By Randall Mayes
As a futurist, if you have scanned “blockchain,” you most likely have learned about the volatile value of Bitcoin and that top banker Jamie Dimon and top investor Warren Buffett are critical of it. Buffett admits he has been wrong before, and Dimon apparently has shifted from fast thinking (emotional) to slow thinking (rational updater). JPMorgan Chase & Co. now has a dedicated section investigating blockchain technologies as an investment and as a potential competitor to banking.
Technology development follows an S-curve, and, interestingly, so does our understanding of technologies. Sometimes people who think they know a lot about a topic actually know very little. Experts in a field will often say how little we actually know. Good scientific writing evaluates what we know and what we don’t know, and this helps sets the stage for the future. Without this clear direction, we do not even know what we don’t know, which has set the stage for wild cards such as Google and Amazon.
So, what do we actually know about blockchain technologies?
Blockchain is a ledger that documents transactions on numerous computers in its network, and in theory this peer-to-peer structure protects your currency from hackers. Bitcoin is just one of numerous cryptocurrencies using blockchain technology. Since 2011, hacking-related losses from digital currency platforms total $1.63 billion (Russolillo and Jeong 2018).
Blockchain is also about protecting privacy. It utilizes people called miners, who confirm transactions. Miners can see your cryptocurrency balance and what you have transacted, similar to a banker viewing your bank account. The process of mining requires lots of electricity. One study estimates that Bitcoin will account for 0.5 percent of the world’s electricity demand by the end of 2018. This is roughly equivalent to the energy needs of Austria, with a population of 9 million people (Oberhaus 2018).
Governments around the world have had a wide range of reactions to this phenomenon. Some authoritarian governments have banned it outright. In contrast, Dubai wants its government to fully utilize blockchain by 2020. While the U.S. government has not yet begun to intervene, it’s unclear how the IRS and law enforcement would adapt to this new economic infrastructure.
In 2008, Satoshi Nakamoto outlined the original blockchain concept in a white paper. He has never talked with business reporters. No one actually knows who he is. Since the white paper is written in perfect English, most experts in the field do not think he is actually Japanese. Some experts have composed lists of possible candidates. In Life after Google (Gateway Editions, 2018), George Gilder presents a case for why he believes Nakamoto is actually Craig Steven Wright, an Australian computer scientist and businessman who resembles Donald Trump, has a rap sheet, possesses a very high IQ, and is obsessed with the Japanese culture.
Why Blockchain Matters
The major theme of the past several World Economic Forums is the Fourth Industrial Revolution—the emergence and convergence of synthetic biology, AI, and smart manufacturing. Unfortunately, we are still sorting out the trade-offs related to the past industrial revolutions—energy security/global warming, cybersecurity/privacy, and job security/income inequality.
The next industrial revolution will involve a new economy and a new social contract to negotiate its impacts. Blockchain could revolutionize economies in several ways.
Blockchain 2.0, or Ethereum, now the fastest-growing blockchain technology, can make financial transactions as well as host smart contracts. New Yorkers are already experimenting with real estate transactions. If this type of transaction becomes popular, it could cross over to other business sectors. This could also add middlemen to the growing list of occupations and skills that machines replace.
A potential game-changing practice involves how consumers and big data companies do business. In the current digital revolution, big data companies such as Amazon, Alphabet (Google), and Facebook are able to rake in billions of dollars, while many of their users become jobless or underemployed. The business model for these companies requires lots of labeled data to mine through using machine learning to determine patterns of behavior and buying preferences. In Who Owns the Future? (Simon & Schuster, 2012), Jaron Lanier describes the practice as “Siren Servers,” which are addictive and lure us into giving away our data for free. While micropayments to each customer would solve this problem, the overhead to make this work with current technologies is too expensive, so these companies rely on advertising for income.
Another type of electronic digital data that has monetary value and whose demand is rising is genomes and electronic health records. Personalized genome companies like 23andMe currently charge around $100 to analyze our genetic information and tell us whether we have risks for certain medical conditions. They are then selling our anonymous DNA to big pharma for millions of dollars. One of the problems with electronic health records is merging numerous systems together. Rather than patching all of these systems, it could be more effective to start from the bottom up with a universal system. EncrypGen, run by David Koepsell, and Nebula Genomics, directed by genomics pioneer George Church, are two on a growing list of start-ups using Ethereum for both smart contracts and financial transactions between individuals and the health-care industry (Medium 2018; Rosenbaum 2018). Using Ethereum, these companies are able to store individual health records and genomes in the cloud, have electronic smart contracts for health providers and pharmaceutical companies, and make financial transactions.
Are Middlemen Necessary?
After numerous discussions with Lanier, Eric Posner and Glen Weyl have elevated his idea to a thought experiment outlined in their new book, Radical Markets (Princeton University Press, 2018). They point out that middlemen are not creating anything of value, but individuals are. For machine learning, individual data is not valuable; however, cumulative data is. To take control, they argue that consumers could collectively create a data labor movement through blockchain to help address the current income equality conditions.
Gilder, George. 2018. Life after Google: The Fall of Big Data and the Rise of the Blockchain Economy. Gateway Editions/Regnery Publishing. https://www.regnery.com/books/life-after-google/
Lanier, Jaron. 2012. Who Owns the Future? Simon & Schuster. http://www.simonandschuster.com/books/Who-Owns-the-Future/Jaron-Lanier/9...
Medium. 2018. “EncrypGen Uses Blockchain Technology to Store and Manage DNA Profiles” (January 25). https://medium.com/@yourcryptomarketing/encrypgen-uses-blockchain-techno...
Nakamoto, Satoshi. 2008. “Bitcoin: A Peer-to-Peer Electronic Cash System.” Bitcoin. https://bitcoin.org/bitcoin.pdf
Oberhaus, Daniel. 2018. “Nobody Knows Exactly How Much Energy Bitcoin Is Using.” Motherboard (May 16). https://motherboard.vice.com/en_us/article/7xmvbq/bitcoin-energy-science...
Posner, Eric, and E. Glen Weyl. 2018. Radical Markets: Uprooting Capitalism and Democracy for a Just Society. Princeton University Press. https://press.princeton.edu/titles/11222.html
Rosenbaum, Eric. 2018. “Harvard Genetics Pioneer Wants to Monetize DNA with Digital Currency and Defeat 23andMe.” CNBC (February 8). https://www.cnbc.com/2018/02/08/harvard-genetics-pioneer-will-monetize-d...
Russolillo, Steven, and Eun-Young Jeong, 2018. “Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy.” Wall Street Journal (July 16). https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happ...
Randall Mayes is a technology analyst and author. Contact him at email@example.com. This article is based on research for a new book, Always in Beta: A Handbook for the Fourth Industrial Revolution, where it is discussed in more detail.