Book Summary - Blockchain by Stephen P. Williams
As a digital ledger software platform that is both unhackable and unchangeable, blockchain is far ahead of its time. Allowing for an unprecedented level of transparency and accountability, this distributed technology can threaten banks, businesses, and even governments based on its high-level capabilities. In Blockchain, Stephen P. Williams provides a thorough overview of this radical concept while highlighting potential outcomes that may arise from its implementation, for better and for worse.
A Digital Ledger
It began as a platform for Bitcoin. Some philosophers refer to it as the next enlightenment.
But what, exactly, is blockchain?
Simply put: blockchain is a digital ledger--or a book where monetary transactions are recorded and tracked.
Sounds pretty dull, right?
However, without the existence of ledgers, civilizations would never have been able to build cities or effective markets.
While history has taught us that ledgers are important, they are not always reliable tools. Some corporations (such as Enron) have even been known to keep a second set of records which are aimed at hiding their true financial undertakings.
To avoid this type of illegal activity, brokers and bankers are often able to certify the legitimacy of a ledger for a fee, but again, this method is far from fail-proof.
Essentially, a blockchain fills in this validity gap by tracking every purchase or sale that a consumer or company makes. Blockchain has a system in place for verifying these transactions, eliminating the need for third-party involvement.
Unlike a paper ledger system of the past or many of the digital ledger formats that exist today, blockchain is not only publicly accessible, but it is not susceptible to hacking or corruption. Next, we will look at why this is the case.
Each ‘block’ in the blockchain is essentially a set of data points.
Think of groups of stars where each constellation is a block in the galaxy’s chain. However, before these sets of stars are able to form constellations, each star is assessed and verified for accuracy and reliability through a set of highly-specified protocol.
One such verification protocol is referred to as proof of work. With this, every set of data points is subject to a complex math problem that needs to be solved before the block can be added to the chain. In order to solve this mathematical challenge, significant computational resources are required, which makes it very implausible that a hacker would be able to get through and manipulate the chain.
So, if hackers can’t solve the mathematical problems required to get their blocks added to the blockchain, who can?
This is where miners come in. Miners are people that are trained to compete to solve blockchains. From the problem-solving process, a cryptographic hash (a string of numbers and letters) is generated along with a timestamp. Both identifiers are used to connect the block with the remainder of the chain.
Now, let’s say that a hacker was able to circumvent the problem-solving process and infiltrate the chain. What would happen?
When the hacker tried to change the information in a single block, all of the hashes for the entire blockchain would immediately become out of sync, which would signal that there was a security breach in the system.
The more blocks that are in the blockchain, the more secure the whole chain becomes.
Blockchain is responsible for enabling distributing applications. These are often referred to as dapps.
So, what exactly are dapps?
Let’s look at an example. One type of dapp is a smart contract. Smart contracts are automated agreements where both parties decide on mutual terms. Once the work is carried out, the payment is delivered to the worker by an algorithm and it arrives in the form of cryptocurrency. Because the blockchain is structured to be highly secure, there is no need for a third-party to verify the legitimacy of the transaction.
Without a doubt, smart contracts could be very useful in the future.
For instance, think about a service like Uber. Rather than using a centralized app to connect drivers and customers, a blockchain dapp could bypass the intermediary and connect drivers and customers directly.
Another potential example pertains to self-driving cars. When self-driving cars are low on gas, a smart contract could allow the car to drive itself to the gas station and fill up the tank. It could also drive itself to the dealership for repairs! Think of how much time you would save by eliminating these frequent maintenance trips...
In the early 1990s, when the Internet began to boom, some people believed that online systems would lead to a utopian society. However, as we have learned, this was not the case. While people did become more connected thanks to the power of the world wide web, many organizations were able to monopolize the network for their own growth (think Facebook). For this reason, the Internet was unable to create the idealistic world that people had wanted.
However, with blockchain, there might be a second chance at utopia!
Distributed systems are inherently able to shift accessibility to the masses rather than just to a select few.
For instance, consider the banking industry. Banking systems are primarily central and revolve around banking fees, credit history, and limited access.
By invoking blockchain, on the other hand, anyone will have the ability to invest.
