State of Blockchain 2017: Smartnetworks and the Blockchain Economy
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Transcript of State of Blockchain 2017: Smartnetworks and the Blockchain Economy
Melanie Swan
Philosophy & Economic Theory
New School for Social Research, NY NY
[email protected] Keynote
UC Berkeley, Berkeley CA, June 8, 2017
Slides: http://slideshare.net/LaBlogga
State of Blockchain 2017: Smartnetworks and the Blockchain Economy
8 June 2017
Blockchain1
Melanie Swan
Philosophy and Economic Theory, New School for Social Research, New York NY Founder, Institute for Blockchain Studies
Singularity University Instructor; Institute for Ethics and Emerging Technology Affiliate Scholar; EDGE Essayist; FQXi Advisor
Financial Markets Background Economic Theory Leadership
New Economies research group
Source: http://www.melanieswan.com, http://blockchainstudies.org/NSNE.pdf, http://blockchainstudies.org/Metaphilosophy_CFP.pdf
https://www.facebook.com/groups/NewEconomies
8 June 2017
Blockchain
Blockchain
2
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
To inspire us to build
this world
8 June 2017
Blockchain
Agenda
1. What is blockchain?
2. What is happening now?
Bitcoin/blockchain networks
Blockchain applications
3. What is the (possible) future?
3
8 June 2017
Blockchain
Thesis
Blockchain: no other technology can
1. Uplift 2 billion people out of
poverty overnight
Intermediary-free remittances
2. Produce an orderly transition to
the automation economy
Humans and machines in
collaboration
3. Transform the only sectors not yet
re-engineered for the Internet era
Economics and governance
4Source: Blockchain Singularities :http://www.slideshare.net/lablogga/blockchain-singularities-65443340
8 June 2017
Blockchain
Two fundamental eras of network computing
5
Source: Expanded from Mark Sigal, http://radar.oreilly.com/2011/10/post-pc-revolution.html
I. Transfer Information II. Transfer Value
6 7
2020s 2030s
Simple networks Smart networks
8 June 2017
Blockchain
What is Blockchain? Software
eWallet software: send money via web
Digital payment system like Paypal
Secure data transfer: better VPN, EDI
Register or ledger of money/account
balances: giant google doc on the web
Permanent Internet-based ledger system
for executing transactions
Secure-write access, all-read access
Secure transfer of assets (like money
and information), computationally,
without an institutional intermediary
6
Source: VPN: Virtual Private Network EDI: Electronic Data Interchange
Email protocol (SMTP)
tells the web how to send
email, blockchain tells the
web how to send money
8 June 2017
Blockchain
Blockchain revolution is just beginning
7
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
Decentralized
NetworksBlockchainBitcoin
Application Software Protocol Secure Value Transfer
Risk of change over time
30-40 years for “Information Internet” roll-out
15 years alone for email as a wide=spread enterprise application
Longer for the “Money Internet” given the sensitivities of
money and asset transfer
LowHigh
8 June 2017
Blockchain
Smartnetworks
Pushing more complexity through the Internet pipes
8
Information
Smartnetworks: high-performance intelligent scalable network computing
CC: Creative Commons license; Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
Distribution of Transfer of
“Rich information” quanta modulated with attributes
Provenance (source), interest level (quadratic voting), relevance
(PageRank), remuneration; (like CC license with more parameters)
CashSmart
Assets
20171990 2025e 2050e 2075e
Instantiation of
Smart
Resources
Smart
Entities
2090e
Simple networks Smartnetworks
Applications
Transfer of Value, Confirmation of Identity,
Registration of Preference (Voting)
Smart
Contracts
Economics Governance
8 June 2017
Blockchain
Scalability and financial inclusion
Hierarchy does not scale
Next leap-frog tech: fintech
Like cell phones vs. POTS, it
does not make sense to build
out brick-and-mortar banks in a
world of digital finance
Decentralized networks +
digital finance = the power of
the printing press in banking,
credit, and money
Access to credit and financial
services as a basic human right
(4 billion under-banked)
9
Source: POTS: Plain Old Telephone Service, http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
8 June 2017
Blockchain
Long-tail economics and governance
One size does not fit all
Any two parties can meet and transact on the blockchain
10
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
One size
fits all
Personalized
Long-tail Systems
Long-tail economics
“Amazon or eBay of money”
Personalized banking, credit,
mortgages, securities
Long-tail governance
“Amazon or eBay of government”
Personalized governance
services, pay for consumption
8 June 2017
Blockchain
Personalized
governance
services
Crypto-enlightenment
11
“One ought to think autonomously,
free of the dictates of external
authority” - Immanuel Kant
Kant, I. "Answering the Question: What Is Enlightenment?" (German: Beantwortung der Frage: Was ist Aufklärung?). 1784.
