Sari Stenfors, PhD from the ReCon Blockchain Research Project at Aalto University looks at how distributed and open technologies transform our interactions
In a forward-looking research project at Aalto University’s Business School in Helsinki, together with partner companies and public organisations such as the Finance Ministry of Finland, we are studying one of the future change drivers, blockchain technology. Much media attention is given to blockchain and its best-known use case, Bitcoin. However, the most impactful business and societal implications of blockchain are yet to be discovered, despite ongoing experimentation ranging from finance and logistics to healthcare and beyond.
The power of blockchains
Different types of blockchain technologies and other decentralised ledger technologies are important building blocks of our future. When they are combined with AI, AR/VR, IoT, robotics or 3D printing, they provide completely new ways to set up the societies we live in. They hold the potential to disrupt not only the internet, but the way our societies are governed and what we know of as the current way of doing business. The impacts could be vast. Blockchain technologies are already being applied to the fields of finance, government, IoT, energy, accounting, logistics, insurance, healthcare, education, record keeping and governance.
Why are they so powerful? Blockchain technology is a novel data-architecture. We live in the data-driven era. The most important businesses, such as Google and Amazon, are about data. Blockchain technology stores data in a decentralised way in multiple computers to make sure it is not tampered with. There are hundreds of different decentralised ledger technologies today and their governance structures ensure that a single computer cannot decide what data is stored. This way, we can trust that the stored information will not be corrupted by a party that would benefit from it. The system creates programmable trust.
Trust in the data-driven society
Trust is the building block of any transaction and our society is based on transactions. If there were no trust, we would not dare to make any transactions. To ensure trust, we have traditionally done business with people and businesses who we were familiar with, or if that was not possible, we used third parties to ensure trust.
In a data-driven society, we would like to find trust fast, at the location of the transaction and with low cost. The availability of internet and all the different mobile apps have opened up a possibility to engage in transactions with far more people and businesses than the generation before us did. We cannot know all of these new business partners and if they broke their part of the deal, how would we go after them? It is costly to be cheated, so there is a price for being able to prevent it, i.e. trust. Also, the market for trust has grown as there is more demand for it. Traditionally, for example, banks, agents, referees or custodians have been able to take high fees in exchange for trust. However, the market mechanisms for buying trust as we knew previously, do not serve us anymore. Trust needs to be more readily available and have a lower price point per transaction. There are two new solutions to trust: reputation systems and blockchains.
Governance models of the future
In 2008, an unknown author with the pseudonym Satoshi Nakamoto wrote a whitepaper which described the governance model of the bitcoin blockchain. It detailed a governance structure that enabled a currency without a central authority watching over it. That introduced new power structures to the financial world. It showed that blockchains can change business models and governance systems. Potentially, we could do all transactions in peer-to-peer networks and third parties would not be needed anymore.
Today there are a variety blockchains with a variety of governance systems. There are also different types of options on who is allowed to access and store data on them. There are public blockchains, federated blockchains, private blockchains, permissioned and permissionless blockchains. Generally, the more closed the system is, the more focused it is on creating process efficiencies for a defined number of users. For giving more power to the larger community and for creating new business models, the blockchain governance systems need to be more open and permissionless. Blockchain-based identification systems can further enhance novel governance structures, by giving the ownership of data to the people who created it. There are numerous ways to enhance and redesign blockchain governance systems to better fit our understanding of fair societies.
Blockchains will be part of our lives. It may take even a decade to develop the infrastructure to the point that blockchains will be mainstream. They are over-hyped and as such, many pilots will fail. The beginning will be slower than what we expect, but they are here to stay. Before long, blockchains will be used in everyday lives and they will dictate how we are governed.
How we create trust and whom we trust, how we exchange value and how power is distributed will be completely transformed. We are still at the beginning of the blockchain era and it is a good time to affect the governance of a society and to reimagine how it could serve you in the best possible way.
These are the types of questions that we at the ReCon research project are thinking about and experimenting on. Certainly, we engage in pilot projects, hackathons, studies, workshops and keynotes. Our mission is to describe, analyse and experiment on the potential societal impact and new business models of blockchain-like technologies. More information regarding the ReCon research team and our partner organisations can be found at http://recon.site/
Please note: this is a commercial profile
Sari Stenfors PhD
ReCon Blockchain Research Project
Tel: +358 50 496 7134