The other day I commented to a friend that while I understand the Bitcoin blockchain well, I don’t fully understand its value from a business standpoint. To be blunt, I get the tech and find it fun and fascinating, and while I know it’s useful, I don’t entirely see how it’s useful. My friend commented that this is a common problem with tech people- we understand the tech but don’t understand the business. Fair enough.
I came across the book Blockchain: Blueprint for a New Economy by Melanie Swan. It’s described as a book that “takes you beyond the currency (‘Blockchain 1.0’) and smart contracts (‘Blockchain 2.0’) to demonstrate how the blockchain is in position to become the fifth disruptive computing paradigm after mainframes, PCs, the Internet, and mobile/social networking.” It sounded good, and it’s an O’Reilly book, so I decided to give it a read.
This post is a summary and review of Blockchain, which is essentially a list of blockchain use cases, all discussed at a very high level. While the author doesn’t touch on the technical side of things or implementation, I found it a useful quick read.
The author begins with a high level overview of Bitcoin. Swan says that the term “Bitcoin” actually refers to 3 things: the blockchain, the protocol, and the currency. The concepts of Blockchain 1.0, 2.0, and 3.0 are introduced. Blockchain 1.0, which is the use of the blockchain for decentralized money and payments, is discussed in the intro. She notes that blockchain is a “push technology” where a user pushes the relevant information to the network for a given transaction, whereas credit cards are a “pull technology” where a user’s personal information is on file at all times to be pulled for any authorized transaction. Being a push technology avoids the need to store user information on the network, and in turn means the blockchain is not vulnerable to hacker identity theft attacks. Swan also discusses wallets, again at a very high level, and Bitcoin’s regulatory status as of the date of writing. The introduction is fine, but I think a bit too high level. A bit of detail into the importance of mining and decentralized transaction verification would have been appreciated. However, this was the first time I read about Bitcoin/traditional banking as a push/pull technology, so points for that!
Chapter 2 is a discussion of Blockchain 2.0, which is the decentralization of general markets and the transfer of assets other than currency via the blockchain. The key idea, Swan states, is the decentralized functionality of the blockchain which leads to the ability to register, confirm, and transfer all manner of contracts and property. Use cases include financial services such as foreign exchange and payments, betting, and crowdfunding via an ICO. Here, the author seems to lump crowdfunding and ICOs together, but they are distinct. A major difference between crowdfunding and ICOs is that in a traditional crowdfunding campaign, investors are completely aware of the product and when to expect its completion, and more importantly, they can compare it to existing products to determine its value. ICOs, on the other hand, provide funding for a company that’s often not entirely defined, and therefore the company’s value post-ICO is not completely certain. I suspect this is why so many ICOs fail. Anyways, I digress. After mentioning crowdfunding and ICOs, Swan goes on to discuss smart property and smart contracts, and the use of smart contracts in DApps and DAOs/DACs, or Decentralized Autonomous Organizations/Corporations, where a DApp/DAO/DAC essentially is an application/organization/corporation governed by smart contracts. To be thorough, a smart contract is essentially a blockchain-encoded agreement between two parties that will automatically execute under some given condition, with no requirement of trust between the parties.
Next, Blockchain 3.0 is discussed under the title “Blockchain 3.0: Justice Applications Beyond Currency, Economics and Markets,” or decentralization of concepts beyond currency and assets. This is where the book starts to become more like a list. Several Blockchain 3.0 use cases are given. By coupling big data prediction analytics with the blockchain, predictive task automation can be facilitated. The blockchain can be used for distributed censorship-resistant organizational models, digital identity verification, and digital asset protection. The idea of a “personal thinking blockchain” is discussed, where ones thoughts are recorded on the blockchain for post-stroke memory restoration, which I think is pretty crazy but pretty awesome. A political use case is mentioned, that is, blockchain governance services where residents could pay for government services in a customized “Starbucks coffee order” manner.
The discussion of Blockchain 3.0 continues in Chapter 4 where the author discusses the efficiency of blockchain uses, which is nothing too exciting if you’re fairly well-read on the topic.
The chapter after, titled “Advanced Concepts,” (which, by the way, ironically don’t turn out to be that advanced) discusses what money is – stored value, medium of exchange, unit of account- and demurrage, which I found interesting, since I’m not an economist and hadn’t heard of this before. A “demurrage currency”, Swan describes, is deflationary and action-inciting in that one is encourages to spend the currency before its value is lost, thus encouraging economic activity. Guaranteed basic income is used as an example of the power of a demurrage cryptocurrency. To reduce income hoarding, a GBI-token could be given that could only be spent in the week of issuance.
The final chapter, before the conclusion that I will skip in this summary, discusses limitations to the blockchain, and acts as a sober contrast to the previous five idealistic chapters. This chapter is similar to the chapter that discusses efficiency, in that there’s nothing new if you’re well-read on Bitcoin.
I enjoyed the book. It got me excited about the power of blockchain technology. However, I felt like the book was a bit too fantasy-like, more like a manifesto for all possible blockchain applications, with little to no mention on limitations. Sure, there was a whole chapter on limitations, but if the book was a person, it would be someone screaming “Blockchain is the best! It can do everything!” and whispering “by the way, this might not even work.” It was quite utopic actually. So while I enjoyed it, I’m not sure what I actually gained from it. It would’ve been more useful to discuss applications and implementations to make it feel a bit more real, or a chapter on common misuses. I can say I understand the business value of the Blockchain quite a bit better, actually, but I’m still unclear on how it can realistically be used.
Rating for Blockchain: Blueprint for a New Economy: 3 out of 5. If it wasn’t so enjoyable I think I’d give it a 2.
Also published on Medium.