Some 20 years ago, the founders of Amazon and Google essentially set the course for how the internet would come to dominate the way we live.
Jeff Bezos of Amazon, and Larry Page and Sergey Brin of Google did more than anyone else to actualize digital commerce as we’re experiencing it today – including its dark underbelly of ever-rising threats to privacy and cybersecurity.
Today we may be standing on the brink of the next great upheaval. Blockchain technology in 2019 may prove to be what the internet was in 1999.
Blockchain, also referred to as distributed ledger technology, or DLT, is much more than just the mechanism behind Bitcoin and cryptocurrency speculation mania. DLT holds the potential to open new horizons of commerce and culture, based on a new paradigm of openness and sharing.
Some believe that this time around there won’t be a handful of tech empresarios grabbing a stranglehold on the richest digital goldmines. Instead, optimists argue, individuals will arise and grab direct control of minute aspects of their digital personas – and companies will be compelled to adapt their business models to a new ethos of sharing for a greater good.
At least that’s a Utopian scenario being widely championed by thought leaders like economist and social theorist Jeremy Rifkin, whose talk, “The Third Industrial Revolution: A Radical New Sharing Economy,”has garnered 3.5 million views on YouTube. And much of the blockchain innovation taking place today is being directed by software prodigies, like Ethereum founder Vitalik Buterin, who value openness and independence above all else.
Public blockchains and private DLTs are in a nascent stage, as stated above, approximately where the internet was in the 1990s. This time around, however, many more complexities are in play – and consensus is forming that blockchain will take us somewhere altogether different from where the internet took us.
“With the Internet, a single company could take a strategic decision and then forge ahead, but that’s not so with DLT,” says Forrester analyst Martha Bennett, whose cautious view of blockchain we’ll hear later. “Blockchains are a team sport. There needs to be major shifts in approach and corporate culture, towards collaboration among competitors, before blockchain-based networks can become the norm.”
That said, here are a few important things everyone should understand about the gelling blockchain revolution.
How public blockchains work
A blockchain is nothing more than a distributed database that functions as a shared ledger between multiple parties. The ledger can be shared among folks with a singular interest, such as Bitcoin holders. Or it can be a ledger for just about any type of information shared between companies or between people and organizations. A live copy of the ledger is distributed to the computers of the participants, and advanced cryptography prevents past ledger entries from being altered.
There’s a big difference between public blockchains like Bitcoin and Ethereum and private DLTs, like those leveraging the open-source Hyperledger framework backed by IBM, Intel, Cisco and dozens of other corporate giants. (More on private blockchains coming up.)
In public blockchains, anyone can participate. The ledger is 100% decentralized, and a completely transparent view of all ledger entries is always accessible to one and all. Public blockchains typically rely on a computational contest, called proof-of-work, to attract participants and to enable the blockchain to function without needing someone to act as the trusted middleman.
Bitcoin mining, for instance, is a contest to solve a difficult cryptographic puzzle in order to earn the right to add the next block of validated ledger entries to the historical chain of ledger blocks. The winning miner gets a token — one Bitcoin. All of the other miners, by competing against one another, serve to validate the ledger, thus eliminating the need for a trusted middleman.
It’s difficult to pinpoint the number of true public blockchains, but there are now a few dozen prominent ones that issue tokens. Thus, peripheral services have cropped up to support trading and speculation of blockchain tokens, aka cryptocurrencies, and the attendant speculation roller coaster gets a lot of attention.
However, cryptocurrencies are only one small part of blockchain technology.
The disruptive component of public blockchains is not what many folks think. It’s not just about issuing digital currency.
The disruptive component of public blockchains is not what many folks think. It’s not just about issuing digital currency. The real power of blockchain lies in its potential to decentralize many other types of ledger keeping.
Sometime in the next 10 to 20 years, blockchains could begin to profoundly supplant all types of middlemen who now control the flow of finances, the movement of goods and services, and the distribution of digital content. This includes eliminating the roles of business leaders the likes of Facebook CEO Mark Zuckerberg and Twitter CEO Jack Dorsey, whose companies control the flow of social discourse.
Social commentators like Rifkin and technologist Andreas Antonopoulos have garnered global followings talking about how blockchain can empower people to control and monetize many aspects of their digital lives. For instance, I attended a provocative talk Antonopoulos gave on this topic in Seattle titled “Escaping the Global Banking Cartel.”
Efforts are underway to develop and someday widely deploy public blockchains that could decentralize how legal documents are issued; distribute and keep track of digital IDs for impoverished people; and divide and distribute fragmented payments to participants in supply chains. Brainstorming has even commenced for making distributed ledgers the basis of fraud-proof blockchain voting systems.
