is not one person or one entity who can turn off Bitcoin.
Disrupting organization, so if we look at organizations we know today whether political or economic, they are very much organized in this hierarchical top to down way smart contracts and the protocols that are machine consensus that is Auto enforceable can now define the rules of an organization's into Auto enforceable code and this way we can get rid of a lot of bureaucracy whether in private organizations or public organizations even though this technology is in the very early stages it has the potential to disrupt the way we organize society if you look at Bitcoin has a market capitalization of more than a lot of small nations out there, and it is completely run decent rally.
The political side let us look at what we had before we had the Kings ruling a dictatorship is very top-down and when we started to have democracy the idea was to allow people to participate in the consensus process the problem with big societies are that it is inefficient for everyone to take part in every the decision-making process and this is why the forms of democracy that we have nowadays our representative democracy this institutionalized representative democracies are in a way very hierarchical we as citizens we can vote every four years sometimes every five years but in between we have very little power over what those representatives do we cannot revoke that power with very limited means in most cases now government entities are trusted third parties in a way and with blockchain with machine consensus or the first time, we are in a situation where we could make concepts like liquid democracy when it comes to organizations happen in a much more efficient way.
Smart contracts or machine consensus is very efficient when we can exactly predict what will happen it is easy to put that into code and to reduce transaction costs smart contract blockchains are lousy when it comes to dealing with unknown unknowns because we cannot enforce situations as those unknown unknowns what do we do when those unknown unknowns occur we need dispute resolution we need some kind of governance mechanisms that we do not have yet, so I think because the technology is still in the early stages since we can use it for any kind of use case let us start with the nonessential or noncritical things because it is still very experimental technology a lot of use cases of blockchain are built on network effects when it comes to accounting when it comes to supply chain Internet of Things, etc. So, we are not there yet for those use cases where we need extreme network effects, we need another five to ten years and hopefully the first killer application in the next three years, but you can see that even though we all long for a more decentralized world we have been socialized to the very top to down structures in a way, so there is a gap between where we want to be and where we can be as a society because we do not have the soft tools yet.
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