Topic: [2015-09-11] Blockchain startups promises a world where no one is in charge (Read 388 times)

https://www.newscientist.com/article/mg22730384-100-blockchain-startups-promises-a-world-where-no-one-is-in-charge/

Blockchain startups promises a world where no one is in charge

The decentralised technology behind bitcoin is creeping out into the real world. The possibilities could change the way society is run Blockchain startups promises a world where no one is in charge

The blockchain eliminates bosses (Image: Tom Sibley/Gallerystock)

THE centre cannot hold. The rise of bitcoin took the right to issue money, once the sole preserve of governments, and placed it in the hands of everyone. Now a spin-off technology could do the same for other core concepts of society: identity, ownership, reputation and even the rule of law.

This technology is the blockchain, and it has the potential to enable the ultimate workers’ cooperatives, or perhaps an ultra-libertarian parallel society, beyond governmental control.

Bitcoin’s blockchain is a cryptographically secured list of every bitcoin transaction ever made. The list is stored on every machine running bitcoin software and is continuously updated as each transaction is completed. No central authority is in control: the machines essentially monitor each other to stop fraud.

But blockchains can be used for more than financial transactions. Last year saw the introduction of Ethereum, a blockchain platform that enables “smart contracts”, which automatically enforce agreements between two parties. You can think of a bitcoin payment as a specialised kind of smart contract, in which one person agrees to pay another a certain sum; but smart contracts can govern any agreement that can be digitised.

Ethereum was fully launched last month with developer tools to build distributed apps, or dapps, on its blockchain, and a host of Ethereum-powered services are springing up. One of the most developed is Augur, in which users bet on the outcome of events, such as who will win the US presidential election in 2016.

These kinds of prediction markets already exist – Betfair is the largest – but they are centralised, meaning that firms must handle money and rule on outcomes. Augur automates this, using smart contracts to gather consensus on completed predictions and pay winners.

“At no point is a human being ever touching anybody’s money, it’s controlled by an algorithm and stored on the blockchain,” says Peronet Despeignes of Augur. The blockchain stores the reputation of users, ensuring that anyone trying to cheat the system is swiftly booted out. The service will launch fully in the coming months.

Existing firms also see the blockchain’s potential. Samsung and IBM are experimenting with Ethereum to control smart devices (see “Our blockchain future“), and banks such as Citi, UBS and Barclays, having seen the rise of bitcoin, are exploring the technology.

“The evolution of the blockchain is perhaps the greatest advancement of computer science since the invention of the internet,” says Barclays’ chief design officer Derek White. The bank has partnered with a number of start-ups and currently has 45 internal blockchain experiments. “Anything that requires proof of ownership through paper today can be replaced by the blockchain.”

“Anything that requires proof of ownership can be replaced by the blockchain” Parallel law

Smart contracts could even go beyond ordinary businesses, giving rise to autonomous entities that live on the blockchain. For example, Etherplan is working on software that is designed to replace wealth managers by automatically investing according to a customer’s desired portfolio, then paying out to nominated individuals. Once set up, it will keep going even after the initial customer has died, says founder Donald McIntyre. “If a customer disappears, and we disappear, the smart investment plans are going to continue executing their investment strategy and distributing to beneficiaries.”

But how will these smart contracts interact with law in the real world? If I sell you my house by transferring ownership on the blockchain, but refuse to actually move out and hand over the keys, will the courts recognise that I have broken our agreement? At the moment, no one is quite sure.

“It’s not recognised by law because it is meant to be a parallel law,” says Stephan Tual of Ethereum. But if people start managing their affairs using blockchain law, governments will have to accommodate it, he says, just as the music industry had to adapt to file-sharing services such as Napster and BitTorrent. “These technologies force the existing environment to evolve.”

We’ve already seen that happen to some extent with bitcoin, with new laws put in place to manage its use. And two government-mandated blockchains are already under way: a digital currency register in the Isle of Man, and a land title registry in Honduras. Perhaps whole governments could one day run on the blockchain, like a town council that wants to provide transparency in its decision making.

“In order for value to be transferred across the blockchain in the future, there will have to be policy and regulation around it,” says White. Barclays has already started speaking to people in government about the way forward, he adds.

But as we have seen with bitcoin, the blockchain is also well suited to illegal activity. Take Silk Road, the bitcoin marketplace for illegal drugs that was shut down by the FBI in 2013. Smart contracts mean that someone could build a distributed Silk Road and then step away, leaving the market to run itself. When autonomous software is facilitating drug deals, who do you prosecute?

Florian Glatz, a lawyer and consultant to blockchain start-ups, says that despite their name, smart contracts are still software and not law, so traditional legal systems will still be needed for now. “The vision of this world where smart contracts rule supreme is really only possible if the whole infrastructure is upgraded to obey whatever is written on the blockchain.”

Such a vision is a long way off, but it’s easy to see how the blockchain could take on other forms of organisation. The functions of the app-powered taxi service Uber – connecting drivers with riders and managing payments – can be translated into smart contracts, but so can the ownership of the firm itself. Drivers could own shares in an automated Uber-like cooperative and avoid the fees Uber currently charges them. It’s a reversal of the trend for technology to eat away at low-level jobs, says Tual. “Historically we’ve automated the workers, now we’re automating the bosses.”

“Historically we’ve automated the workers, now we’re automating the bosses”

There’s an irony that tech disrupters such as Uber, which claim to bring power to the people by cutting out middlemen, could themselves be disrupted by the blockchain, eroding their centralised power. “In Europe there is quite a big concern about the growing dominance of US tech giants,” says Despeignes. “Ethereum holds the promise of creating a new paradigm of decentralised applications that no one owns.” Extreme capitalism

But autonomous organisations could equally concentrate power in the hands of a few owners – or even none. Some have floated the idea of a blockchain-powered self-driving car that takes fares and pays for its own upkeep. This extreme version of capitalism, in which the means of production own themselves, could leave the rest of us to be bossed about by machines.

That particular example seems far-fetched, as someone ultimately has to be liable when a car crashes, but the libertarian bent of the bitcoin community makes extreme capitalism a concern, says Glatz – no one seems to be interested in replicating the welfare state on the blockchain. “We’re building up this infrastructure where our core concerns are more and more irrelevant because they cannot be captured by software.”

This power struggle over the future of the blockchain will probably unfold just as the internet has, with companies, criminals and hardcore idealists all carving out their own corners of the technology. What remains to be seen is how the public will feel about passing some of the most important mechanisms behind society into the hands of everyone and no one at the same time. Bitcoin caught on thanks to the potential to get rich quick, but these newer blockchain concepts are less immediately appealing. “What’s going to be the catalyst that will drive the greatest adoption?” says White. “We don’t know yet.” Our blockchain future

The range of applications built on the blockchain is growing all the time. Here are just a few of the up-and-coming concepts.

ADEPT is a joint IBM–Samsung experiment for putting devices on the blockchain. Your washing machine could use smart contracts to order itself detergent.

BoardRoom will let people run organisations on the blockchain, controlling secure votes and budgets from anywhere. Charities and governments could use it for ultimate transparency, says founder Nick Dodson.

Everledger is working with Barclays to track the ownership of diamonds and combat fraud. There are plans to expand into other goods.

Provenance will reveal supply chains by recording the transfer of goods through businesses.

Finally, Slock.it provides internet-enabled physical locks on the blockchain, so you could email your keys to someone and revoke them at any time.

This article appeared in print under the headline “Automatic world”