L&T asks an expert about the buzziest thing on the internet.
‘Blockchain technology’ is one of countless buzzwords currently bouncing around the tech industry. But what do you really know about how it works? Forbes provides a helpful and concise summary of the technology’s function in relation to online financial transactions conducted via tools like Paypal and Venmo — transactions that still depend on users’ pre-existing accounts with traditional financial establishments. Says Forbes:
“Blockchain technology offers the intriguing possibility of eliminating this “middle man”. It does this by filling three important roles — recording transactions, establishing identity and establishing contracts — traditionally carried out by the financial services sector.”
L&T CEO Cooper Pickett sat down with Arthur Falls, host of The Ether Review, to clear up some blockchain basics and chart the future of a technology that Falls believes has the potential to decentralize power from existing authorities in business, law, and technology to a broad set of stakeholders.
What does it mean when people say that “Blockchain is the internet of value?”
In the same way that you send packets of data through the internet, which just contain information, you can send packets of value through the internet. It’s still data, but it’s data that represents value. So it’s the idea that a cryptographic token which can be provably tied to a real world asset, but doesn’t necessarily need to be, can be sent through the internet — and that can be allowed to denote ownership.
Because a cryptographic token can be designed to be unique, it’s not forgeable. You can assign a real world asset to that token and use that token to denote ownership of the real world asset. And then because that cryptographic token, which is basically just a string of numbers, can be sent through the internet, you can pass around ownership of whatever real world asset the cryptographic token represents through the same pathways that we traditionally send any information through. So it’s kind of subtle. That’s why it’s called the internet of value.
It seems like that phrase is really tied up with its financial application then, more than its application to healthcare or voting.
Absolutely, yeah. But it’s the same mechanism that allows all of these things to work. It’s the fact that this is something that’s unique and cannot be forged or stolen. There’s a sense that in the ontology of a blockchain, nothing is ever stolen. Ownership can be transferred but ownership is denoted by math.
In other words, the total value of all the tokens is in a known location all the time. There are no buried stacks of cash anywhere.
That’s absolutely correct. Whoever controls what are called the private keys that control the token effectively owns that token.
How do you imagine the legislative environment around these technologies developing? What happens when a court says, Arthur you have the keys but actually you don’t own those tokens and I do.
There’s something quite subtle here, and it’s not very well understood within cryptocurrency: that contract is something ephemeral, denoting responsibilities, ownership, etc. So there is a social contract that you have in the jurisdiction that you live, with the powers that be in that jurisdiction. When you work somewhere, you enter into an agreement with the government there to obey the laws, to pay your taxes, to be a good citizen. And to abide by the decisions of its court.
The best that a blockchain can ever do is hold a representation of that contract. So the social contract that you have that exists outside the blockchain always trumps whatever’s going on on the blockchain. That’s just a simple fact of life. People in the blockchain world don’t like this fact, but that’s the case.
They’re imagining a utopia where governments are handled by the blockchain in a certain sense.
Yeah, or where blockchain is the judge. But at the end of the day, all things are human interactions and they take place between humans. And the blockchain, all it can do is represent those contracts, those interactions, and automate them through business logic in a way that people generally agree with. If someone says “Hey, I don’t agree with how this was done,” then they take that to an external adjudicator.
When we talk about the future of the internet at this event, and we think about blockchain being a part of that, what are some of the other technologies that come to mind?
So there’s something really interesting that’s emerging — it’s not necessarily going to be the dominant technology, but it does a good job right now: it’s called IPFS. What’s unique about it it is that it uses a technique called “content addressing” where the address of a file is derived from the file itself. What that means is that you only need one copy of everything, because if you have a file, it has one address.
And if you say you want to upload a file, it automatically attempts to go to the address of the version of that file that exists online, which is identical. By the magic of math, content address is just perfect; it automatically works. We’ve had it for years, it’s just never been developed to the point where IPFS is developing it now.
Like what you read? Join L&T on September 15th for “Beyond Blockchain: The Future of the Internet,” a panel discussion moderated by Falls and featuring Jock Percy, Founder and CEO of Perseus, and Jesse Grushack, of the Strategy and Product Team at Consensys.