The blockchain revolution and the end of trust
“One Ring to rule them all
One ring to find them,
One ring to bring them all,
And in the darkness bind them,
In the land of Mordor
where shadows lie”
In the classic, the “Lord of the Rings”, Sauron’s ring was a coveted tool of power that let the holder control those connected to it. The story shows how men struggled with an object of power, which though first intended for good, ultimately corrupted all that touched it.
Societies and centers of power
Societies naturally organise by creating centers of power, starting with head of the family, on to the village chief, and all the way up to the European Union and United Nations.
Centralisation is a good thing, and has led to rapid evolution of society, with institutions such as banks, railways, corporates, governments, etc. all coming to play.
However, centralisation also means that we have to yield power to those we trust, and they have not always acted in our best interests. Recent examples include:
- Enron - The billion dollar company that was embroiled in accounts-fraud and insider trading, where executives sold stocks to the public they knew were worthless, in the months leading Enron's bankruptcy.
- 2008 Credit Crisis - Resulted from risky mortgage products and lax lending standards by banks, which then repackaged bad loans and sold them to unsuspecting countries. This led to the financial crisis spreading in Germany, UK, Ireland and other European nations.
- Banks failing - This happens more often than we realise, with a recent example being ABLV, Latvia's third largest bank failing under accusations of money laundering.
- Corrupt fiscal policy and failed nation states - Countries that have printed their money to levels where inflation becomes detrimental include Germany, Zimbabwe and Venzuela. In 1971 the US ended the gold standard, after other nations realised it had been printing more currency than it could back with Gold.
- Supply chains - that harm the environment, people or animals in developing countries to provide their customers with cheaper products. Apple was recently discovered to having its products made with poor labour practices, that involved children.
- Social media data exploitation by large companies who own, farm and sell your personal information.
- Land rights - Powerful officials in poorer countries regularly grab property because citizens are unable to provide substantial proof of ownership.
Code is Law - a new future
Blockchains allow social agreements, or "smart contracts", to be formalised and entrusted to machines to execute at the right time, and right conditions. These codified laws can be audited by anyone, and are impossible to hack. Since everyone can look at these contracts, the need for having to trust a third party is eliminated, and instead transferred to machines that automate trust.
This property of blockchains makes them 'trustless', where transactions between individuals no longer need a trusted third party, such as a bank.
Imagine a future where machines talk to each other, to track supply chains, pay carbon credits, manage the ownership of assets and emission of currencies in a new world, where trust is guaranteed by technology.
The internet gave us easy access to information, which we now take for granted. Blockchains will make trust a natural, expected and readily available commodity. Trust will be so ubiquitous to society, that it will be an invisible fabric of business.