Oh! look, a rabbit!
I had heard the term before, “Bitcoin”. Sounded like some kind of digital wallet. And I wasn’t really interested in what felt at the time like some new form of Paypal. I saw it again here and there but didn’t think much of it.
Then somewhere around 2013, an esteemed colleague of mine, Udo Blenkhorn, told me about bitcoin and its underlying technology, the blockchain. He mentioned that it was big and that he was considering mining bitcoins. I Wasn’t really sure what people meant by mining but it sounded like speculation. I was mildly intrigued but still not interested.
Later on, I eventually read an excellent piece in the Economist and later on in Wired, last fall and last winter. It helped me understand the basics of a what a blockchain actually is and grasp that this would most probably eventually lead to something. But I didn’t really get it. It did feel pretty promising but also incredibly complex and it therefore seemed like we had ways to go before it would translate into real changes. I was somehow still oblivious.
A few more headlines caught my attention in the recent months and I now finally felt compelled to dig. So I read a few more articles… and a few more… and more… and then, it eventually hit me… like a ton of brick! Holy s**t!!! This thing is for real… and it will change… everything!!!
Down the rabbit hole…
So I started reading the news and getting familiar with the players in this new industry. I also ordered some books. I started with the Blockchain Revolution from Alex and Don Tapscott. And I haven’t looked back since…
I remember in my early teens thinking that it felt like our institutions were so obsolete. I couldn’t understand why our economy was based on currency rather than natural resources. I looked at democracy and government and everything felt so bloated and inefficient. It felt like people were not in charge but rather subject to a plethora of middle men who didn’t share the same interest. The legal system also felt heavy and dated…And event the education system felt inadequate and equally bloated.
Then later on, in business, in the late nineties, working on my first startup, I started to envision notions of what came to be known as crowdfunding and crowdsourcing but there were no such things back then. At least, not that I knew of. The notions were really powerful but the system between the people, all these layers of bureaucracy and institutional layers upon layers… it wasn’t very conducive…
And the corporate world suffers from the same cancer: layers of middle management, diverging political agendas, personality clashes, lack of transparency, information hoarding and data wasting…
But peer-to-peer has now been redefined and empowered in the most incredible way… People, workers, doers, voters, owners can now reach automated consensus in a trustless system that is decentralized… there is now this thing called the blockchain… and it can change it all…for good!
Watch Don Tapscott explain the paradigm shift at USI in June 2016
To Rabbit City, Wonderland and beyond…
A blockchain is essentially a distributed ledger. It’s like a database where you log things but instead of being centralized it’s distributed, meaning it exists in tons of copies, in separate nodes, all over the world. It’s therefore very hard to tamper with since you would have to falsify most of the nodes to be successful.
Because it’s engineered to reach automated consensus, what’s very powerful about such a ledger, such a decentralized log, is that it removes the middleman. Whoever was responsible before for keeping and processing that data, that log, is no longer needed. That could be a financial institution, a notary, a lawyer; it could be a government body, a custodian or else. The possibilities are endless.
What’s also interesting about the whole thing is that blockchains usually sit on a cryptocurrency, some form of digital money that is used to pay the nodes in the network for sustaining the whole system. Cryptocurrencies are very efficient for a variety of reasons. They allow transactions to the eight decimal meaning they allow micro tiny transactions. It normally isn’t viable to process a micro payment because of the cost of transaction and the practicality of the whole endeavor. With a blockchain, you can envision making payments for fractions of fractions of cents to multiple stakeholders in near real time. And that is what is shaking the financial world at the moment.
Imagine that you could pay everyone that contributed to a song in real time every single time a song is played. Imagine that you have a light bulb that would automatically pay for its own electricity usage every minute, items you subscribe for rather than buy. That might change the game of programmed obsolescence for good… Imagine voting from your living room knowing that your vote cannot be tampered with. Imagine crowdsourcing part of the work in your company and having people paid for their results with equity, automatically and in real time. Imagine an ad server that pays contributors for their content in real time for every single page view or conversion… Once again, the possibilities are endless.
Web 3.0 and the 4th industrial revolution
And this is just the tip of the iceberg. The underlying implications are so strong that economists now peg us at the dawn of the The 4th Industrial Revolution. Our economy is essentially based on two pillars: double entry accounting and the corporation. As double entry accounting becomes triple entry accounting (one credit, one debit and one real time entry in the blockchain), the need for audits and verification becomes obsolete. Everything is verified automatically in real time. Deloitte, one of the world’s 4 foremost accounting firm estimates that one third of their business that comes from auditing will now become obsolete. And they decided to replace that part of the business with blockchain consultancy. If you can’t beat them, join ’em right?
Corporations are already becoming for some a thing of the past. Through the blockchain enters the distributed autonomous organization: a series of smart contracts that determine who does what and how with mechanisms for automated consensus. Traditional hierarchy becomes a thing of the past.Think of it as a long series of “if this then that” conditions that run a business through its workers.
It so happens that this type of distributed ledger is exactly what the Internet of Things need to take off. If objects can communicate through an ID that can’t be tampered with, if we can give them smart contracts to take care of business and if all of it is done in near real time at a viable cost… the IOT becomes real and pervasive…
Where the web 2.0 was about information and connectivity, web 3.0 is about value. We now have the means to truly circulate value between individuals in an efficient and viable way. The current financial mechanisms are more than outdated. Some of the technology banks use to process your money are more than 100 years old. There is often 4-5 intermediaries in any given transaction. And for assets to realy move from one person to another, it takes days or weeks to be processed by the bank. You think you got an instant payment through a few clicks but that transaction is really pending and gets processed for days on end, at your cost. And all that’s about to change.
Now that people have caught on, almost every major corporation you can think of in the software world is involved… and so are financial institutions.,. and so is venture capital. The sums of money that are pouring into this new industry are rapidly dwarfing all the money invested in the world wide web at the end of the nineties. This is no longer a wave, it’s a tsunami and one of epic proportion.
Feels like science fiction? Balanc3 is a company that offers triple entry accounting through the blockchain. The Personal BlackBox company is managing personal data for the consumer in a blockchain for Unilever so they don’t have to. The people of Ghana can safely register their land titles through Bitland. And in Estonia, the whole country has been running government on a blockchain since 2014…
As William Gibson put it, “The future is already here. It’s just not evenly distributed…”
Some fascinating books on the topic: