Blockchain is not transforming social relations yet, but it has the potential to do that. It has the potential to make our institutions a lot more robust.
Just recently there was an election in one of the states in India. And immediately, the opposition party has claimed that the voting machines were hacked. People are already demotivated from voting, people don’t really have the motivation to go to the voting booth, and when you can’t even trust the results because half of the population is saying that the voting machines were hacked, why would you vote? I can imagine this being transformed if you have a system where people can say, “yes, I voted for these people, and these are the people that got elected, and everyone can verify this” - and that could revolutionise democracy.
Similarly, there is this whole technology of smart contracts. Smart contracts are an interesting idea. Normally, what you would do is you would write a program, run it on the computer, and get an output. What smart contracts do is they decentralise that process. So now you write a program, you put it on the blockchain, and everyone executes that program. This is, in a way, an electronic contract. I could have a contract with my bank saying that I am taking a loan for 1000 pounds, and I have to pay it back by December 22, 2019. If I don’t, they get ownership of my house. And this contract is published on the blockchain, and everyone executes it. And when that date arrives, if I haven’t paid back the loan, the bank can take my house because everyone now knows that I breached the contract. You don’t have to rely on a trusted intermediary anymore.
This is a very specific example, but smart contracts can be as generic as needed. So you could have a smart contract for basically anything, and that is a pretty revolutionary idea, where you can enter a contract about anything with anyone, and everyone can verify it, so there is no way for me to deny it later on, or to say I didn’t mean something or I didn’t sign something. If you could prevent that kind of fraud, it would be pretty revolutionary.
This is not discussed enough and is very important. There are many ways in which technology is transforming society: when you think about the ‘uberization’ of the economy and about artificial intelligence (AI), bots online interacting with us in customer service situations; blockchain is a part of this broader shift towards technology.
It’s still too early to tell what all this means, but one area that is potentially really important and interesting is how technology impacts human trust. Swedes were polled and asked, “How much do you trust your fellow Swede?”, and well over 60% of Swedes generally trust their fellow Swede. The same question was posed to Brazilians, and the result was that less than 10% of Brazilians trust their fellow citizens. So there is a massive trust gap between some countries. How can we bridge that trust gap? How could you ever get Brazil up to where Sweden is? That’s not an easy problem to solve, but there would be significant benefits if people trusted each other more in terms of economic activity, relationships, paying taxes, and so on. One of the big challenges Greece is facing, for example, is that people don’t think other people are paying their taxes, so why should they? What if we could interrupt this state of mistrust?
Blockchain could potentially create systems where you obviate the need for some forms of trust. You won’t actually need to trust someone, because the rules of the blockchain system would bound you to a set of governing processes, where certain things were prevented from happening (e.g., fraud). So in essence, you could replace trust with software code; “in code we trust” so to speak. We replace the handshake with a digital handshake that can’t be broken, because the rules of the system are organised in this way and are tamper-resistant (although, importantly, they are not entirely tamper-proof).
Now, what would it mean for society if we didn’t need to trust each other as much? This question requires greater attention.
Garrick Hileman and Michel Rauchs released the 2017 Global Blockchain Benchmarking Study, which can be downloaded as a PDF here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3040224.
You can read the brief summary of their study here: https://insight.jbs.cam.ac.uk/2017/central-banks-are-trialling-blockchain/
The above interview was conducted on 12 December, 2017.