Hayek, F. The De Nationalization of Money. 1976. (paraphrased)
“Multiple private currencies should
compete for customer business”- Friedreich Hayek
Personalized
economic
services
8 June 2017
Blockchain
Agenda
1. What is blockchain?
2. What is happening now?
Bitcoin/blockchain networks
Blockchain applications
3. What is the (possible) future?
12
8 June 2017
Blockchain
How does blockchain work?
13
eWallet app: holds keys, not money
Using PKI (public key infrastructure): electronic wallet
software issues a public-private key pair (public address is a
32-character alphanumeric code)
Scan public address (QR Code) & submit transaction
Private key confirms access and funds availability,
transaction validated and posted to blockchain
8 June 2017
Blockchain
Why is it called blockchain?
Ledger (chain) of sequential transaction blocks
Each new block starts by calling the last block, so a
cryptographic chain of transactions is created
Every 10 minutes, the latest block of submitted
transactions is validated (by cryptographic mining) and
posted to a single distributed ledger
14
Source: Satoshi Nakamoto whitepaper: https://bitcoin.org/bitcoin.pdf, https://blockexplorer.com
Block 10 Block 11 Block 12
8 June 2017
Blockchain
How robust is the p2p software network?
15
p2p: peer to peer; Source: https://bitnodes.21.co, https://github.com/bitcoin/bitcoin
7340 Global Nodes running full Bitcoind (6/17); 100 gb
Run the software yourself:
8 June 2017
Blockchain
What is Bitcoin mining?
16
Mining is the software-based accounting
function to record transactions, fee-based
Mining hardware/software “finds new blocks”
Network regularly issues random 32-bit nonces
(numbers) per specified cryptographic parameters
Mining software constantly makes nonce guesses
At the rate of 2^32 (4 billion) hashes (guesses)/second
One machine at random guesses the 32-bit nonce
Winning machine confirms and records the
transactions, and collects the rewards
All nodes confirm and append the new block of
transactions to their copy of the distributed ledger
“Wasteful” effort deters malicious playersSample
code:
Run the software yourself:
8 June 2017
Blockchain
CyptoCurrency Market Capitalizations (6/17)
17
Source: https://coinmarketcap.com
S&P 500: $19tn; Bitcoin: $41bn (over $2500)
8 June 2017
Blockchain
ICOs (Initial Coin Offerings)
$36m
18
Sources: http://icorating.com, https://tokenmarket.net/blockchain/all-assets
$5m
$200m raised in ICOs 2016
$12m
$25m
30 sec
15 min
Recent ICOs completed in 2017
8 June 2017
Blockchain
Bitcoin vs. other payment networks
19
Source: Statista / Coinmetrics, http://www.altcointoday.com/bitcoin-ethereum-vs-visa-paypal-transactions-per-second
1,667
7
Average daily transaction volume ($US mn)
Average
transaction
volume per
second
Visa: 2,000 transactions/sec; Bitcoin: 7/sec
Visa: $18bn/day; Bitcoin: $300mn/day
8 June 2017
Blockchain
Scalability
Transactions/block: 400 (2014) vs 2,000 (2017)
Current Bitcoin block size limit: 1 mb
Change proposals
SegWit (Segregated Witness): 2-4 mb
Emergent Consensus / Bitcoin Unlimited: no limit
(Former): BIP 100 (adjustable block size), BIP 101 (8 mb)
Second-layer solutions: batch posting to blockchain
Factom, Storj, Lightening Network
Democracy: 5 constituencies decide
Developers, miners, exchanges, wallets, merchants
20
Segregated Witness: move non-critical “witness” data off the blockchain; BIP: Bitcoin Improvement Proposal
Source: http://www.coindesk.com/data/bitcoin-number-transactions-per-block
Bitcoin
transactions
per block
(https://coin.dance/blocks)
8 June 2017
Blockchain
Blockchain risks?
