A trustless future soon to be realised
Or, why isn’t everyone embracing blockchains already!?
During the last couple of years, blockchain and bitcoin have been some of the hottest topics in technology and business circles. Unfortunately, unlike artificial intelligence and machine learning, the word “blockchain” does not trigger the imagination of people; there is no HAL 9000 equivalent for blockchains... So how can one explain blockchain technology in a few words that convey its essence but also keep the audience awake?
In the elegant and concise paper that essentially gave birth to blockchain technology and bitcoin cryptocurrency, Satoshi Nakamoto mentions the word “trust” 14 times and he concludes that he is essentially proposing “… a system for electronic transactions without relying on trust”. The ramifications of such a claim are overarching. Trust is the cornerstone of human interactions on both business and personal levels. Now, an ingenious deterministic design alleviates the need for trust!
There was one big problem in all of the above. Humans.
Unfortunately, blockchains do not operate in a deterministic vacuum. They are still controlled by humans with diverse motives, which themselves are not always benevolent. The most overarching control humans exercise is that of protocol code governance; in essence, which version of the blockchain protocol is the latest one and what is included in that version.
The theory was simple: the group of people maintaining the blockchain code would propose changes and then participants of the blockchain would vote on those changes through adopting them or not. As there is economic and operational benefit to eventually side with the voting majority, any adoption of changes would be eventually universal and effortless.
But as Yogi Berra said,
“In theory, there is no difference between theory and practice. But, in practice, there is.”
There are currently two leading open blockchains: bitcoin and ethereum. Both tried the above and both have shown how the element of trust has yet to be removed.
Bitcoin blockchain: The most well known blockchain has had to deal with its success as the number of transactions that are processed by the network was steadily growing. A limit on the number that the bitcoin blockchain could handle created delays in transaction processing and prompted the bitcoin community to start discussions on scaling the processing capacity. And hence the scaling debate started. It exposed the current governance limitations of the bitcoin blockchain, the diverging interests in the community and the concentrated power large bitcoin miners (processors of transactions on the bitcoin network) hold. Theory did not equate practice.
Ethereum blockchain: The Ethereum foundation, led by Vitalik Buterin, has been having its own problems with updates to the Ethereum protocol. Irreversible upgrades introduced last summer essentially forced the community to move to a certain direction but also questioned the method for introducing changes that not all agree upon but affect every application on that blockchain.
In both examples above, if one chooses to participate in one of these public blockchains, he/she also chooses to trust the governance of those blockchains. And the track record of governance for both cases is somehow spotty.
Large corporations cannot place their operational and financial well-being on platforms that evolve in erratic processes, as they simply cannot trust them. But what they can do is replicate blockchain technology in an environment where core participants are trusted and the governance model follows certain agreed upon rules. And thus the permissioned blockchains were born…
Permissioned blockchains (or Distributed Ledger Technology, DLTs) allow only specified actors to participate in transacting and/or processing transactions. An analogy would be to see them as intranets whereas open blockchains, such as the bitcoin one, are the internet.
Permissioned blockchains are anathema to blockchain purists(!). They see them as reversal of the entire essence of blockchain technology. My thesis is that permissioned blockchains are essential as a step towards a “trustless” future. Equally essential are collaborative structures that nurture these protocols and provide an open yet clear framework on how these protocols could develop (see Hyperledger Project and, more recently, Ethereum Alliance). They provide the testing ground for enterprise-relevant applications, governance models and protocol designs; the testing ground for automating the notion of trust!
The end result will be open permissionless blockchains bringing together humans and machines around the world in truly peer-to-peer interactions. But until we reach that destination, lets embrace the journey; whether that is through permissioned blockchains or not. If the ones closest to the sector do not accept that there is still some way to a trustless nirvana and work hard to achieve it, the more we will push the rest to dismiss blockchain as pure hype.
Blockchain technology is a trustless future soon to be realized.