Here is the IDATE 2016 DigiWorld Summit closing panel on Blockchain ; the whole conference was revolving around trust hence the title chosen before I engaged in a panel discussion with Consensys‘ Joseph Lubin and Polychain Capital‘s Olaf Carlson-Wee.
Addressing the question of trust and blockchains requires to remember the context in which Satoshi Nakamoto’s white paper was issued in December 2008 : it was a few months after the subprime crisis and the fall of Lehman Brothers, at a time when the trust in people was extremely challenged, both in their ability to process numbers without mistake, as well as their tendency to operate behind others back. It was a time where libertarians would trust machines and distrust people.
In a way, The Economist’s « The Trust Machine » could be interpreted as « trust the machines / distrust the middle people »
I am thrilled to be back at the Digiworld summit, and by the challenge of getting you into this trust and blockchain prospective conversation with Joseph and Olaf.
The challenge of introducing the topic in 10 min is a huge one, as both trust and blockchains are very flexible and often misunderstood notions.
We have covered many facets of trust across yesterday including trust in the future epitomised by our past icons Igor & Grichka. Still, the essence of trust does rely not in technology but in people first.
How many of you have read Professor Yuval Harari’s « Sapiens » essay ? It is an inspiring and powerful reminder that what made mankind emerge from other species is its unsurpassed ability to cooperate at large scale, and with remote strangers.
Trust is the core enabler for cooperation and applies to people as well as actions.
The analogy used by Marc Andreessen 2,5 years ago, comparing Bitcoin/Blockchain to TCP/IP as we knew it in the 1990’s is a quite interesting one : a usage neutral technology that insiders identified as extremely disruptive and applying potentially to many different use cases, yet not having reached critical mass.
There are at least two core differences though:
- Internet is a very efficient information and content copy machine while Blockchain is about transactions
- Internet wasn’t as much covered by media as Blockchain is nowadays
Blockchain is a very difficult topic to frame indeed and generates as much misunderstanding as it triggers both fear and enthusiasm.
Why is it difficult ? Because is is incredibly complex, but also because it challenges in lots of ways conventional wisdom.
This is particularly true in large organisations, in the public sector, and in France as we french all share, to various extent, a 17th century cultural genetical disease spread by Descartes.
We french love concepts. We love framing complex issues into simple formulas.
And it turns out Blockchain almost maliciously resists any attempt for intellectual reduction.
Blockchains are about ledgers.
It is transforming, morphing and extending a cornerstone of modern trade and finance : double entry accounting has indeed shaped our modern world for the past 450 years and was invented by Luca Pacioli, a franciscan monk, in Venice.
Blockchain has european roots in this prospect.
Blockchains are about decentralization and this is why Marc Andreessen’s analogy is relevant.
Blockchains are also and beforehand about securing transactions
As we saw Internet is a fantastic copy infrastructure : send an email, send a picture from your smartphone, each time you are duplicating information and content. The media industry knows what this means !
Now lets make an experiment : what if we replace « email » and « snaps » with « $20 » ? In the real world it is an everyday, implicit consensus on the safety of cash and the fact there is no bank note copy machine in any of our pockets.
In the blockchain world, what secures the whole transaction system and avoids double spend is a crypto asset.
Name it Bitcoin, name it Ether, the most secure public blockchain implementations at large scale rely on a digital asset that is both the transaction token and the reward mechanism for securing the ledger and make it untamperable, which means that everybody can trust the transactions that are irrevocably recorded in it.
Blockchains as transaction infrastructures are therefore redefining how we operate trust and reduce frictions in the digital age, but they challenge us all as public blockchains operate on open source software and aside any governmental framework or regulatory body
There might be promises of private / permissioned blockchains, even blockchain without the cryptocurrency, but the fact of the matter is that for now the most robust, resilient blockchains over time involve a cryptocurrency to enable trust (Bitcoin turned 7 in January of this year without having ever been compromised – only its interfaces with the traditional financial world may have been misused and compromised / like gas stations or toll bridges giving access to an autobahn where no accident occurs)
So what makes us so uneasy then when it comes to large organisations or public institutions ? What makes us distrust the trust machine ?
- It is not only about crypto currencies in my view.
- It is not only about open source software, which is free, while we still think that « what is free has no value »
- It is also linked to how all of this emerged in a context of strong distrust in « the system ».
It all has to do about the relationship between trust and permission.
- Satoshi published his white paper then instantiated the first Bitcoin node without asking permission to anybody
- Vitalik Buterin raised the equivalent of $18 M in a bitcoin crowdfunding sale in 2013 to fund the development of the Ethereum Project without asking permission for what was a the time one of the largest crowdfunding campaigns for a software project.
- In spring 2016, TheDAO raised the equivalent of approx. $160 M in what was deemed then as the largest subscription round for a fund. Except such fund had no GPs, no LPs, no investment thesis mentioning a target, no soft cap nor hard cap, no agreement with any regulation agency. The team behind this piece of code (TheDAO was indeed a smart contract running on the Ethereum Blockchain) never asked permission to anybody either.
While « code wins argument » or even « code is law » (including the « code has flaws »), when it comes to move/track assets and value there seems to be some governance needed
So what shall you do ?
- Be humble
- Be curious
- Explore by yourself with no prior assumptions.
- Be technology agnostic.
- Explore together as this is about redefining transactions networks
I hope by now that you have a better sense of how Blockchains enable trust between machines and could be the foundation of the Internet of transactions.
But will Blockchain technology be the ultimate trust solution ?
To address this tough question I am thrilled to welcome on this panel two specialists. They will introduce themselves much better than I would then we will go through 5 core questions :
1. Trust in people
2 . Trust in code
3. Trust in Oracles and smart contracts
4. Trust in currencies & cryptocurrencies
5. Trust in the future of Blockchains
Thank you, and please give Joseph and Olaf a very warm welcome !
(below is the slide deck used during the keynote)