ISSUE
21
Regular global technical meetings (Satoshi Roundtable);
vociferous debate/proposals (democratic power struggle)
PoW: not scalable, PoS: validator model too complicated
Cybersecurity Hacks Mt Gox, Ethereum DAO, Bitfinex
Silk Road, drug dealers,
terrorists, criminals
ScalabilityBlock size, Consensus method
Mining Centralization 51% Attack
RESPONSE
Temporary; mining is collusive; attack unsustainable, cannot
steal coins, confirm transactions or change protocols
Building resilient system constantly under open
attack 24/7 (remember early Internet DNS attacks)
Blockchains are a universal technology available to
all; non-criminal activity predominates
PoW: Proof of Work (mining), PoS: Proof of Stake (validated voting) – mechanisms for establishing ledger state consensus
Early Internet: “this will never scale, insecure, not resilient;” Yahoo, AltaVista down for days due to DNS attacks
Technology Risk
Perception Risk
Regulatory Risk, Economic Risk
Government regulation,
bans; Exchange rules
Governments modernizing economic infrastructure
with blockchains too; licensing, open dialogue
8 June 2017
Blockchain
Agenda
1. What is blockchain?
2. What is happening now?
Bitcoin/blockchain networks
Blockchain applications
3. What is the (possible) future?
22
8 June 2017
Blockchain23
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
Blockchain: Fintech and beyond
AssetsImmediate
cash transfer
Applications
PaymentsMoney
Remittance
Financial
instrumentsUnified ledger
Mortgages, loans
Titling: house, auto
Inventory
Commercial trade
PaymentsFinancial
Services
Logistics &
Supply Chain
Energy, IoT
Healthcare
Government
Humanitarian
Non-profit
Industry adoptionTime
Complexity
Stocks, bonds
Goods transfer
Assurance, provenance
IdentityDriver’s License
Passport, Visa
Contracts
Registries
Marriage licenses
Public Documents
Birth/death registries
BoL, Forfeiting
Insurance
Cash Smart Assets Smart Contracts
8 June 2017
Blockchain24
Source: http://futurememes.blogspot.com/2016/10/blockchain-fintech-programmable-risk.html
Stock Transaction
Real Estate Purchase/Sale
Health Insurance Billing2. Steps that can be automated with blockchain
1. Steps with human decision-making
Energy Contract
International Trade Shipment
Reengineering economics and governance
Any complex transaction has two kinds of activities
Blockchain automation economy
Economics Governance
8 June 2017
Blockchain25
Secure information exchange
Asset confirmation and transfer
Automated coordination
Example: fleet management of drones,
autonomous driving, robotics, clinical trial
patients, cellular therapeutics
Blockchain: automated, secure
coordination system with remuneration
and tracking
Key blockchain functionality
Source: Swan, M. Philosophy of Social Robotics: Abundance Economics. Sociorobotics, 2016.
http://www.melanieswan.com/documents/SocialRobotics.pdf.
8 June 2017
Blockchain
Financial services
Shared ledger
Instantaneous transaction
validation (t=0, not t+3)
Settlement, clearing,
Custody, insurance
Secure, lower risk, cheaper
Financial assurity
Securities asset registries
Automated clearing
Quoting, deal placement
Billing, settlement
26
Source: https://www.cbinsights.com/blog/financial-services-corporate-blockchain-investments
Shared Ledger
8 June 2017
Blockchain
Supply chain and logistics
Asset transfer and customs clearing
Provenance, assurance, release
Inventory management
Custody, insurance, damage
Automated tracking and notification
Pallets, trailers, containers
Trade finance and documentation
Track purchase orders, change orders,
receipts, shipment notifications
Custody and product certification
Link physical goods to serial numbers,
bar codes, RFID tags
27
8 June 2017
Blockchain
Energy
Blockchain energy projects
Enerchain: trading (NE Europe)
BTL Interbit blockchain energy
platform: trading (Vancouver CA)
PONTON: DSO, TSO, aggregator,
generation power-balancing (Austria)
Automatic markets
“Energy Internet” - smart buildings
on regional energy smartgrids
Smart resource self-pricing
Load-balancing
Source fungibility: wind, solar power
Energy price and trade validation
28
Sources: https://www.newscientist.com/article/2079334-blockchain-based-microgrid-gives-power-to-consumers-in-new-york,
https://enerchain.ponton.de/index.php/16-gridchain-blockchain-based-process-integration-for-the-smart-grids-of-the-future
8 June 2017
Blockchain
EMR (electronic medical record)
Personal health records
