Why Blockchain
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Why Blockchain Matters

by Ben WatersSeptember 10th, 2018
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At the beginning of the nineteenth century, the French diplomat Alexis de Tocqueville wrote of political decentralization as “<a href="" target="_blank">the true spirit of liberty</a>”. Tocqueville’s focus — the division of power into localized federal U.S. states — may seem quite removed from ideas of decentralization we associate with <a href="" target="_blank">blockchain</a> <a href="" target="_blank">technology</a> today. In essence though, the significance of blockchain reflects what Tocqueville recognized in disruptive changes in America almost two centuries ago — <em>Systems that distribute social power can be catalysts for wider involvement in social and economic concerns.</em>

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“Decentralization has, not only an administrative value, but also a civic dimension, since it increases the opportunities for citizens to take interest in public affairs (…).” - Alexis de Tocqueville

At the beginning of the nineteenth century, the French diplomat Alexis de Tocqueville wrote of political decentralization as “the true spirit of liberty”. Tocqueville’s focus — the division of power into localized federal U.S. states — may seem quite removed from ideas of decentralization we associate with blockchain technology today. In essence though, the significance of blockchain reflects what Tocqueville recognized in disruptive changes in America almost two centuries ago — Systems that distribute social power can be catalysts for wider involvement in social and economic concerns.

In 2009, Satoshi Nakamoto brought blockchain to the world stage with Bitcoin. The technology solved the famous “double spending problem” allowing parties unknown to each other to transact digitized assets without the need for middlemen such as payment processors, banks, and crowdfunding facilitators.

Blockchain enthusiasts often describe the technology’s revolutionary potential as a “transfer of trust in a trustless world.” Traditionally, intermediaries would establish the validity and the security of valuable assets and transfers. But because blockchains are essentially shared, any changes are subject to automated consensus protocols that can perform such verification and validation without the support of a central authority.

It is these consensus protocols that make blockchain the true revolution to come from its Bitcoin beginnings. As trust-centered processes are “hardwired” into blockchain ledgers, assets can be assigned and transacted more directly — without the delays and costs associated with the typical intermediaries. And because blockchains are digital, asset management becomes programmable too, with smart contracts and distributed apps allowing for greater flexibility through automation.

Bitcoin showed the benefits of blockchain for digital currency creation and use, now we are starting to see a diverse range of assets, from houses to cars to business contracts, being registered on blockchains to make them easier, cheaper, and safer to store and manage. The common thread running through these use cases is that blockchains facilitate the establishment of unbiased consensus without the oft-required centralized, administrative crutches — escrow services, banks, and notaries.

From Italian merchants to the wheelers and dealers of the past century, we have relied on centralized records of credit and debit to tell us who has what. Increasingly, we have also relied on centralized databases to store information. Our data, identities, and access to goods and services are entrusted to authorities, often not through choice, but because this has been the only way to play the game.

Government clerks documenting the public legislative process

But the centralized mechanisms that make economic activity possible skewed the distribution of power. Early on, banks, and later stock exchanges and other intermediaries, went from being facilitators of a fluid economy to gatekeepers. They charged fees and restricted access, creating resistance and curbing innovation. To a large extent, centralized actors began to dictate markets, setting the price of admission and the rules of inclusion. The story of access to goods and services has been a similar tale of gatekeeping and monopolizing by centralized goliaths.

We claim to live in a globalized society — the most connected era of humankind. Yet individuals and groups around the world still experience a lack of power and a lack of opportunity. People often feel unfairness, inequality, and that their voices are not being heard. Many believe centralized actors — social networks, banks, the media — serve their own interests, lie to them, and invade their privacy. In this “globalized society,” 2 billion people have no access to bank accounts because authorities refuse to accept their records, essentially locking them out of the global economy.

Protesters in New York during the Occupy Wall Street movement

Blockchains show important administrative advantages in terms of speed, cost, and accuracy. But the booming interest, investment, and excitement surrounding the tech cannot be attributed to these factors alone. Establishing the truth and making decisions by consensus, disseminating the power of third-parties, at its core, is an extreme mode of decentralization. And as Tocqueville recognized in the study in which he coined the term, there is often more to decentralization than the administrative benefits it brings.