What makes private DLTs tick
By contrast, private blockchains are essentially the product of the corporate sector recognizing something big is going on and reflexively scrambling for a foothold, so as not to be left behind. Private DLTs don’t have any need for a proof-of-work mechanism. This is because a single corporate entity, or a group of entities, retains full control of validating new blocks of entries and adding them to the standing ledger. You have to be invited to participate in a private blockchain, and the view of the ledger is restricted to permissioned users. Of course, everyone in a private blockchain must agree to abide by a set of rules established and enforced by the governing corporate entity or entities.
The big attraction for corporations to implement private blockchains is that the ledger data gets distributed across many machines, boosting the efficiency and flexibility of transactions in a way that is very accurate, and very difficult to maliciously alter. However, after an initial burst of exuberance, enterprises today are no longer racing after blockchain systems just to be able to say that they’re doing something innovative, Forrester’s Bennett told me.
Fewer projects are getting launched by the corporate world, and the initiatives that are getting greenlighted tend to focus on mapping the cultural and technical obstacles that lay ahead and setting technical ground rules everyone can agree on. This queuing is most notably taking place within Hyperledger, a consortium hosted by the Linux Foundation whose founding members happen to be 30 corporate giants in banking, supply chains, manufacturing, finance, IoT, and technology, led by IBM and Intel.
Since private blockchains don’t use any type of proof-of-work mechanism – the very thing that makes public blockchains next to impossible to alter – traditional cybersecurity concerns apply.
Since private blockchains don’t use any type of proof-of-work mechanism – the very thing that makes public blockchains next to impossible to alter – traditional cybersecurity concerns apply. With no miners vying to win tokens and validating the accuracy of historical records, a trusted middleman is needed. And that trusted middleman remains the same as always: a vulnerable corporate entity. In fact, with so many more interfaces swirling through a blockchain system, it becomes even more important for enterprises to adhere to very strict cyber hygiene practices, and everything, security-wise, must go right for them. How often does that happen today?
“Those involved in the most advanced privacy DLT initiatives have discovered that operationalizing and scaling this technology is a major challenge,” Bennett says. “Some of these challenges will disappear over time as tooling improves, but others won’t, such as making the system and all its interfaces secure.”
Open source collaboration kicks in
This is the reason for Hyperledger, which is not a blockchain, per se, and cannot issue any type of cryptocurrency of its own. IBM and Intel would like nothing better than for Hyperledger to arise as the go-to framework for both public and private blockchains, standardizing, as much as possible, around reliable open-source components. Again, think back 20 years. This is exactly how Linux evolved from a hobbyists’ operating system to a commercially viable OS widely used in enterprise networks.
I ran this by Avesta Hojjati, head of research and development at DigiCert, a Lehi, Colo.-based supplier of digital certificates who’s an active participant in Hyperledger. “You can think of Hyperledger Fabric as a car chassis that’s been welded, painted and maybe has wheels on it,” Hojjati told me. “You still need to add an engine and a number of different things to make it fully functional. But you’re able to work with something that’s very easy to maintain and deploy.”
Launched in 2016, Hyperledger has begun incubating projects such as Hyperledger Ursa, which is intended to be a go-to, shared cryptographic library. “In the past, utilizing such technology would have required subject matter expertise,” Hojjati says, “whereas today, any developer can utilize the Ursa library and implement projects based on these capabilities.”
Capturing public-private synergies
New tools under the Hyperledger umbrella could be used to tilt us into an age of much more democratized global commerce. Or they could turn out to be the tools that help today’s corporate captains remain in power.
I’ve come to believe that it’s probably going to be something in between. Public and private distributed ledgers have already begun to converge. A ton of innovation is under way. Difficult tradeoffs must be made and pivotal architectural advances must be achieved. Enterprises will remain at the table because improved productivity and greater profits are possible. But is it conceivable that the hybrid blockchains of the near future could also blow up the existing digital gold mines and democratize who gets access to the gold dust?
Forrester’s Bennett has observed and analyzed emerging tech for 30 years, the past five looking at distributed ledgers. I asked her what role she thought blockchains will play 10 years from now. Her answer:
“The only thing we can say for certain is that it’ll look nothing like what we’ve got today. I’m not anti-blockchain, I’m just aiming to be realistic. While the technology won’t deliver miracles, it does provide us with the opportunity to do things differently – radically differently – from today. In other words, blockchains can support new business and trust models – but we need to design them first. And while some compromises will no doubt be necessary, the technology issues are more likely to be solved more quickly than all of the non-technical aspects.”
When you put it that way, it’s difficult for me to visualize the complete extinction of today’s top middlemen. But maybe they’ll get shoved down a few notches by a new breed of middlemen.
The blockchain revolution has commenced, folks. There’s no turning back. It very well could take us to improved privacy and cybersecurity. Going forward, one thing is certain: It won’t be dull. I’ll keep watch.