Users key-permission doctors to records
Digital health wallet
Identity + EMR + health insurance + payment
Health insurance billing chains
Automated claims processing
Price-quoting for medical services
Health Data Research Commons
Biobanks, QS (DNA.bits), genome files
29
Source: http://futurememes.blogspot.fr/2014/09/blockchain-health-remunerative-health.html
Healthcare
Digital health wallet
8 June 2017
Blockchain
Politics: governance services
30
Blockchain weddings (Bitcoin, Ethereum)
Public document registries
Titling Registries
Local government RFPs for home, auto, land
Legal services: register and attest
Contracts, IP, agreements, wills registries
Proof of Existence: hash + timestamp + blockchain record
Voting
Quadratic voting (interest), PageRank (relevance)
Delegative democracy, random sample elections
Opt-in personalized governance services
Composting vs education
Sources: http://merkle.com/papers/DAOdemocracyDraft.pdf, http://www.proofofexistence.com/, https://bitnation.co/ , World’s First
Blockchain Marriage: David Mondrus and Joyce Bayo, 10/5/14, ConsenSys wedding : Kim Jackson and Zach LeBeau, 11/2/15
8 June 2017
Blockchain
Humanitarian
Refugee identity system
Phone access: smartphone eWallet, SMS
Object access: card, paper wallet, pendant,
ring, keychain, tattoo, implantable chip
Biometric access: word phrase, fingerprint,
iris, facial scan
Financial inclusion, access to learning
Smart contracts for literacy
Bitcoin MOOCs “Kiva for literacy”
Open-source FICO scores
Decentralized credit bureaus
Remittance, blockchain-tracked aid
31
8 June 2017
Blockchain
Agenda
1. What is blockchain?
2. What is happening now?
Bitcoin/blockchain networks
Blockchain applications
3. What is the (possible) future?
32
8 June 2017
Blockchain33
Better horse or new car?
FutureTech
8 June 2017
Blockchain
Blockchain smartnetworks thesis
High-performance intelligent
scalable network computing
Any complex operation in the future
performed via smartnetwork
Some kind of technology like
blockchain required
Key blockchain properties
Secure authentication of participants
Conduct of transactions
Automated coordination of arbitrarily-
many items
Remuneration, tracking, auditability
34Source: Swan, M. Blockchain Singularities :http://www.slideshare.net/lablogga/blockchain-singularities-65443340
8 June 2017
Blockchain
Smartnetworks
Advanced applications
Friendly AI
Deep thinker registries
Thinking chains
Brain-computer interface cloudminds
Bio-cryptoeconomy
A nanorobot in every cell
Medical nanorobotic cell repair
Runaway nanotech and synbio plagues
Unavoidable “signing” per detectable origins
Blockchains in space
Terraforming, asteroid mining, cargo tracking
35Source: Swan, M. Blockchain Singularities :http://www.slideshare.net/lablogga/blockchain-singularities-65443340
8 June 2017
Blockchain
Reinventing economics and governance
How to redesign industry
sectors not yet reinvented
for the Internet era?
Economics
Finance
Governance
Need smartnetworks for
secure value transfer
Information
Assets
Money
Contracts
36
Personalized governance services
Personalized economic services
One size
fits all
Personalized
Long-tail Systems
8 June 2017
Blockchain
Economics and Finance
37
Economics Finance
Source: http://www.slideshare.net/lablogga/blockchain-payment-systems, http://www.slideshare.net/lablogga/blockchain-financial-
networks
Organizing assumption:
uncertain future value of assets
Finance = access to
capital, credit, assets
Organizing assumption:
production and consumption of
scarce material goods
Economics = access to
producing and consuming goods
Past, Present Future
Time
Systems for organizing access to resources
Organizing assumptions no longer true in the world of
zero marginal cost, rival goods, and digital distribution
8 June 2017
Blockchain38
Reinventing Economics
Technological Unemployment
Definition: jobs outsourced to technology
Estimate: Half (47%) of employment is at risk of automation in
the next two decades – Carl Frey, Oxford, 2015
Why are there still so many jobs in a world that could be
automating more quickly? – David Autor, MIT, 2015
Blockchain Economics challenge: orderly transition to
the Automation Economy
UBI + access to education, opportunity, fulfillment
UBI: Universal Basic Income; Source: Swan, M. "Automation Economy: An Abundance Philosophy of Economics" In
Surviving the Machine Economy. Eds. Hughes, LaGrandeur, Palgrave Macmillan. 2017.
