Blockchain, a peer-to-peer protocol that produces consensus on a current transactional status, has captured imaginations in the West and the East. Having long led hypecurves as the ‘next Internet’, blockchain has been claimed as a transformative technology that would retire trust as the necessary lubricant to economic transactions and empower an era of decentralized business models, that is, not dependent on any intermediary or authority. Will we finally see the emergence of people's business models? Will blockchain simply supercharge business?
Yet the applications so far are modest. Beyond cryptocurrencies – the imaginary dragons of today as discussed by Aleksi Grym from the Bank of Finland in this Dialogue forum – there are investments in blockchain technologies in financial industry (including Initial Coin Offerings), supply chain documentation (including logistics and shipping), asset registries (such as land ownership), health care (medical records), proof of origin (diamonds) and smart contracts that may enable decentralized autonomous organizations, DAOs, on blockchain-based platforms (such as Ethereum).
Permissioned blockchains that are developed by the financial industry offer significant efficiencies, counted in billions of USD by many interested parties. Similarly the collaboration between IBM and Maersk suggests there are gains to be made in shipping as documentation and verification become automated and tamper-proof. Through such efforts private blockchains can become a back-office infrastructure, a sort of plumbing for ‘smart’ transactions, that provides efficiencies compared to current information technologies and governance systems. It should be noted though that in contrast to private permissioned blockchains, the permission-less or open blockchains are notoriously inefficient due to their redundant structure (the essence of their immutability), being slow and using vast amounts of computing power and electricity. Hence in many transaction-intensive applications blockchain does not necessarily offer any benefits relative to current technologies that are faster and reliable through existing means of authentification.
In China, as Jin Chen and Yansheng Liu (in this Dialogue forum) report, there is significant interest in blockchain technologies. The Chinese Internet giant Alibaba claims to be leading in blockchain related patents. One example of their application is the fast growing BaaS (backend-as-a service) platform operated by Ant Financial. The Shenzhen Municipal Taxation Bureau together with Tencent reported that through WeChat they can invoice taxes through a blockchain platform (Cointelegraph, Dec 12, 2018). The People's Bank of China (PBoC) is testing a blockchain platform for trade finance. Beyond accounts receivable, it claims to allow real-time monitoring of financial activities (Cointelegraph, Sept 4, 2018). Experiments are many albeit still tentative and sometimes offer more provocation than actual business or operational plans.
Blockchain's transformative though elusive promise is about its potential for non-hierarchical governance. The technology might help deliver the evasive idea(l) of an organization that departs from decision-making hierarchies and knowledge centralization. Wright and De Filippi (Reference Wright and De Filippi2015: 38) describe this:
Bring trust and coordination to shared resource pools, enabling new models of non-hierarchical governance, where intelligence is spread on the edges of the network instead of being concentrated at the center…..delegating to the community the collective responsibility to monitor and evaluate its own achievements.
Such distributed organizational forms have been experimented through pilots such as Robin Hood Coop, a Finland-based member organization exercising agency to make finance more accessible (Välikangas & Carlsen, Reference Välikangas and Carlsen2019) and Backfeed, characterized as a ‘social operating system for decentralized organizations’ (see backfeed.cc) (Davidson, De Filippi, & Potts, Reference Davidson, De Filippi and Potts2016). There are also startups in renewable energy that seek to give consumers more influence in shaping the sources and patterns of energy consumption. The city of Berkeley, CA, is rumored to consider using ‘initial community offerings’ as a finance instrument to help homeless. In Helsinki, a local currency is being considered for experimentation. And Switzerland has its Cryptovalley that is home to many blockchain-based financial startups near the town of Zug.
While much of the activity around blockchains is highly speculative, there are enough indications to start asking important questions. Will (post–) blockchain technologies help democratize and de-intermediate or automate socio-economic cooperation? Or will the technology eventually rather be used for mass surveillance? Anonymity was one of the motivating factors behind the emergence of peer-to-peer electronic cash. Yet the Chinese government may soon require users to register with their national identity card when using a blockchain (The Verge, Oct 22, 2018). And will blockchain technologies simply create ever more concentrated structures (wealth, power, knowledge) despite their peer-to-peer character as it appears in terms of bitcoin ownership, for example? Bloomberg reported in Dec 8, 2017 that about 40 percent of bitcoin wealth is held by perhaps 1,000 users.
This leads to the fundamental question regarding governance: To what extent can we design new relationships among ourselves, with the help of distributed protocols? As De Primavera and Loveluck (Reference De Filippi and Loveluck2016) argue, there is a distinction between the governance by infrastructure, which is peer-to-peer in open blockchains, and is seemingly working as planned in bitcoin, and the governance of infrastructure. The latter is evoked when a core group of coders have the sole authority to suggest code changes, which nevertheless need to be endorsed by the parties representing the majority of computing power. Recent forks in bitcoin suggest this type of governance is still not easy.
The governance issues should be taken seriously. A distributed model may mean any emergent governance vacuum is quickly filled by un-vetted parties or concentrated interests. A peer-to-peer society appears attractive to many, but as Lessig (Reference Lessig2000) has written, pushing the government interests completely aside may be risky:
To push the antigovernment button is not to teleport us to Eden. When the interests of government are gone, other interests take their place. Do we know what those interests are? And are we so certain they are anything better?
Of course, peer-to-peer communities must do their part in weighing on purposes governments and other industry-dominant organizations use blockchain technologies. Only when there is a constant balancing between public and private interests, should we put our heads on a blockchain, or any emerging technology promising power shifts. What are the dregs that Jin et al. call to be discarded and what is the essence that brings the benefits, is worth considering as technologies such as blockchain have the potential to reset the relationship between centralized and decentralized, authority-governed and peer-to-peer. Middlemen, for sure, stand to lose.