Already, the United Nations, the World Economic Forum, and the Rockefeller Foundation are creating ways to allow blockchain technology to benefit the economy. In particular, there is currently a push for blockchain-based applications aimed at empowering disadvantaged farmers, disenfranchised voters, and even individuals that do not have banking access due to a lack of financial privilege.
This technology encourages a rethinking of the operational hierarchies and structures that we so adamantly rely on for nearly every aspect of our lives. By reconsidering resource allocation and distribution based on this new format, we are setting the stage for a far more equitable and sustainable version of capitalism.
Let’s look at another example.
Think of an Airbnb. If you own one, you need to manually approve and manage agreements with your guests. However, if a smart contract were utilized in this situation instead, the venture could effectively run itself. This both frees up time for the business owner and benefits society in general by encouraging peer-to-peer rather than hierarchical interaction.
In America today, there is a huge push for transparency. From the food on our dinner tables to the medicine we are putting into our bodies, we want to know exactly where everything is coming from and why it outperforms competing brands.
Humans, be warned. For future Thanksgivings, it is likely that you will have the ability to closely observe your turkey’s journey from farm-to-table via your cell phone. In fact, there is already a blockchain app in testing that does exactly that. It is owned by the company Cargill which houses The Honeysuckle White, a popular brand.
In addition to food and medicine, there is another area in which we are quick to authenticate our products: jewelry. With blockchain technology in the works that is aimed at preventing blood-diamond trafficking, we will soon have enabled diamond miners to track where their diamonds have ended up--and we will be able to avoid blood diamonds at the point of purchase.
This is huge, as this process provides equity to diamond miners. They become just as intrinsic to the supply chain as the buyers at the other end.
Blockchain could even impact the porn industry. By privately tracking identities, blockchain technology could manage sex worker reptuations while making the industry safer overall.
Up until now, the blockchains being discussed have been predominantly public ones. However, it is possible for blockchains to be private as well. A private blockchain could be critical for sectors that involve significant confidentiality--such as people who work in healthcare--and ensure maximum privacy would be ensured through an invitation-only platform.
While we have discussed many of the upsides to blockchain technology, we would be remiss if we failed to touch on a less positive point. Blockchains require a ton of energy to operate. Bitcoin, for instance, requires an enormous number of computers to run their proof-of-work protocols.
On some days, Bitcoin requires more energy to run than the entire nation of Denmark!
So, what do we do about this unsettling trend?
We get creative.
Rather than relying solely on proof of work protocol to guarantee that work is being done effectively, some companies have been experimenting with a proof of stake option instead that places a bet on whether or not the work will get done. This reduces blockchain energy consumption and is also intended to make transactions faster.
Blockchain itself has multiple environmental applications. For one, it is largely involved in the carbon-trading market and helps to turn carbon emissions into a tradable good as a way to offset air pollution. Blockchains could also be used to track and record greenhouse gas emissions, endangered species, certification of land ownership, and even as a countermeasure to deforestation.
When technology is endless, so are the possibilities.
The Main Take-away
Every day, new and innovative products emerge within the tech sector, but it is far less often that a mechanism is introduced that completely turns the world of technology on its head…
Blockchain, the latest in disruptive technology, not only benefits the technical world, but its many diverse applications can revolutionize a variety of industries including medicine, sustainability, transportation, and even animal welfare.
Blockchains are comprehensive, digital ledgers intended to remove the middle-man from economic transactions while maintaining top-quality security and reliability. Due to its highly structured encryption, hackers are unlikely to gain access to the chain.
Today, we are driving our cars to the gas station, but with blockchain technology, it is highly probable that they will soon be driving themselves.
As blockchain technology continues to evolve, we will begin to see more and more of its capabilities integrated into our daily lives. The possibilities are endless.
About the Author
Stephen P. Williams, the author of Blockchain, is a well-regarded journalist who has written for The New York Times, Newsweek, GQ, The Smithsonian, and Martha Stewart Living, as well as numerous other publications. Having earned an MA in Communications from Stanford University and an MBA in Sustainability from Bard College, Williams is the founder of a sustainable fashion startup called Wm. Williams, which relies on blockchain technology for distributed manufacturing. Currently, the writer and entrepreneur live in New York City.