What is social value itself, if not a product of consensus? It would be an inane concept without. Exchanges of value are premised upon the fact that we trust each other’s claims about what we own, what we are owed, and what we owe. This is also the case with our information, identities, and access. A functioning society requires us to agree on what matters and what does not and to establish certain shared principles upon which social activity can be based.

The real promise of blockchain technology is that it could drastically strengthen the trust upon which social activity is premised through radical, decentralized approaches to the creation and management of value, by extension, creating new economic structures and organizations to be discovered and explored.

The blockchain demonstrates that people can participate in society in a fairer, more balanced, more inclusive way. When people feel they have renewed power, that they are given a voice, that they have a more equal say in decisions, it can catalyze innovation. And as with moments of renewed invention such as the Renaissance, advancements often spur further progress. We may soon be about to enter an era of disruptive technological changes that will shift the distribution of social power for digitally-native societies to come.

Internet creator Tim-Berners Lee

Internet creator Tim-Berners Lee famously remarked of his invention, “I never expected all these cats”. Technologies can rapidly become so much bigger than their roots, especially those that widen access to power, influence, and information. The use-cases for blockchain are diverse but it is difficult to say what its greatest effects will be. Like the internet, blockchain is a foundational technology, one which will produce further possibilities as it grows in use and is adapted to meet various needs.

Few people in the 1990s could predict the meteoric rise of Google and Facebook, but the dot-com bubble brought huge investment to the technology, laying the foundations for future giants to awaken. We see a similar dizzying whirl of investment, hype, volatility, skepticism, and idealism surrounding blockchain today. It’s easy to get caught up in the excitement of the technology around us. But it will likely be some years until the blockchain space shifts and shudders to form its highest peaks.

What is clear is that the innovations we are currently making are preparing for a better future, one which could bring an abundance of possibilities for wider involvement in economics, politics, investments, and businesses, and as yet unknown sides of our stake in contemporary life. Blockchain has already demonstrated its disruptive potential in many domains. Wide-scale, game-changing cases have been made for adoption in the financial services, telecommunications and media, manufacturing, healthcare, energy, life sciences, and the public sector.

Until blockchain, there was no way to make decisions en masse and hand control of their implementation to impartial actors. We had to outsource that job to people we thought would make sure decisions were followed through with, that business was conducted fairly. Increasingly though, these actors gained influence, becoming valuable targets in the societal software to be hacked (from both inside and out). The blockchain is how we iron out these bugs, how we form a more balanced, empowering social ecosystem, optimized for the most people to benefit from its diverse opportunities.

At IOST, we are creating the infrastructure for a decentralized economy, one that will not take shortcuts or compromise on the true possibilities of decentralization. IOST will be a high-speed blockchain platform allowing developers to build mass-adoptable applications and contracts, which will help make the world a better, fairer place.

We understand that decentralization should be non-prescriptive. That’s why we are taking our time to understand how best to provide people with a blockchain platform that is flexible enough to be adaptable to many uses, secure enough to process data at high speeds without vulnerabilities, and fair enough to distribute control over the network and reward positive contributors to the ecosystem.

For Tocqueville, the most beneficial dimension of decentralized politics was its civic dimension. The civic effects of the dissemination of power in the U.S. were the strengthening of local involvement in the political system through the empowerment of individuals. The mode of decentralization blockchain offers could increase opportunities for individuals to participate in economies of their own making through more freedom of choice, more direct interaction with other individuals and businesses, and possibly new means of economic and societal expression.

It is in the nature of technologies that better distribute decision-making influence to empower. So though the administrative benefits of blockchain are significant, it may be this civic dimension that will reflect the biggest changes. The community interest that fed the cryptocurrency boom is now laying the groundwork for the next generation of blockchain projects to mobilize people by technological means.

Protesters using mesh network technology for mass communication

It is not simply by advertising, marketing, or party politics that revolutions are started, it is through hope — not as an emotional construct but through the glimmer of an opportunity to make a difference. Blockchain, as a foundational technology, will offer an abundance of opportunities for increased involvement in future economic activities and interests. This is why blockchain matters — in whichever areas its revolutions may arise.

Ben Waters is Head of Digital for IOST. A 10 year veteran in the digital space, he brings a wealth of experience in technology marketing, business strategy and management. As a strong advocate of cryptocurrency and blockchain, Ben has been actively involved in the community, development and promotion of blockchain technology since 2016.