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Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money,Business & the World
Don Tapscott & Alex Tapscott
368 pages; Average reading time 5 hours 12 min
This bookbhook summary will take not more than 9 minutes
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This bookbhook summary has been handcrafted by Shawna Guha. Shawna is a banker with one of India’s largest banks and believes reading helps in widening the horizon of hopes, and handcrafts book summaries for India’s favourite book summary app.
This handcrafted summary will help you learn
- What are the seven principles of Blockchain technology?
- What is Ethereum?
- How will Blockchain affect business and governance in the future?
- Can Blockchain help in inclusive growth and development?
When did Trust become protocol?
After the whirlpools of dot com, big data, social media, cloud computing and the like, it is now time for another massive technological wave that is imminent in the near future -the ‘Blockchain Technology’. This started as a brainchild of Satoshi Nakamoto, a pseudonymous person who ‘outlined a new protocol for a peer-to-peer electronic cash system using a cryptocurrency called Bitcoin’. In other words, the concept of cryptocurrency or digital currency, which is the key factor related to Blockchain technology, will erase the presence of any ‘trusted third party’ during the process of distributed computations thereby enabling the data integrity. The same will percolate into every single level of businesses, governments, privacy advocates, journalists and much more.
The digital currency will work like a ledger that will be visible to everyone as it will be present in a distributed network and hence, the processes will likely to become much more streamlined with higher speed, accuracy, optimised costs, and security. The Internet of Information will in a way get transformed into the Internet of Value or Money via the Ledger of Everything. Banking and financial services have already embraced Blockchain technology in the form of distributed ledger technology.
Where presently the virtual trust resides through the intermediaries like banks, governments, PayPal, Visa, Uber, Apple, and Google, Bitcoin may revolutionise this whole concept as the trust will rest on the very objects of the network. The Internet will rise in a brand new avatar where every individual will have a personal identity or the ‘black box of identity’. It will help to create a trusted peer-to-peer sharing economy, protect economic rights, and reconfigure the financial system ensuring speed and inclusion.
7 Blockchain principles
The Blockchain technology not only focuses on safeguarding the privacy of people but also ensures rights like the right to property and recognition of a person. Satoshi Nakamoto formulated seven design principles that have become the primary Blockchain principles:
- Networked Integrity: Trust and integrity go hand in hand and therefore, are equally intertwined in the Blockchain economy concept. This is important to protect the privacy interests of the commoners along with inculcating a sense of undiluted trust amongst them. The Proof of Work or PoW mechanism of Bitcoin ensures strengthening the trust and integrity along with other relevant mechanisms like proof of activity, proof of capacity and proof of storage. The overall socio-economic and political activities will be benefitted by the same
- Distributed Power: Gaining inspiration from the HashCash by cryptographer Adam Back, Satoshi Nakamoto devised a distributed power principle sans a single point-of-control. In fact, the Bitcoin protocol can be downloaded by anyone for free, and a copy of the same can also be retained. The society at large can participate owing to the effective peer-to-peer network.
- Value as Incentive: The participants or holders of the Blockchain tokens will receive the financial incentives for participating or adding value to a particular activity in any and every kind of field. The Internet of Things is an example of this.
- Security: Safety and security are the two most threatened aspects regarding digital platforms nowadays. The Bitcoin Blockchain is supposed to eradicate the same by imparting the necessary cryptography throughout the network without which one cannot proceed at any cost.
- Privacy: Every single individual’s right to privacy is taken care of by Satoshi’s Bitcoin The identity of a person remains as a pseudonym
- Rights Preserved: The preservation of rights in all forms is another major aspect of Bitcoin Blockchain in every sphere such as physical assets, intellectual property, personal BlackBox of identity and the like. There is an appropriate rights management system in-built in this new technology that arms the users with the adequate knowledge about their rights.
- Inclusion: The Bitcoin Blockchain technology works on the distributed capitalism concept that makes the economy work for everyone in the society. In other words, effective inclusion is the primary paradigm of this technology, which drives overall prosperity.
Blockchain in financial services
The domain of global financial services is severely lagging behind owing to the age-old technologies that still prevail here whereas the world outside is dynamically digitalizing by leaps and bounds. The onset of Blockchain technology and the impact that it is going to have on the financial services sector will revolutionise financial services. The major factors that will transform are attestation or establishment of adequate trust while taking up financial transactions, cost optimisation, speed, value innovation and above all, the implementation of open-source technology.
The financial services sector starting from the banks and financial institutions to stock exchanges will undergo a massive metamorphosis altogether. Eminent global banks such as Barclays has already started exploring Blockchain technology to modify their financial operations. In fact, 2015 witnessed a historic event when world’s nine topmost banks – Barclays, JP Morgan, Credit Suisse, Goldman Sachs, State Street, UBS, Royal Bank of Scotland, BBVA and Commonwealth Bank of Australia joined hands towards establishing ‘common standards for Blockchain technology’ by bringing the concept of R3 Consortium.
