Blockchain Advocates Must Learn the Law of Standards
In 2011, I predicted that Bitcoin would do to money what the internet has done to information: move it instantly and seamlessly around the world.
Six years later, the need for an Internet of Value is greater than ever. The surge of ad blockers is challenging existing business models on the web. Micropayments using cryptocurrency could be the solution, yet with transaction fees north of $6 and a brewing “civil war” in the community over how to scale its processing power, Bitcoin by itself is no longer viable as a payment system.
In hindsight, perhaps it should have been obvious that a single blockchain and currency wasn’t going to be the final word. The rise of competing digital assets and new technologies was inevitable, while legacy systems weren’t just going to disappear.
Facilitating efficient exchange of value is not about focusing on one specific currency and network. Rather it requires creating a standard that connects all currencies and all networks, so that everyone can use their preferred service and still efficiently exchange value with everyone who chose differently.
So far, most interoperability solutions in the blockchain space, such as Cosmos and Sidechains, assume that there will be a single technology stack that will win over all others. But is that a reasonable assumption? What are the characteristics of a good digital standard?
Raising our standards
In 1991, computer scientist John Sowa noticed how attempts to impose new digital standards never went quite to plan, and formulated his Law of Standards:
“Whenever a major organization develops a new system as an official standard for X, the primary result is the widespread adoption of some simpler system as a de facto standard for X.”
One of the many examples he cited was the US Department of Defense’s implementation of Ada, which resulted in C becoming the standard for system programming. He also used his law to successfully predict that Linux would replace Windows as the de facto standard for operating systems, a remarkably prescient prophecy given Windows’ preeminence at the time. Today, Linux dominates everything from mobile phones and embedded systems to the server world. Even Windows now implements Linux’ APIs.
There have been many more examples since Sowa’s article. Open Systems Interconnection (OSI) was a major international effort to create a computer networking standard that was overtaken by the “cheap and agile, if less comprehensive” Transmission Control Protocol and Internet Protocol (TCP/IP). As pioneering researcher Einar Stefferud put it: “OSI is a beautiful dream and TCP/IP is living it”.
What the winning de facto standards have in common is a simplicity that “facilitates efficient scaling” and encourages wider adoption. Project Xanadu was a rival to the World Wide Web, but the former’s more ambitious feature set was no match for the web’s restraint, which, at its core, consists of a minimal protocol (HTTP) and a simple data format (HTML).
Current payments standards
History suggests that a simple standard will underpin digital payments, making today’s most-favored proposals appear less likely. Take ISO 20022: a standard for how financial institutions exchange data, often applied to payments. Its broad scope makes it more complex than a payment-specific protocol would need to be and difficult to implement — a clear contravention of Sowa’s Law of Standards.
Hyperledger is a project that focuses specifically on payments and blockchain technology. However, in its current incarnation, it is less a standards effort and more a loose collection of open-source code. Crucially, it is a global collaboration involving large corporations across a variety of industries. Designing a new standard in that context would be challenging and we would expect a simpler alternative to emerge and be adopted.
A simpler alternative
Recognizing the need for a simple, lightweight payments protocol, Evan Schwartz and I co-created the Interledger Protocol (ILP), a standard for value transfer that provides an easy way for disparate ledgers — blockchain or not — to connect. The core ILP specs are already quite polished and we’re starting to see some really cool experimentation, such as this app from Shopify. Hyperledger recently accepted Hyperledger Quilt, a new project to use ILP for blockchain interoperability. And the Bill and Melinda Gates Foundation uses it in its Mojaloop project to make digital financial services more accessible to the poor.
I believe ILP’s simplicity gives it a major advantage in the race to implement a universal payments protocol. My earlier prediction that Bitcoin would revolutionize finance will not be entirely accurate. But a global payments “network of networks” underpinned by ILP will finally usher in a true transformation in how consumers and financial institutions exchange value online.
To learn more about ILP and get involved, please visit interledger.org. If you’re an engineer and would love a job building the future of the Internet, shoot us an email to firstname.lastname@example.org and mention “X Projects” in your subject line. If you work for a bank or process a lot of cross-border payments, find out how Ripple are leading the transformation to real-time global payments, please contact us.