Brooklyn’s New Block Party

There’s a new type of block party in Brooklyn and it is all about blockchain technology. Blockchain tech startups are sprouting up throughout Brooklyn, especially in the neighborhood of Bushwick.

Let me back up for a minute as some of you may be asking, “What is blockchain technology?” Essentially blockchain technology is a peer-to-peer network that sits on top of the Internet. Bitcoin is the first application of blockchain technology, which is why the cryptocurrency use case is the most well-known to date. Until recently, the majority of conversations about the blockchain have revolved around the financial services industry.

With the emergence in recent years of new blockchain application platforms, such as Ethereum, the dialogue around blockchain technology has expanded to many more industries and to a broader set of business applications. People have begun to realize that blockchains are useful for things other than just money. According to the Ethereum website, “Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.”

The use of these smart contracts dramatically expands the types of business problems the blockchain may be capable of solving and increases the potential for meaningful business process transformation. For instance, several startups are currently exploring solutions for digital media rights management and royalty payment flows using blockchain technology. Other startups aim to solve use cases involving peer-to-peer marketplaces, voting and governance, as well as identity and reputation.

In a Harvard Business Review article entitled “The Truth About Blockchain,” Marco Iansiti and Karim R. Lakhani explain:

“With blockchain, we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision. In this world every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared. Intermediaries like lawyers, brokers, and bankers might no longer be necessary. Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction. This is the immense potential of blockchain.”

A report issued by Deloitte entitled “Blockchain - Enigma. Paradox. Opportunity” highlights the elements common to all blockchains:

1. A blockchain is digitally distributed across a number of computers in real-time;
2. A blockchain uses many participants in the network to reach consensus;
3. A blockchain uses cryptography and digital signatures to prove identity;
4. A blockchain has mechanisms to make it hard (but not impossible) to change historical records;
5. A blockchain is time-stamped; and
6. A blockchain is programmable.

You probably get it by now but I believe that blockchain technology is so important to the future of commerce and other human interactions and exchanges that I want to use one more reference in order to provide further context about this technology.

Vinay Gupta was involved with the initial release of Ethereum. He was once called “the man whose job it is to constantly imagine the total collapse of humanity in order to save it.” On May 4th, Ethereum hit $100 for the first time and Gupta wrote about it. In his article, he explains blockchain technology as follows:

“A blockchain is a way of arranging a lot of computers together to do the same thing. It’s a bit like Dropbox or Google Docs or any other syncing technology that moves pictures from your phone to your laptop or whatever. The difference is that it’s syncing thousand and thousands of computers. If a few machines drop offline or get hacked, the network does not even notice: the consensus of all the machines which have the same data overwhelms the occasional drop outs. The computers form a choir, and they never forget the chorus.”

Brooklyn is quickly becoming a hotbed for this exciting, disruptive and transformative technology. Joe Lubin, one of the original founders of the Ethereum Project, is also the founder of Bushwick, Brooklyn-based blockchain startup ConsenSys. The mission of ConsenSys is to “create simplified and automated decentralized applications (dApps) to facilitate peer-to-peer transactions and exchanges.” I spoke with Joe recently to better understand how blockchain technology will solve different types of problems:

Ben Arnon: Tell me about the genesis of ConsenSys and what problems the company aims to solve.

Joe Lubin: “One year into the Ethereum Project, things were looking good. I figured I could ramp down my activites there, and was very confident that we would release version one and it would be awesome. But basically, sort of like releasing Xbox with no game titles, that’s what we were looking at. So I figured I would try to get some people together and start building stuff. It’s not easy to build decentralized applications on a platform that doesn’t really exist yet, with no tools. So it took us some time to build out important elements of the ecosystem. But we got an early start.”

Ben Arnon: Which industries do you think will adopt blockchain technology quickest?

Joe Lubin: “Quickest we’re seeing the financial industry kick it up. But every industry is going to be affected by this. We’ve been building siloed information systems, because the database technology could only support that; systems that didn’t speak well to one another. And that supported the model of top-down command and control companies that have customers.

We’re moving into an era in which we can have cooperating and competing actors share the same infrastructure. They can cooperate and compete and reduce redundancy, and have information flows and value flows that are pretty close to instant. So that’s going to affect every industry I think. It will affect social, economic and political systems.