The world saw a historic milestone being achieved with the onset of the Blockchain platform called Ethereum. Ethereum came about from the Brooklyn office of Consensus Systems (ConsenSys) which is ‘one of the first Ethereum software development companies’. Ethereum is the brainchild of the 19-year old Vitalik Butterin, a Canadian of Russian descent.
According to the website of ConsenSys, ‘Ethereum is a platform that runs decentralised applications, namely smart contracts, ‘exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. Ethereum is like a Bitcoin in that it either motivates a network of peers to validate transactions, secure the network, and achieve consensus about what exists and what has occurred. However, unlike Bitcoin, it contains some powerful tools to help developers and others create software services ranging from decentralised games to stock exchanges.’
ConsenSys has eliminated the concept of hierarchy based working by replacing the same with a ‘hub’ nature of the environment. This facilitates even more seamless and smoother open communication with the help of Blockchain technology. This can, therefore, be taken up by the several firms in the future for more even distribution of power, increased transparency, enhanced user privacy as well as anonymity.
Apart from all these advantages, the transaction costs are also going to be optimized by collaborative transformations of the three types of costs in an economy as specified by Nobel laureate Ronald Coase –’The costs of search (finding all the right information, people, resources to create something), coordination (getting all these people to work together efficiently) and contracting (negotiating the costs for labor and materials for every activity in production, keeping trade secrets, and policing and enforcing these agreements)’.
Distributed applications (DApps)
Blockchain will be revolutionising the way the businesses run today. While the basic operations of the businesses remain the same, the overall interface will be transforming with Blockchain. These Blockchain based business applications will be named distributed applications or DApps, which are nothing but ‘a set of smart contracts that stores data on a home-listings Blockchain’. The transactions through this Blockchain based interface will simplify even more and become seamless. It will be a peer-to-peer based network that will ensure much more privacy of data, reduction of risks, enhanced reputation, provision for identity verification and other smart features like insurance, payment settlement, and property access using Smart Locks (devices based on Internet of Things). After the evolution of the software applications from the client apps, server apps, virtual private network (VPN) and cloud computing, it is time for the distributed applications based on Blockchain to take over.
With the help of these, uploading of any program in the Blockchain platform followed by self-execution of the same backed by a tough crypto-economical guarantee will become easier, and this will not be residing inside any particular entity or organisation. Rather, it will be a public platform that will keep on performing in a secured manner. This will be made possible with the help of collaborative action of the Open Networked Enterprises (ONE), Distributed Autonomous Enterprises (DAE), Smart Contracts, and Autonomous Agents of the Blockchain technology.
In other words, the companies and organisation at large will have to take part in this transformation phase driven by Blockchain economy to survive amidst the change by value creation (through entrepreneurship) and value participation (through distributed ownership of the firm).
Blockchain & the internet of things
With the advent of Blockchain technology, the software and technologies related to the Internet of Things will be revolutionised as intelligence can be inculcated within the infrastructure with the help of smart devices so that these can communicate easily with each other through the peer-to-peer network of Blockchain. This will make the system more robust, cost-effective, and economical. The basic backbone underlying the configuration will be a mesh network unlike the conventional ‘top-down models of organisation, regulation, and control’.
Since the concept of a centralised organisation or entity is rooted out in the Blockchain technology, therefore, the system tends to become more secure with enhanced privacy. The power and distribution system will become much more streamlined as the digitisation of the power nodes will lead to the creation of a peer-to-peer structure that will ensure efficient energy consumption and storage in a particular neighbourhood.
It is speculated by several technology companies that Blockchain will help in tapping the potential of the Internet of Things technology to the maximum possible extent where every single node or device of business will act as an independent, self-sufficient ‘micro-business’ unit. This sphere will separately be known as the industrial Blockchain. In other words, the Internet of Things that require the Ledger of Everything for operating efficiently and effectively will be driven by Blockchain. This will in turn help in taking care of the nine facets of Ledger of Everything, namely: Resilient, Robust, Real-time, Responsive, Radically Open, Renewable, Reductive, Revenue-generating, and Reliable.
In short, the actual objects of the real world are ‘animated’ and placed in the Ledger of Everything, which then comes alive and starts communicating and responding by taking appropriate action as well. Networked intelligence as specified in The Digital Economy will be the main keyword of Internet of Things thereby redefining businesses altogether.
Can Blockchain be inclusive?
