Bye bye, bank manager: can you trust the blockchain and remove the middleman?
- The blockchain can be bewildering, even to experts — Shermin Voshmgir of BlockchainHub explains how a complex idea can be understood.
- “The technology behind the blockchain, while fundamental, seems almost the least revolutionary part to me.”
- Would you be comfortable trusting a snippet of code rather than trusting bankers, politicians or lawyers?
Community. People. Togetherness. Trust. These are not the first things we may think of when dipping a toe into the murky water that is the blockchain. But Dr. Shermin Voshgmir is helping us see it a little differently.
She realised that this opaque wall of difficult technology and demanding terminology, is actually a big, human, understandable network: we just need to talk about it the right way.
So Shermin created BlockchainHub to do two fundamental things any new community needs: explain itself in clear language, and bring participants together.
Shermin will be speaking at TOA 2017 in Berlin — and so we got in early and asked her to answer some of the fundamental questions about blockchain technology. Questions as simple as: what does it all mean?
So, Shermin, let’s start with the acid test: what is a blockchain?
SV: “Depending on who you ask, the definition of blockchain is quite different. It all started with Bitcoin, and then pivoted into other types of blockchains, often with very different properties and purposes. Now it seems to have become a religious war of what a ‘real’ blockchain is.
“People very often refer to quite different things when talking about the blockchain. We definitely need to start using adjectives!
“Some people think there should only be one blockchain to rule them all; whilst others are comfortable with the idea of different types of blockchains.
“Is a ‘blockchain’ actually a permissionless public blockchain where everyone can be part of the network? Or a federated blockchain, like some banks are trying to build? Or is it a private blockchain — which actually is not really a blockchain at all?!
“The phrase Distributed Ledger Technologies (DLTs) has emerged as a term to describe these alternative blockchains.”
It sounds like this must result in a lot of behind-the-scenes politicking! How do you think this disparity will be resolved, and what will happen?
SV: “Basically, private or federated blockchains can be compared to Intranets in the Nineties. Private companies wanted to use the idea of a network of computers — the Internet — but only within the firewalls of their own private intranet. Eventually they understood that this was not efficient or necessary.
“I think that a similar thing is happening with blockchains. Corporations are still mistrusting the idea of public, permissionless blockchains like Bitcoin or Ethereum, so they are building their own systems.
“Only time will tell which direction this will all take — so while blockchain technology is still very early stage, we are very likely entering the era of the Internet of Blockchains.”
Does the act of you clarifying these complex issues create acceptance and understanding within the community you’re helping to build?
SV: “Before I started BlockchainHub two years ago, the blockchain ecosystem mostly comprised hardcore crypto-enthusiasts, and was focused around developing the core technology.
“I realised that there was little information available for non-techies, so I created and shared information on a blog to make these ideas available to all people. Eventually this panned out into a diverse array of activities and research areas, and the BlockchainHub even started to expand internationally.
“We’ve now formed multi-stakeholder working groups around the intersection of Blockchain and various topics like Blockchain & Law, Decentralisation & Governance, Self Sovereign Identity, and Blockchainified Life Science.”
While the blockchain is a socio-economic-technological revolution, the technology behind it, while fundamental, seems almost the least revolutionary part to me.
While decentralising control from people who act as gatekeepers to an agreed code sounds ideal, in practice will people find it difficult? Don’t we still have to trust the people who change the code too — how do you build that trust?
“The soft change that distributed networks like blockchains will bring is much more difficult to adapt to than the technological change. De-centralisation is first and foremost a social problem.
“We are not used to working decentrally, and we are not used to decentralised management styles. It’s hard to get rid of existing social conditioning, since most of us have been socialised in “command and control” environments, whether at home, at school or at work.
“The claim of many early blockchain advocates was ‘trustless trust,’ where blockchain protocols and smart contracts pre-define the rules of interaction, and are automatically enforced when all participants to a transaction meet the pre-defined conditions.
“Let’s say, for instance, I want to transfer money to someone I don’t know. At the moment, if I don’t know you, I have to go through a bank — because we both trust the bank. But with Bitcoin, I can send you the funds directly, because we both trust the code: the code makes sure that I have the money, and that you’re who you say you are.
“This radically reduces transaction costs by getting rid of intermediaries — who previously acted as trusted third parties.
“But as disruptive as this is, it does not mean that we will eradicate the act of trusting people in the network altogether. We will still need to trust the software developers and system architects of these blockchains”.
“The most interesting application of blockchain will be disrupting governance itself, in every shape and form.”
How will blockchains really affect us at in day-to-day life, and what might happen in the long-term?
“The most interesting, most disruptive application of blockchain will be disrupting governance itself, in every shape and form. It can get rid of all the bureaucracy — where we currently need people to confirm transactions — and making the process smaller, cheaper and faster, and make organisations flatter.
“Just like the internet revolutionised everything, blockchain is general-purpose technology that’ll allow us revolutionise how society coordinates itself.
“We can now automatically coordinate a large set of people — who don’t know or trust each other, or even live in the same place — around a blockchain and without trusted intermediaries. The first use case of this was Bitcoin: money without banks and bank managers.
“Blockchain enables machine consensus, and smart contracts help remove what economists call the principal-agent problem — where, due to informational asymmetries, managers and bureaucrats might not always act in the best interest of the people they represent.
“This is highly transformative, possibly eradicating the need for many middle managers or bureaucrats necessary today.
“Other long term implications arise from the intersection of blockchain and the law. Are the developers of today the lawyers of tomorrow? Are smart contracts legal contracts? Which law applies in a serverless, peer-to-peer network of computers?”
But for the blockchain to be totally transformative, the change will still involve trusting technology instead of people: a big, hard societal change. Will it also be a slow change? Might it take a generation or two to really bed-in and be accepted?
“I’m quite sure that, just like how digital natives automatically adopted the Internet, they will adopt this idea of blockchain and the decentral web.
“The next generation will understand blockchain and distributed networks instinctively, and will be able to build really cool decentralised applications on the so called ‘Web3'.
“Even though many of them might not fully understand the technology, they will probably trust the idea more easily than our current generation.
“Having said that, I must admit that I am quite impressed by how much people from all generations and backgrounds embrace the idea of blockchains and smart contracts.
“There is far less resistance than I thought there would be. Even among many politicians!”
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This interview was edited for clarity and length.
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