The Decentralized Cloud Vision of the DFINITY Blockchain

This post explores the decentralized cloud vision of the DFINITY team and how it relates to traditional blockchain and existing cloud providers such as Amazon Web Services. Demonstrations of DFINITY technology applied by a large-scale network will be made in the fall of 2017 that will be followed by a Main fundraising for the supporting not-for-profit foundation, with the “open cloud” network expected to launch early summer 2018. DFINITY is a realization of dedicated blockchain research ongoing since 2014.

Today people mean many different things by the word “blockchain”. The word is often used to describe networks similar to Bitcoin designed to allow tokens to be transferred from one address to another in a verifiable and tamperproof way. But increasingly, the meaning relates to “blockchain computer” functionality provided by networks such as Ethereum. This is most similar to how those working on the DFINITY project understand blockchain. When DFINITY researchers talk about blockchain, they are imagining a super massive and highly performant blockchain computer in cyberspace that scales up its capacity as needed to provide a mainframe computer the world can share — ultimately, a new open cloud computing platform underpinned by a decentralized network that will be an alternative to the centralized systems run by technology giants such as Google, Amazon and Microsoft.

If you are non-technical, and aren’t that familiar with cloud computing, you can takeaway that the DFINITY network will create a giant virtual computer in cyberspace that will support enterprise IT systems (that is, backends for websites, HR systems, supply chain management systems and other things companies and other organizations run) and eventually mass market open source autonomous businesses and decentralized finance. Additionally, since DFINITY is a blockchain computer, it will also support all of the applications of blockchain discussed in the media today, but with far better performance and greater capacity than currently possible. This is achieved by applying numerous novel crypto innovations and technologies produced by our stellar team. This post examines the general perspective and explains product-market-fit.

DFINITY represents an Internet 3.0 paradigm in which the Internet acts as a computational resource with new properties that can run business systems, applications, and a new kind of “open source autonomous business”. This is very different from today’s pure cryptocurrency blockchains, private blockchain systems that Amazon will offer to host, or indeed today’s centralized cloud platforms such as Amazon Web Services. Those clouds will be able to offer DFINITY technology in service form to provide some of its special properties, but Internet 3.0 will be decentralized and open. For a start, many fully peer-to-peer applications such as file sharing (e.g. BitTorrent) or cryptocurrencies (e.g. Bitcoin) could not be run upon these centralized clouds as threatened industries and suspicious authorities might petition for them to be shutdown. But more fundamentally, businesses, application developers, and people generally will strongly prefer to build their systems on large open cloud networks for similar reasons they preferred the open Internet to proprietary curated walled garden networks such as AOL or Compuserve in the 1990s. Once this new paradigm takes root, network effects will quickly propel open scalable blockchain computers such as DFINITY ahead with explosive growth.

The first objective pursued by DFINITY is not particularly abstract and involves the mass hosting of enterprise IT systems. On first glance this seems a strange idea, since the complex protocols, cryptography, and high degree of data replication inherent in its workings will make raw computation much more expensive than on, say, Amazon Web Services. That is until you realize that the costs of enterprise IT are almost all related to the human capital involved in R&D, system maintenance, and administration. It is in dramatically reducing exactly this supporting human capital and thus overall costs that DFINITY will excel. The platform is unstoppable and data inside software persists automatically, often removing the need for continuity planning, backup and restore and traditional database management systems. Since the system is tamperproof, and there are no backends for hackers to gain access to, the need for security administration is reduced as well. DFINITY is also introducing a new R&D concept called “Liquid Development” (to be explained in a later post) that will reduce the cost of developing new systems by orders of magnitude.

The potential for cost savings is related to the special properties that the decentralized cloud provides through its high capacity blockchain computer underpinnings. These properties also make it much easier to create a single shared source of truth that can be verified by multiple parties and create systems that are inherently tamperproof among other things. Using these properties, enterprise IT systems can not only be reengineered to save money, they can also be fully reimagined to generate new value.

If businesses relocate their enterprise IT to the DFINITY network en masse, hundreds of billions of dollars in value will be generated each year as costs are cut and the benefits of its blockchain-derived properties are exploited. The migration in turn will fuel the creation of Open Decentralized Business Infrastructures (ODBIs). These can be thought of much like shared business infrastructure components that can be included into business systems rather like reusable software components. For example, in the past, if a developer created an HR system, say, he would program the forms that display employee data such as name, DOB, role and salary, but he would not program the software to decode and display staff photographs himself since this would involve years of work. Instead, this would simply be included in component form from some preexisting software library, which would be shared and reused by thousands of businesses. In the future, those encapsulating business logic inside enterprise software on the DFINITY blockchain computer will include ODBIs rather like developers include such software components, quickly extending their business operations in ways that would otherwise be too difficult and expensive.