The ultimate success of any form of technology lies in its ability to percolate to every single stratum of the society. It is only with the growth and development of all the levels of the society that overall economic prosperity can be attained. Consequently, the Blockchain technology too has got the immense potential that can be utilised in unveiling the unbanked strata of the society that comprises of the poor and destitute who are leading lives depending upon agriculture, livestock, fishing and other allied sectors. It is understood that all these are simply assets that ought to be utilised for gaining money by exchanging value, which can be possible with the help of Blockchain Bitcoin.
This technology can work with even tiniest of pennies, and therefore, even the meagre assets of the individuals can prove beneficial by enabling them to go for the hassle-free opening of bank account, followed by utilising all the necessary benefits of deposits and credit backed by Blockchain. In fact, availability of ‘a mobile phone and some Internet access’ is enough to start participating in prosperity build-up using Blockchain technology.
Apart from these tools of abundance, persistent identity and democratised entrepreneurship are the pivotal points related to prosperity through Blockchain. The domains of microfinance, asset ownership, payments, and settlements are going to be revolutionised with Blockchain that will, in turn, lead to a concept of distributed ownership and investment. Added to these factors, it will become easier to the government organisations, NGOs and other philanthropic entities to distribute funds to the needy section of the society for their betterment and well-being.
Blockchain & good governance
In Estonia, digital identity is central to governance and administration. This is possible using an electronic ID card with a chip carrying information on identity authentication as well as a digital signature and a personal identification number (PIN).Estonia has also digitised information on a seamless platform across sectors such as education, health care, transportation systems, social services, and overall administration. The blockchain is the basic building block for this type of scenario that ensures that the technology spreads uniformly across all sectors of the society thereby achieving inclusive growth and prosperity.
Blockchain steps into metamorphosise the present nature of ‘the state’ concept into a much wider and more inclusive concept by inculcating integrity, public power, the value of the votes, preservation of privacy and technology inclusion. There are two major areas where Blockchain will play a major role- ‘integrated government and the public sector use of the Internet of Things’. The common people will be empowered in such a manner with Blockchain that they will be able to serve themselves as well as other fellow beings around them. The infrastructure will be more secure, and hence, a stream of open and trusted data, public value creation, and utilisation of the smart social contracts in case of political reputations will be possible.
What about Intellectual Property?
Blockchain technology can also be utilised to make the most of the intellectual property and therefore, enrich the concept of culture largely. In other words, the artists are supposed to be sole gainers under the purview of Blockchain while they get to express freely and at the same time, are financially benefitted as well. Blockchain will provide the platform for achieving this fair value by creating the appropriate intellectual property aimed at the well-being of the artists at large. The complications of the music industry and other allied cultural domains are likely to be simplified with the help of smart contracts of Blockchain technology.
A fresh genre of music ecosystem will be developed with the help of Blockchain not only powered by the smart contracts but also backed with the concerned artist’s reputation, integrity, and transparency that will, in turn, allow for the seamless deal making, privacy, and security, respect of rights and fair exchange of value. The Blockchain will be coming with value templates, inclusive royalties, transparent ledgers, micro-metering, micro-monetizing, rich database, usage data analytics, digital rights management, auction/dynamic pricing mechanism, and reputation system. Other features are basic copyright registration, digital content management system and the new artists and repertoire that work jointly to facilitate freedom of speech, privacy and freedom of press driven by Blockchain.
It’s not all good news
Blockchain technology being another nascent concept is likewise facing some major challenges at present that either may become roadblocks towards its successful implantation or can be averted to make the most of Blockchain benefits. This is first because it is still a complex concept that is hardly comprehensible by the all and sundry. At the same time, it comes with some other cons such as it can reduce the need for workforce thereby cutting down jobs, its energy consumption is not sustainable, insufficient incentives compared to the distributed mass collaboration work, privacy issues, malicious use of Blockchain by anti-social elements. Overall, it’s a mammoth task to make Blockchain operational. However, if the pioneers of Blockchain can stay firm regarding professional promises, then a new era of technology is possible.
The road ahead
It is not the job of a single entity like a government or another private sector to lead the Blockchain led evolution. Rather, the primary players in the market throughout the world have to come together and join hands to make Blockchain happen. These players include the Blockchain industry pioneers, venture capitalists, banks and financial services, developers, academic people, governments, regulators, law enforcement bodies, NGOs, users, and women leaders of Blockchain who have a crucial role to play in the successful functioning of Blockchain. The world will be interconnected with several networks like knowledge networks, policy networks, advocacy networks, operational & delivery networks, networked institutions, watchdog networks, platforms, governance networks, global standard networks and Diasporas under the purview of Blockchain. Together, the countries worldwide have to unite for enforcing Blockchain to the ultimate extent in the society.chnologies and drugs when they are needed, but also understands how our mind controls our physiology by making us better.
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