This is the second of three articles about Blockchain technology and its implications. The first was an introduction, this one’s about how Blockchain works and its role in creating digital trust, and the third article will be about how you’re likely to make first contact and use it. I’ll remind you that Blockchain is a complicated topic, so thanks for your continued patience.
To understand Blockchain, we must first contemplate the primordial role of trust. Just as every chemical process in the human body takes place in the medium of water, every human interaction – every one – takes place in the medium of trust. As civilizations, societies, and markets evolved, all were made manifest by the existence of, and singular devotion to trust. It’s the cornerstone, the keystone, and the capstone of our civilized existence. As the original open source model, trust is the intangibly awesome foundation of equilibrium and creator of order.
This will be on the test: For 10,000 years, humans required analog trust. In the Digital Age, humans will require digital trust. As open source technology beyond cryptocurrency, Blockchain is enabling trust’s metamorphosis from analog-to-digital, as it becomes synonymous with digital trust.
For Satoshi Nakamoto, creating Bitcoin was easy. But making his peer-to-peer cryptocurrency deliver on the human trust expectation was complicated by the fact that fiat currency – trusted as value-in-exchange – is backed by the full faith and credit of the issuing sovereign government. To become a viable fiat alternative, users had to trust Bitcoin to be authentically tendered by its true owner, just as merchants trust bank technology to verify in real time that customers have the money they’re spending. So, to eliminate the “double-spend” concern, Satoshi created his Blockchain, which has the task of delivering a trustable Bitcoin.
Now let’s take Blockchain beyond currency. The essence of analog trust intermediaries, like government, banks, lawyers, title companies, etc., is to facilitate a transaction that doesn’t require the parties to trust each other. As a practical alternative, Blockchain can do the same thing, but faster, more efficiently and at lower cost. But what about those trust expectation?
Blockchain will increasingly compete with legacy trust intermediaries because of its symbiotic distributed ledger network. You’ll trust a digital record or asset that’s installed on a Blockchain and distributed to a network of ledgers called “nodes.” Practically speaking, Blockchain is essentially a database platform – a digital pegboard – onto which you can plug any number and variety of digitally encrypted elements and applications: a contract, a record, or a financial asset, like cryptocurrency or an ownership share of a business. Even your last will and testament.
When a classic will is created, it can be changed/duplicated/corrupted/lost after the fact because it’s, well, analog. Physical. Everyone knows of cases where wills have been challenged as not being the real one, or the last one, even when held by a lawyer. So, let’s put your will in an encrypted digital file and install it on a Blockchain. Then we’ll send it over the Internet to be received, date/time-stamped and authenticated by, let’s say, 1,000 of those nodes in the distributed ledger network.
This network is operated by “Miners” who create and manage the nodes, which are designed to receive, store and validate assets/documents like a cryptocurrency or your encrypted will, on-demand, 24/7/365. And your very last wish is that only the encrypted version confirmed by all 1,000 nodes is your last will.
When you distribute your will to the network, you’ll receive a unique digital “key” that must be used in the future to access that Blockchain. To secure your bequest from devious deviation, you’ll require the next use of the key by anyone but you to prove evidence of your death. So, when the key is presented with, say, your death certificate, all 1,000 nodes simultaneously confirm (this takes a few minutes) that proper access is authentic. In Blockchain vernacular, that’s called “proof of work,” and upon such authentication, the execution of your will begins.
For example, instructions installed on the Blockchain holding your now-authenticated will distributes a prescribed amount of money to one or more heirs – perhaps in cryptocurrency. Other instructions could transfer a real estate title to a different heir. And so on. Your will could be executed within minutes with limited expense and drama, but more importantly, as you wished. Miners don’t store and authenticate for free, but in bypassing most or all of the legacy intermediaries, you also avoid their costs.
The distributed ledger network can be ten nodes or a million, depending on how much digital trust you require. And since it’s an encrypted file on a distributed ledger network, any corruption (double spend), as in the case of your will, would require someone to create 1,000 co-conspirators. You’ve heard there’s strength in numbers? In the Digital Age, there’s trust in numbers. So, how much digital trust do you need? Ten nodes? A hundred? A million?
Analog trust was handy in the Analog Age when most interactions occurred very close to the analog humans involved. But the more we employ global digital leverage by merely pushing an “Enter” key, the more we need digital trust – crypto-trust, like Blockchain technology.
Future success of the Digital Age – as digital leverage replaces analog leverage – will depend on our ability to move trust at the same speed as the leverage. Today that’s at the speed of light, over 9 GHz, nitrogen cooled, 28 core processors.
Blockchain technology isn’t replacing trust – it’s the future of trust. Because you and I require it, even in – especially in – the Digital Age.
Write this on a rock … In the Analog Age, there was strength in numbers. In the Digital Age, there’s trust in numbers.
Recommended reading: Blockchain: The Next Everything by Stephen P. Williams
Next time: Your Blockchain Close Encounter of the First Kind
Jim Blasingame is the author of The 3rd Ingredient, the Journey of Analog Ethics into the World of Digital Fear and Greed.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.