The long term potential of the emergence of Blockchain
What is Blockchain and what are the possible consequences for the future?
Blockchain is the key innovation behind the cryptocurrency Bitcoin and have lately come in focus almost everywhere.
Blockchain itself can be described as a technology with the ability to displace the need for other (e g human, legal, governmental…) layers of trust between any numbers of globally distributed endnodes. We can compare it to how e-mail and messaging is displacing the need for mailmen and postal services. Or putting it another way: it is a global distributed platform for implementing algorithm based trust relations.
Ok, but what does all this mean for the world in the longer term?
Possible future implications
Service based organizations like e g insurance companies, banks and most governmental bodies rely on two core capabilities: (1) the ability to provide a certain service while (2) retaining their role as a trusted provider. We already witness how accelerated digitalization and democratization of technology moves processing power from centralized service centers to our smart phones and personal computers. One consequence is that our devices now have the capacity to completely bypass the central servers. If it wasn’t for the trust aspect many systems and apps would be redesigned taking advantage of the new technical possibilities. What Blockchain is doing is opening up the possibility to digitally integrate the trust component.
If the local endnodes in a global system of relations provide algorithmic trust i e have an algorithmic proof mechanism instead of having to rely on other ways of trusting each other, it opens up the world of global and individualized cooperation and collaboration. More specifically it opens up an innovation arena for the, now much larger, army of hackers that e g built the Internet.
A huge wave innovation around Blockchain will change the world quite dramatically. The administrative services we rely on today from a few large providers will be digitized, unbundled and reinvented by millions of innovative individuals who have better ideas. Specific platforms like e g Ethereum or more generic cloud platforms like e g Google, Facebook or Amazon will provide the trusted storage, processing and communication needed to run the societal administration.
If there is a wide adoption of blockchain-like technologies it will mark the beginning of the end of organizations, companies and governmental bodies who provide information and administrative services. Cloud platforms will be fully capable of provide a large part of their value. Those institutions who are not rendered completely obsolete in this transformation will at least live through an accelerated unbundling of services which will break institutions apart and turn them into new and unrecognizable constellations.
For nation states this might turn out to the greatest challenge of them all. Already today the nation states are gradually becoming reduced to insurance companies with armies. This is starting to become a huge problem for many governments who see their relevance for their people are being reduced step by step. With Blockchain there might radically less need for a trusted nationwide insurance logic. What is left is then – an army!
Supporting driving forces
- The technology is supported by the combined forces of a individualization, bottom-up innovation and the increasing influence of Internet technology and mentality.
- There is a long list of applications built on blockchain in the pipeline attracting a huge interest from early adopters and innovators around the globe
- The current uncertainty and instability around the global economy, currencies and even the nation states is opening up for new models of trust and payment (see e g the book: Stuff and Money in the Time of the French Revolution)
Weighs and challenges
- Most institutions, governments and corporations don’t understand and are skeptical to this new technology which seems both uncontrolled as well as uncontrollable. One notable exception of corporations supporting the technology is the recent interest from the bank community who is now investing in Blockchain knowledge.
- The association with Bitcoin, an independent och perceived dubious currency by some nations, might be an obstacle (e g Russia and Thailand)
- The huge interest and the many application efforts might not just have positive consequences for the development of Blockchain. Among the current projects there might be ideas and application that will be considered offensive or subversive to powerful actors like governments or corporations.