We’re also moving from, essentially thousands of years of analog technology that organized how we operate. So things like money, identity, reputation, trust and agreements, all those things are built in legacy, frictional analog technologies. Pieces of paper, rules, humans interpreting those rules, other humans enforcing judgments. So if you move all of that stuff to become native and digital, to digital money, digital agreements, self-executing agreements, digital identity, digital reputation, then you move into this lightning-fast, fluid economy. You don’t have friction anymore.”
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Another Brooklyn-based serial tech entrepreneur is Benji Rogers. Benji is the Founder of PledgeMusic and the CEO and Co-Founder of dotBlockChain Music. I recently sat down with Benji in DUMBO, Brooklyn to better understand his technology and how it leverages the blockchain.

Ben Arnon: Describe what you’re building with dotBlockChain Music.

Benji Rogers: “Songs used to be put onto disks and then they were put onto cassettes, and then to digital disks. The second they were put onto digital, they became files that go everywhere.

Music suffers from multiple issues. One problem is that even if you were to get a file with the perfect metadata in it, what keeps the metadata there? There’s no persistence of it. So at dotBlockChain, what we decided to tackle was the idea to bind the publishing and performance information. If you bind them together with a copy of the sound recording and the title and the authoritative parties, what you actually have is a tradable asset.

dotBlockChain is seeking to create a wrapper around the music which basically says the publishing and performance information are bound together around the recording and if you remove any one of those pieces, it doesn’t work. When you bind it for the first time, say when you’re recording the song, instead of exporting it as a WAV file, we export is as a dotBC file. You can’t get it into the dotBC wrapper unless you’ve entered one piece of the writer’s share of information, and then you can add the performance piece. You share it with the co-writer and then it hits the blockchain.

Ben Arnon: How quickly can the entire process take place?

Benji Rogers: “Instantly. The difference is you can’t remove any of the data because blockchains won’t allow you to go backwards so everything is a step forward. That bundle around the music becomes a non-authoritative, basically zip file which is what you move. You don’t move the media itself, you reify the media from various places and then the change log history blockchain becomes the global decentralized database for music rights.

Every time a song is credited it adds to it and every time a song is amended it adds to it but you never delete anything. So, if someone comes in and starts to try and claim that they’re not who they say they are or that they’re trying to claim what isn’t owned, everyone can see it. It creates almost like a credit score for the song.

So we’re basically using a Facebook graph style of ownership and relationship information. And a song is defined by its entanglements and made safer by the more trusted parties that add their information in, and you become a trusted party by your relations with other people. If I come into the system and try to claim that I’m Beyoncé, I have to prove to Sony that I am, I have to log in via her social media accounts, and then I have to claim that I wrote “Single Ladies.” So you build it via this - what we call a ‘graph of claims’

In its best form, when we create a song, we will digitally and permanently enshrine our rights into it and if we sell those rights, that will be recorded but you can go back by the chain logs, the first time it hit the blockchain, that first blockchain ID created becomes the first unique identifier.”

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Blockhain technology is disruptive, transformative and very exciting. Brooklyn is very much at the heart of blockchain technology innovation currently. So how quickly will of of this innovative technology begin to change the way we conduct commerce and other exchanges and interactions as human beings?

Alexander Shelkovnikov, who serves as the Blockchain Lead and Head of Corporate Venturing for Deloitte, based in London, makes this prediction:

“I think we will start to see real appealing applications that consumers will use on a big scale within the next two to three years. Probably not a huge amount of those yet, but there will be a few, which will be heavily and widely used by the community, globally. Beyond three years, I think the pace of production will accelerate and there will be much, much more applications.”

Additionally, Meltem Demirors, who serves as Director of Development at Digital Currency Group, adds:

“The reason I got excited about Bitcoin was this idea that instead of having an account and tracking stuff moving in and out of your account, you actually had ownership of assets and ownership of that asset would transfer from person to personal wallet. That to me, that fundamental innovation, the idea of the blockchain, will be transformative, because it's a paradigm shift in how we view the world. And this idea of distributed computing, of distributed architecture, I think is one that brings security, resiliency, and censorship resistance to a lot of parts of our world. Identity is one that I'm excited about.”

Hang on tight and enjoy the ride! This block(chain) party is just getting started