Supply chains, which move goods and services, nicely illustrate how this will work. The DFINTY team is particularly familiar with this use case as it is supporting the development of Fortune 500 supply chain blockchain systems that will move many billions of dollars in value annually (note the terms supply “chain” and “blockchain” are unrelated, if you are unfamiliar with this area of business). Using DFINITY, it will be relatively easy to create a tamperproof supply chain system that tracks the movement of large volumes of goods and services that is shared amongst many industry participants, and once these systems are in production, additional exciting opportunities will be unlocked. For example, the 90 day payment terms of many invoices tie up billions of dollars in liquidity in many of the supply chains we have looked at (since vendors must wait for their payments and therefore cannot reapply the cash in their own operations immediately).

One way to address this is to create open markets where investors can finance invoices, paying say 97% of their value to the vendor immediately and then collecting the full 100% from the payer later to make a profit. Such functionality can be obtained via a market ODBI included as a component, but to resolve disputes occurring in the real world, for example relating to the non-performance of contracts, another ODBI providing arbitration functionality must also be included to resolve them. Since most lorry drivers also own their vehicles, another market ODBI can be used to automatically engage haulage services on demand where appropriate. Such ODBIs can be included like software libraries by any new supply chain system to greatly increase their impact while reducing the costs of development and maintenance. DFINITY Stiftung is currently working with BCG DV (Boston Consulting Group Digital Ventures) and its spinout DVolution to create ODBIs for supply chains and other types of business infrastructure responsible for billions of dollars in annual merchandise volume.

While reducing enterprise IT costs and enabling the creation of new business infrastructures is a key initial objective for the project, there are other equally important prongs to the DFINITY vision. In fact, originally the project was spun out of 2014 research into scalable blockchain technologies with the primary aim of enabling the creation of mass market “open source businesses” implemented as autonomous self-updating software systems (software independently resident on chain with an inbuilt governance system that enables it to upgrade and tune itself). We look at a company such as eBay, whose website has hardly changed in 20 years, which can simply extract rent by virtue of its monopolistic position as an absurdity, and believe the fabric of the Internet should play the role instead. This thinking can be extended to many intermediary systems from social media, through resource sharing systems such as Uber, to fundamental services such as messaging and, even, Web search. Search is particularly interesting technically since a good user experience depends upon provision of results almost instantly. Remarkably, relatively simple crypto techniques such as lottery charging and lazy validation can take you a long way toward this goal. Such services will themselves also become a kind of ODBI, since people will be able to easily integrate their colocated systems.

The final prong relates to decentralized finance. Currently, we believe that the term cryptocurrency is a misnomer. The problem is that money, or currency, performs three roles as a unit of account, medium of exchange and store of value. Unless its value is stable, it cannot perform the first two roles very well at all. The problems are obvious. If I borrow a bitcoin today, I might have to pay back twice the value tomorrow. If a farmer wishes to hedge the weather using the Gnosis prediction market on Ethereum, he will have a problem because the ETH he uses will be more volatile than the effects of the weather. DFINITY plans to address this by helping to launch the PHI system, which generates “cryptofiat” tokens that securely mirror local fiat currencies. An explanation of the workings are beyond this post, but it involves the issuance of loans using randomly selected sequences of validators, such that tokens are created that are transitively backed by aggregate liens on assets, cash flows and personal guarantees (in turn backed by income). As it turns out, PHI requires not only a blockchain computer with good performance and huge capacity, but also sources of unmanipulable and unpredictable randomness that DFINITY generates using special cryptography. We believe that it is this final step that will truly uncork the decentralization genie.

In summary then, it is perfectly fine to understand DFINITY as a decentralized cloud that will begin by reducing enterprise IT costs. This alone can generate hundreds of billions in value every year, and takes us nearer to the original Internet vision in which it was never intended that data and computational capacity would be concentrated in a tiny handful of huge data centers as they are today (after all, the Internet was conceived to help us withstand nuclear war). But this step quickly leads to the development of ODBIs, something that is truly revolutionary, where business infrastructure can be included like software in a new paradigm where businesses can be built from components. This, remarkably, is already in motion via business partners. These first steps precede much more disruptive phases in the development and application of the decentralized cloud, in which critical infrastructure and monopolistic intermediary businesses are decentralized and open sourced, accelerated by the advent of cryptofiat and the emergence of viable advanced decentralized financial systems in cyberspace. The aims of DFINITY are ambitious, which is reflected in the stellar team we are building. Whether the DFINITY project will succeed cannot be known, but any blockchain computer network that successfully delivers on even a fraction of this vision will become very valuable to humanity indeed.