Economics
8 June 2017
Blockchain
Reinventing Economics
Blockchain Economics
39
Economies of the Future: Production and consumption
of intangible social goods in addition to material goods
Trust, recognition, freedom, belonging, acknowledgement
A
B
C
Source: Swan, M. "Automation Economy: An Abundance Philosophy of Economics" In Surviving the Machine Economy. Eds.
Hughes, LaGrandeur, Palgrave Macmillan. 2017. UBI: Universal Basic Income
Survive
Thrive
Economics
8 June 2017
Blockchain
Reinventing Finance
Any asset as a service
40
Source: Blockchain Fintech: Programmable Risk and Securities as a Service, http://futurememes.blogspot.com/2016/10/blockchain-fintech-programmable-risk.html
CD, DVD
ownership
Music and video
streaming
Entertainment as
a Service
Hard
Asset
Service
Auto, home ownership
Uber, Lyft, Gett, Juno, Via
Airbnb, HomeAway, VRBO
Transportation, Living
Space as a Service
Securities ownership
Securities as a service:
Rent access to
consumable benefits of
owning securities:
dividends, capital
appreciation
Securities as
a Service
“Assets as a Service”
Access to the consumable benefits of
the asset, without the requirement of
ownership
Works if trust that the asset will have
future availability
Finance
8 June 2017
Blockchain
Reinventing Finance
Risk asymmetries
41
Finance
Source: Blockchain Fintech: Programmable Risk and Securities as a Service, http://futurememes.blogspot.com/2016/10/blockchain-fintech-programmable-risk.html
HFT (high-frequency trading,
hedge funds, securities, FX)
RTB (real-time bidding for
advertising)
Energy Markets (automatic
load-balancing)
Logistics (automated freight
networks)
No risk-return recalibration of
systemic and non-systemic risk
Need to reassess risk-return
parameters
• No UBI mechanism
including full population
Tighter risk correlation means entire
global economy as giant HFT
Automated control of cryptographic
assets on smartnetworks
Automatic Markets Concentrated Risk
Automatic markets trade together and concentrate risk
Programmable risk, not just programmable instruments
8 June 2017
Blockchain
Blockchain Economics and Finance
42Source: http://www.slideshare.net/lablogga/blockchain-payment-systems, http://www.slideshare.net/lablogga/blockchain-financial-
networks
1. Abundance instead of Scarcity
2. Fulfillment economy instead of
Labor economy
3. Intangible assets instead of
Tangible goods
1. Assurity instead of Insufficiency
2. Access instead of Ownership
3. Programmable risk instead of
Monolithic risk
Mindset shifts for rethinking economics and finance
Economics FinancePast, Present Future
Time
8 June 2017
Blockchain
Agenda
1. What is blockchain?
2. What is happening now?
Bitcoin/blockchain networks
Blockchain applications
3. What is the (possible) future?
43
8 June 2017
Blockchain
Blockchain Strategies
Leadership Edge
Start or join industry consortium
Implement digital ledgers
Automate transfer of money, assets, bids,
quotes, RFPs, ERP, supply chain
Value chain process mapping
Revenue-generating
Offer blockchain-based services to clients
Example: banks targeting larger customer base
through blockchain-based eWallet solutions
Cost-saving
Finance, treasury, accounting, GL/AR/AP
Quality assurance, regulation, compliance,
audit
44
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
8 June 2017
Blockchain
Thesis
Blockchain: no other technology can
1. Uplift 2 billion people out of
poverty overnight
Intermediary-free remittances
2. Produce an orderly transition to
the automation economy
Humans and machines in
collaboration
3. Transform the only sectors not yet
re-engineered for the Internet era
Economics and governance
45Source: Blockchain Singularities :http://www.slideshare.net/lablogga/blockchain-singularities-65443340
8 June 2017
Blockchain
Conclusion
Blockchain is a fundamental IT for
secure value transfer over networks
For any asset registered in a cryptographic
ledger, the whole Internet is a VPN for its
confirmation, assurity, and transfer
Reinvent economics and governance
for the digital age
Long-tail structure of digital networks
allows personalized economic and
governance services
Smartnetworks are a new form of
automated global infrastructure for
large-scale next-generation projects
46
Personalized
Long-tail Systems
One size
fits all
IT: Information Technology
Melanie Swan
Philosophy & Economic Theory
New School for Social Research, NY NY
[email protected] Keynote
UC Berkeley, Berkeley CA, June 8, 2017
Slides: http://slideshare.net/LaBlogga
State of Blockchain 2017: Smartnetworks and the Blockchain Economy
Thank you! Questions?