Blockchain revolution review
As the underlying technology used in Bitcoin, blockchain is shaking up our centralized institutions, which held until now a monopoly on the creation of trust. The blockchain revolution shakes the established order whereby institutions played the main role in disseminating trust in society. For the first time since the birth of institutions approximately 10, years ago, a technology allows to establish a system of trust that does not rely on a central authority but on all the members of the community that use it.
Because we have been raised and educated in a centralized world, we feel insecure about decentralized systems. Nevertheless, it is very powerful operating mode. There will be great resistance, maybe even chaos, when shifting from one system to the other.
Philippe Rodriguez — The blockchain revolution shakes the established order in which institutions played the main role in disseminating trust in society. With the publishing of the article on Bitcoin signed by Satoshi Nakamoto in Decembera new paradigm was proposed to create trust.
This paper demonstrates that it is possible to build a peer-to-peer money system without any central authority, fully working and in which property can be guaranteed i. This is a revolution insofar as for the first time since the birth of institutions, a technology creates a system of trust that does not rely on a central authority but instead, on all the members of its community of users.
At the origin of blockchain, there is Bitcoin. And at the origin of Bitcoin, there is a group of researchers who wanted to reverse the old paradigm whereby the creation of trust requires a central authority. Interestingly, the creation of blockchain is not based on a stroke of genius but on a very elegant combination of pre-existing technologies such as hashing, timestamping, etc. The founding paper is very short: If you ask someone to explain how blockchain technology works, they will probably respond by explaining how Bitcoin works.
It was operated by those who were interested in blockchain technology but not in Bitcoin, which had gained a wide reputation. In fact, this statement is quite hypocritical: That is, if the Bitcoin blockchain is as powerful in terms of security, it is because Bitcoin supports it. Indeed, for the system to be very secure, it must be open and unpermissioned i.
To do this, you have to pay those who bring power. This implies a unit of account and therefore, a cryptocurrency. Without that, you get closed systems that have security problems because, on the long run, there are significant risks that they will be centralized.
A parallel can be drawn with the Internet and the intranet. In itself, an intranet is neither good nor bad. It just responds to the need for a closed network in which participants are known. But the intranet is a sub-family of something larger, which is the Internet, and innovations come from the Internet, not the intranet. Likewise, closed blockchains are useful to certain communities and are not in opposition to open, unpermissioned blockchains which allow everyone to bring in computing power and have a truly decentralized system.
In your book, you are convinced that the blockchain technology can help meet the challenges of the great transitions of the 21st century, whether demographic, ecological, numerical, monetary or even democratic.
We are currently seeing the development of free-floating mobile entities, such as electric scooters in open access in cities, powered by what smart grids. Energy networks will increasingly look like the Internet. More and more people are able to produce energy and have no interest in selling their electricity to a central company. All of this requires units of account, trust and completely decentralized organizations, all of which are possible thanks to blockchain technology.
Another example of democratic transition is that electronic voting is difficult to implement because it is centralized. The only way to make it work is to entrust it not to a single centralized organization but to an open source algorithm, auditable and within a decentralized system. But precisely, a decentralized technology is attacking a still very centralized world That is why I am talking about a revolution and not an evolution.
We have been raised and educated in a centralized world and therefore, feel insecure about decentralized systems. Take Wikipedia, a wonderful example of decentralized organization. Thirty people work there full time and it is one of the ten most visited websites in the world.
It could be compared today to a common good of mankind. Wikipedia, with its decentralized system, realized something that had never been achieved using a centralized system. Before, encyclopedias were hard enough to disseminate and almost impossible to publish in many languages and countries. When Wikipedia started, most analysts thought its chances were slim. This example shows that our culture is evolving, even if it remains totally unintuitive for us because we learned at school that we live in a society of trust, primarily thanks to our institutions.
But given the distrust towards institutions today, the system seems ripe for change. This is the paradox: I am speaking of institutions in the broad sense: In your book, you stress the risk of an Asian oligopoly on the mining market.
Where do you think this cryptocurrency is heading to? I am quite confident about Bitcoin as it is supported by a very solid technology. Bitcoin provides a highly anticipated and acclaimed service, and also, following my societal analysis, one that is needed. There are some risks of centralization due to organizations that tend to regroup. But this risk was known from the start of Bitcoin and the community tends to self-regulate itself.
There is a negative feedback mechanism: China has a lesser impact today. It was the underlying electrical factor that explained in great part this centralization, since China offered the most interesting mining location, cost-wise. With the raising price of Bitcoin, this situation is changing and other geographical areas around the world are becoming interesting for mining. Is there any way to replace the proof of work, that many criticize in terms of carbon footprint?
There are lots of ways to change the proof of work. In particular, by replacing it with a so-called proof of stake. Instead of bringing in computing power, we prove that we share enough of the common unit to be part of the transaction verification algorithm.
The proof of stake also has defects of its own: Bitcoin, on the other hand, continues to be based on proof of work. Bitcoin is divisible ad infinitum. A bitcoin unit can be divided into as many pieces as one wishes and tagged with a certain color to make tokens.
Take the example of a group of neighbors that wishes to build a park. They create one million tokens and a smart contract whereby every time a person sends money, they receive tokens in exchange.
It is possible to set any kind of rules, such as waiting to reach a certain amount of tokens before distributing them. It is like a crowdfunding system except that no organization deals with it, only software. Tokens will also be listed on a market where it is possible to buy bitcoins or Ethereum.
It resembles a financial security but there is no guarantee of return as interest or dividends. It is rather a digital asset but which can also serve as basis for governance. To continue with the example of the park, the day when you have to decide of the color of the slides, you can have all those who have tokens vote, each with as many votes as the number of tokens they possess.
The interest for ICOs has therefore deepened. First of all, there is the issue of regulation. Regulators around the world are starting to take an interest in ICOs. According to them, it is illegal to raise money and create securities outside the stock market. No, because investors need some kind of protection. I believe we need a mix of regulation and self-regulation.
National markets regulation authorities will not be able to control everything because we are talking of a global system. If these tokens truly resemble stocks or other financial securities, the same rules should apply. As for the rest, the players of these organized communities need to self-regulate themselves, like with the Internet, by setting up a number of technological standards and rules of good behavior.
My deep conviction is that something very interesting is happening here that will probably revolutionize the access to capital. But the form it will take will certainly be very different from what is being developed today. The vision is right but its realization is somewhat chaotic, like everything that happens around blockchain technology and Bitcoin. Blockchain, a revolution of trust As the underlying technology used in Bitcoin, blockchain is shaking up our centralized institutions, which held until now a monopoly on the creation of trust.
Can we say that blockchain technology has now freed itself from Bitcoin? What is your view on private blockchains? Managing partner of Avolta Partners, president of the Bitcoin France association. The rise of a new generation of technologies, performing many financial transactions from mobile phones, opens a new avenue for development.
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I also have some failsafe nuclear options (more on that in the risk management section) if the markets implode extremely (this would be on the scale of the January crash we saw or a Mt Gox style meltdown). Other than that seems fine for now, but I barely have 1. And so today, we are pleased to sign a Memorandum of Understanding blockchain revolution review sets out the beginnings blockchain revolution review a partnership that I am confident will benefit the people of Bermuda.
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