Blockchain’s recent history has been marked by oscillations between boom and bust. Inflated expectations and inherent scepticism have caused a perfect storm of negative commentary when Blockchain hasn’t rapidly changed everything as we know it.
Blockchain has been through two key waves of evolution:
At its inception, no-one even talked about the technology powering Bitcoin, the “Godfather” of the cryptocurrency world. However, smug insiders spoke in hushed tones about the “real innovation” of Bitcoin’s underlying technology – the Blockchain.
Soon, the big end of town woke up to the fact they could get on the hype train for this new technology without dabbling in the murky world of Bitcoin. Voila, working groups and pilots for Blockchain (or if they wanted to be fancier “Distributed Ledger Technology”) sprung up at all the big banks and financial services companies around the world.
Having been through this cycle of boom and bust, Blockchain is now on the cusp of a third evolution, one that could be truly transformative for its wide-scale use and adoption.
At its heart, Blockchain’s profound potential isn’t about dreary concepts like database management or authentication. Blockchain’s power really comes into stark relief when you consider its potential in the context of incentive design. Incentives are what drive society forward and facilitate creative enterprise. Blockchain enables new and innovative consensus
mechanisms to transparently and accurately motivate and reward communities.
Consider the example of a community on the outskirts of the burgeoning metropolis of Lagos, the beating heart of rapidly industrialising Nigeria. The residents of the community want to ensure that, as the urban sprawl continues, their children still have a field to play football. Today, they would probably have to bribe and lobby their local officials – a tough and fruitless task. Even once the park was built, there would be no guarantee that any institution would maintain the park and overuse would see it soon fall into barren disuse.
Imagine a different way – one supported by Blockchain, which overcomes this Tragedy of the Commons1 and moves the dial towards collective or democratic commerce. Suppose 100 of the residents decide to self-organise and each contribute $30,000 Nigerian nairas (approximately A$100) towards rehabilitating the park, maintaining it, and building a fence around the space. In return, they each receive a unique digital token which they can use to exclusively access the park for the next two years.
If other residents of the community become aggrieved that a subset of the community now has privileged access to this beautiful park, there is a simple solution:
This concept may be anathema to people who believe that capitalism has no role to play in the provision of public goods, but it is undeniable that Blockchain-based solutions of this nature could be profound because they:
Blockchain is on the cusp of exiting from the trough of disillusionment and enabling a new way of economic thinking and incentive design which “harnesses self-interest as a public good and operates by mutual coercion to preserve the freedom of all participants”. 2
To realise this freedom, individuals and companies alike will need to think differently about Blockchain and its applications to commerce and society. Blockchain really could be a brave new world – bigger and bolder than anything that has come before.
Written by Ashton Jones (BCom ’07), Head of Investments, Retirement and New Propositions, TAL Australia