Society’s Next Step — How Blockchain Changes Everything

Imagine a society where:

• music and video streaming is virtually free
• insurance is ridiculously cheap
• banks aren’t required for mortgages
• taxes can be done in a single click
• financial laws/regulations are trivially enforced
• people can securely participate in government online

These outlandish ideas become a realistic possibility when new blockchain technology meets its full potential. To understand how technology can radically improve our modern governing system, we first have to understand the purpose of government.

Law

The code of Hammurabi isn’t some trending open-source GitHub project, but rather one of the oldest set of laws in history established in 1754 BC. Law, in its simplest form, is a system of rules accepted by a group of people, identifying what actions are acceptable and, in violation, the consequences that face a bad actor. Government has formed as a result of the need to create, maintain, and uphold the land’s established set of rules.

Naturally, the process of law modification and content of laws have changed over time to reflect changing societal views. If we assume that law systems will continue to mutate as they have for the last 4,000 years, it’s safe to say advancements in technology, that change how society interacts, will also affect how society creates, obeys, and enforces laws. This begs the question, what’s the next step for a modern government? In today’s advanced age of inter-connected computing, it may be possible to apply law to a software system at a national scale allowing for an automation of much of the responsibilities of a modern government.

The idea ‘Code as Law’ is an observation about how accepted protocols regulate a system. For the internet, HTTP is a widely accepted application layer protocol that regulates how internet-connected devices communicate despite the lack of centralized entity forcing adoption. The reason the power of computing hasn’t been applied to the legislative process is that there is a lack of authentication for the parties involved. For instance, someone could fraudulently cast votes which could unlawfully pass a law or even swing an election. This causes me to believe trust is the fundamental component missing from applying law to code.

Trust

Given the need to track something, e.g. inventory, payroll, law, there must be some form of trust behind that ledger, otherwise the entire thing may be incorrect and meaningless. If I keep a ledger for myself, I inherently trust it. However, if I have the need to share that ledger with anyone, I have to be able to trust them as well otherwise the ledger could be fraudulent.

When a large scale of people need to use the same ledger, institutions form as a result of the need for a single trusted entity, most prominent examples being banks or the government. These institutions are single points of trust which if found to be corrupt or fraudulent break its entire network of trust. In the financial crisis of 2008, big banks were going bankrupt because they bundled subprime mortgages into securities that other companies trusted. This collapse was financially motivated and could have been avoided if there were a way to take for-profit banks out of the picture. By distributing the responsibility and outsourcing the loaning process to everyone, none of this would have happened.

Tech

Blockchain technology already solves the decentralizing trust issue, but the question remains: When will adoption reach the point of disrupting? I believe the answer may lie in parallels between the development of the internet applications and the current state of blockchain.

Since the introduction of the internet in the 1970’s, it has become the single most useful gateway to information and communication, but it didn’t happen overnight. Internet adoption wasn’t forced upon people, once they realized how useful a tool it was they elected to use it and growing usage incentivized companies to reach those users by improving the infrastructure.

As more people started using the internet, different protocols naturally emerged to the point they became inseparable from the internet itself. Blockchain technology is currently in the pre-widespread adoption phase, where the different protocols are still competing for dominance. EOS and Ethereum are projects that show the most promise in creating a fast, secure, and usable blockchain protocol for general application. Once a general blockchain protocol is widely adopted then we will start to see how powerful this new technology is when actualized.

Disruption

Now that we understand the need and incentive of this new tech, what could be some of the real world applications? Currently, the most prevalent application of blockchain technology is Bitcoin, which acts as a decentralized currency. Other likely candidates for disruption are industries that offer services directly dealing with interest or monthly payments because you’re not just paying for the service, you’re paying for all operational costs and overhead. Once a decentralized system is adopted, interest rates will drop and monthly payments will disappear because there are virtually no expenses.

Take a service like streaming music for example, when decentralized, instead of paying monthly you could pay a fraction of a cent per listen. This might sound like it would be a lot, but say I listen to music non-stop for the entire month, at an average of 3:00 per song and if each song costs one-thousandth of a cent, then I’d pay about $1.48 compared to Spotify’s $5/month. Not only would it be less expensive, the money could directly go to the artist instead of being delegated through Spotify, making it a win-win for consumers and producers.

Plenty of decentralized apps(dApps) are in development, but it’s obvious no industry has been disrupted. For instance, ethlend is a decentralized loaning platform and voise tackles decentralized music sharing, yet banks haven’t been worried and Apple music is unfazed. The current state of dApps makes a decentralized future seem far-fetched, but once the advantages become blindingly obvious, traditional institutions will have no choice but change.