It’s the end of The World As We Know It
I feel like a street preacher standing on the corner outside of some university’s Union Hall, preaching that the end is near. The only difference is: I can prove it.
The Greatest Thing since Sliced Bread™
I will go ahead and posit that the invention of smart contracts is on par with the invention of the printing press; with worldwide adoption, we will be looking at a paradigm shift in the way we communicate, share information, and conduct business.
Via a global distributed ledger coupled with zero-knowledge proofs such as zk-SNARKS or Bulletproofs, we will be able to store people’s identities on the ledger without ever revealing their personal information. We are able to store property rights, housing contracts, employment contracts, insurance policies, wills and estate agreements, and any form of agreement between two or more parties that you can think of.
We can also bank the unbanked, allowing those in developing nations to safely store their money without the fear of corruption, hyperinflation, or economic collapse affecting their funds.
We can make a more permanent, censor-proof form of the internet, ensuring the freedom of information and the press around the world.
But you already knew all this, so why am I telling you this? Because as amazing as these advancements are on their own, when used in tandem we can truly enter the real digital age. What do I mean?
Decentralized, Autonomous, and Completely Disorganized
Enter the concept of the Decentralized Autonomous Organization, or a DAO. Yes, yes — we all know what happened to “The DAO.” The truth is, that was just the beginning, and many of The DAO’s problems stemmed from the fact that this technology is still so nascent that we still have a while before we see robust DAOs becoming mainstream. The DAO’s creators launched their platform in a very primitive stage with no open alpha/beta testing before they went live, and all it took was a single bug to bring down the entire organization.
Anybody who has developed smart contracts knows that it’s difficult to get more than a basic smart contract deployed. This technology is so new, and platforms such as Ethereum and the Solidity language are changing at such a rapid pace that you’re hard pressed to find anything beyond basic tutorials on the internet — because there are very few experts in this field! The vast majority of tutorials out there are still very basic in nature when compared to other programming languages.
Furthermore, it is no exaggeration to say that features of the Solidity language change on a monthly basis. This makes it exceptionally difficult to stay up to date, and smart contracts deployed “long in the past” are often far less secure because they were written on legacy code using outdated paradigms (in this case, a long time ago is often just a few months in the past).
Even the best of the best make mistakes, and when financial assets are at stake people are very hesitant to take risks. However, taking risks is exactly how we learn, so until we see more and more experimental ventures trying new things and venturing into new spaces, we’re only going to see incremental progress and basic dApps with very small user bases.
As computer scientists, we’re used to the breakneck pace of technological developments. However we often forget that during the period between 1945 and 1985, the average consumer saw very little development in the way of computational capability, mostly because we didn’t have access to computers outside of academic and corporate environments.
Nowadays we expect a new iPhone model or CPU/GPU generation every 12 months, and the average person has access to some of the most powerful software and computing clusters in the world with Software-as-a-Service and cloud computing services.
We are currently in a similar stage of research and development — lots of promises have been made, just like children in the 50’s and 60’s thought that flying cars and robots were in their near futures. Now it’s time for the research and development to happen, and it will be several years before we start to see dApps become an everyday part of our lives — particularly because very little regulation exists and few are willing to bear the potential financial responsibility should something go wrong.
What does this have to do with Smart Contracts?
Scroll through any of your social media feeds and you’re bound to find an article from some online publication describing somebody who is making “tons of money” working remotely/from home, confidently stating that “you too can work from home and take back your freedom!”
The fact of the matter is that those outside of the tech and creative industries have a much harder time working from home, as it’s often difficult to coordinate and communicate remotely, even with tools such as Discord and Slack. Even those of us in the tech industry often prefer to be physically present with our coworkers, often for no other reason besides we as humans crave human interaction — even if you’re an introvert. We’re social creatures, we can’t help it!
Don’t worry, though — this isn’t another “everyone will work from home in the future!” post. Decentralized autonomous organizations are far more than just a means to work remotely; they enable us to work with people, organizations, and governments around the world without ever needing to trust them in the first place!
Walk into any corporate office and I guarantee you that they have an accounting department, even in this age of automation. Accountants exist to ensure that customers keep paying, and they will come after you if you don’t!
An unfortunate but important fact is: we need to get paid for what we do. It’s the fundamental archetype of our entire economy: I provide you with a good or service, and you compensate me often with a token (money) that can be spent for other goods and services.
However, what if we could provide a good or service, and mathematically guarantee that we will be paid for it? Most people would jump at the opportunity, and I’m telling you that it’s not only possible — it’s going to be the standard method for conducting business in the future.
When we enter into a subscription online, it is done with either a credit or debit card, and the cost is charged on a monthly basis. Both methods operate under the assumption that you have enough funds in your bank account now, and in the future. If you don’t, you will receive a warning, however the subscription will continue for some time until your payment becomes delinquent and your account suspended.
However, in the corporate world we still rely on good old-fashioned invoicing for most things, even major transactions. What happens if “Company A” buys a service, say they contract a major IT firm “Company B” to handle all of their ICT, and Company A is in fact unable to pay the bills at the end of the month? Company B essentially will provide its service for free until they realize that their customer is broke!
This is a major risk of conducting business, and most corporations underwrite that loss almost as if they expect some of their clients to be unable to pay. But what if we could automatically and instantly pay for every incremental modicum of “work” or “service” being rendered? Companies would only receive exactly as much as they can afford, and not a cent’s worth more! The moment they become insolvent, the service ends and/or the goods cease to be delivered. Company B doesn’t lose anything and wastes little to no resources in their business transaction, and Company A’s bankruptcy process will be simplified as they will have no outstanding debts (of course this is under the assumption that everything they do is facilitated via smart contract, but you get the point).
The Future of the “Gig Economy” is Far Less Predatory
In the current economy there are very few opportunities to create a product or provide a service when there is little or no demand for your particular skill. Furthermore, even if you have a particular set of skills, you need to find somebody willing to pay you for those skills; hence, the concept of employment.
But what if you could provide your service or talents before you had a customer lined up? What if you could indeed work remotely without ever needing an employer, and still guarantee that you will be paid for your creation, should somebody utilize it?
Smart contracts will allow us to create digital goods and services, and charge for access to our creations. It’s no secret that subscription models and micro-payments are exploding in popularity; one only need look at the shift from purchasing software in the past to the current subscription model we see today. Communities like Steemit.com allow content creators to post their content online, get paid according to how popular/useful it is, and ensure that nobody else can steal their content or infringe their copyrights in the future. They can essentially create demand by creating the product, which until recently is something only large corporations with huge R&D budgets could afford to do!
Last but certainly not least, those who are not creators but rather service providers will still be able to guarantee their payment by preventing potential customers from engaging in their service without first “fronting” the payment to the smart contract. Once the service is rendered (something that can largely be automatically detected, eliminating the need for honesty) the provider is paid automatically and instantly.
There are lots of problems, though…
This was just the beginning, outlining some of my thoughts about the potential for smart contracts and DAOs. Many (over)simplifications were made, and clarifications needed.
Future posts will go into far more technical detail, and I hope to include copious amounts of real research and references to actual projects that are doing actual work in my future posts.
Some will be technical, and others more broad, but hopefully all will be informative and shed some light on what the future of DLT is going to look like.
My next post will be diving deeper into how a large-scale DAO might operate, how it will adhere to laws and regulations, and be more technically secure, robust, and profitable than traditional corporate structures. Stay tuned!