Blockchain Benefits

ARE YOU BLOCKED ON BLOCKCHAIN?

What is the blockchain? If you don't know, you should and if you do, chances are you still need some clarification on how it actually works. This article is meant to help demystify this world-changing, trust-building technology which represents nothing less than the second generation of the Internet and holds the potential to transform money, business, government and society. WORDS LUC LIEVENS

The technology that is likely to have the greatest impact on the next few decades has arrived. And it's not social media, big data, or robotics. It's not even Artificial Intelligence. You may be surprised to learn that it's the underlying technology of digital currencies like Bitcoin. It's called the blockchain.

When it comes to assets – things like money, financial assets, intellectual property, a vote, and carbon credits and other holdings – we rely entirely on big intermediaries: middlemen like banks, governments, big social media companies and credit card companies to establish trust in our economy. Overall, they do a pretty good job. However, there are growing problems. To begin with, they're centralised. That means they can be hacked. They exclude millions of people from the global economy, including people who don't have enough money to have a bank account. They slow things down. It can take a second for an email to go around the world, but it can take days or weeks for money to move through the banking system across a city. They take a big piece of the pie – 10 to 20 per cent, just to send money to another country. They capture our data, and that means we can't monetise it or use it to improve the management of our lives. Our privacy is being undermined.

So, what if there were an Internet of value – some kind of vast, global, distributed ledger running on millions of computers and available to everybody? One in which every kind of asset (from money to music) could be stored, moved, transacted, exchanged and managed, all without powerful intermediaries? In 2008, an anonymous person or persons named Satoshi Nakamoto developed a protocol for a payment system using a cryptocurrency called Bitcoin. It enables people to establish trust and carry out transactions without a third party. For the first time in human history, people everywhere can trust each other and transact peer to peer. This trust is established, not by some big institution, but by collaboration, cryptography and clever coding. You may be wondering how the system works.

Assets are not stored in a central place. Instead, they are distributed across a global ledger, using the highest level of cryptography. When a transaction is conducted, a block is created and posted globally, across millions and millions of computers. And then – this is the key part – that block is linked to the previous block to create a chain of blocks.

The Bitcoin blockchain is just one. There are many others, including the Ethereum blockchain developed by Canadian programmer, Vitalik Buterin. This blockchain has some extraordinary capabilities, one of which is that you can use it to build smart contracts. Smart contracts are self-executing. They handle the enforcement, management, performance and payment of agreements between people.

So, could we use the blockchain technology to redistribute wealth? Could we change the way that wealth gets created by engaging more people in the economy, and then ensuring that they receive fair compensation? Let me describe five ways that this can be done. Firstly, companies are working to put property titles on a blockchain. And once they're there, this is immutable. This creates the conditions for prosperity for potentially billions of people. Secondly, what if there was a distributed application on a blockchain for Airbnbs that was owned by all the people who had a property to rent? Thirdly, the biggest flow of funds from the developed world to the developing world is people sending money back to their families at home. Using blockchain payment technology, the whole thing would take minutes and would cost a few cents. Fourthly, we create data as we leave a trail of digital crumbs behind us as we go throughout life. But the virtual you is not owned by you – that's the big problem. Finally, there are countless content creators who don't receive fair compensation, because the system for intellectual property is broken. These are five opportunities to solve one problem and promote prosperity. Of course, technology doesn't create prosperity, people do. My point is that the technology genie has escaped from the bottle, and it's giving us another opportunity to rewrite the economic power grid and solve some of the world's most difficult problems if we allow it to.

g Luc Lievens, a lawyer and economist, is a Blockchain and Crypto Currency believer, coach and educator.