Again and Again, It’s Just Another Block in the Chain

Let me tell you the story of a dead-end technology.

It starts with a middling college student, who writes a crude application in order to learn about Windows development. He employs a technical approach that makes it drop-dead easy to steal music rather than paying for it. The app turns into a huge fad… until his company, his competitors, and thousands of their users face a crushing wave of successful copyright infringement lawsuits. Shortly thereafter, big companies using traditional technology take over the market.

Now let me tell you about a technology that could just change the world. It has a long history of development in the world’s great research labs, both corporate and academic. It tackles a fundamental challenge of networked computing, which explodes in importance as the internet grows. Today it’s widely used, although mostly behind the scenes. Microsoft relies on it to deliver games efficiently to the XBox, for example, while the U.S. State Department funds products employing it to circumvent censorship by repressive regimes, and IBM just launched a system using it to provide severe weather alerts during disasters.

The first technology is peer-to-peer (P2P) networking. So is the second.

Here’s another story of a dead-end technology. It starts with a shadowy figure in the shadowy world of financial cryptography, amid the ashes of the 2008 financial crisis. He’s convinced banks and governments can’t be trusted. So he publishes a paper, ands writes some code, about a way to circumvent the legal controls on financial transactions. (Ironically, it relies on the same P2P structure that got the nappy-headed college student in trouble.) Within a few years, drug dealers, ransomware thieves, and Chinese money-launderers are having a field day. There are arrests, hundreds of millions of dollars vanishing from collapsing businesses, even a daring $50 million heist in full view of the victims.

And finally, there’s the story of yet another technology with a long history of development in the world’s great research labs, corporate and academic. It tackles a fundamental challenge of networked computing, which explodes in importance as the internet grows. Today, the technology on the way to being very widely used, although mostly behind the scenes. Wal-Mart is employing it to monitor global supply chains. The state of Delaware is using it as a better way to manage corporate records. Seventy of the world’s largest banks are building a platform based on it to handle financial agreements between them.

Yes, these two technologies are also the same. And yes, what they describe just might change the world.

The approach goes by many names: blockchain, Bitcoin, distributed ledger technology, fault-tolerant distributed databases, and consensus, for starters. There are important differences embedded in these monikers, but deep consistency. So what if the big idea isn’t so new and the new aspects aren’t quite so big? The silent partners of great innovations are always timing and fertile soil.

Where P2P removes the need for central control points in communication, blockchain does so in computation. Once there is reliable computing across distributed networks, there is reliable exchange of value. And perhaps, that most valuable and elusive of qualities: trust.

If I can be confident that what I’m seeing in my records is what you’re seeing in yours, without the overhead of reconciliation or the risks of trusted third-parties, a whole new horizon of opportunities opens up. True, the same benefits that excite the democracy activists and the bankers also excite the crooks. That’s a challenge, but an addressable one. The bad guys thrive in darkness and obscurity. The blockchain is quickly becoming anything but obscure.

Foundational solutions that are open and solve real problems have a curious history in information technology: They are dismissed quickly, then win slowly and massively.

Along the way, such technologies inevitably disappoint the idealists, because mass adoption means compromises. There are frequent arms races between the good guys and bad guys, along with cycles of reformation and counter-reformation breaking down and building back up centralized power. And yet, with the perspective of distance, we can look back and see progress. The winners write the histories; we tell ourselves stories. And so it continues.

Another block in the chain.