It's becoming mainstream: The blockchain effect

in #blockchain7 years ago (edited)

   With almost 10 million passengers flying with British Airways this summer, blockchain would be the mainstream topic onboard all aircraft of the British carrier. The cover of the July/August edition of its in-flight magasine portays Vitalik Buterin.

British Airways Business Life magasine cover - Jul/Aug 2017

   What a surprise when I found this magazine in front of my seat, realising that everyone flying with British Airways has now a chance to learn more about this amazing technology through the following article:

   “It's something that could disrupt the world in a really fundamental way,” says one expert on the rise of blockchain technology. And it's already causing tremors on the markets as investors pile in. Tim Hulse finds out what the fuss is all about.

Ethereum Launch - July 30, 2015

   On July 30, 2015, a handful of people gathered around a screen in a small room in an office in Brooklyn, New York. They were about to witness the birth of a technology platform that two years later is beginning to change the world, and in the future may change it in ways that have not yet been imagined.
  “The air was electric,” recalls Canadian author Alex Tapscott, who was there that day. “And not just because there was a thunderstorm looming on the horizon and we were getting flash flood warnings on our phones, but because there was this thing that a huge community of thousands of people had been spending two years building on faith, and this was the seminal moment when it was all going to go live. No one really knew what to expect.”
  What they were watching was the birth of the Ethereum blockchain - essentially a global, peer-to-peer network of thousands of computers (known as ‘nodes’) - and they were watching it in the offices of Consensys, a company that has since gone on to ride the wave of innovation the Ethereum blockchain has set in motion.
 The screen showed a map of the world. At around 11.45am, the very first block of the blockchain, the so-called "genesis block", was created, and on the screen a red marker dropped on to the map over New York, signifying that was where it had been established.
  “There was a lot of religious connotation in the moment,” says Tapscott. “I don't want to overplay its Old Testament-like nature but it had a lot of that birth/rebirth feel to it.”
  More red markers began to drop every few seconds, as new nodes became active around the world: in Toronto, London, Shanghai, Amsterdam... In Berlin, Dr Gavin Wood, one of the creators of the Ethereum blockchain, and then its CTO, was watching the same picture on a screen, together with many of the core founding team. With typical British understatement, he remembers the occasion in slightly less portentous terms.   “It was a very smooth-running occasion,” he says.
  “It was so smooth, it was almost anticlimactic. We were looking at a screen and looking at the nodes on the network and it was really just detailing what number it was at. So of course it began at zero and we were able to see it go up to one and two and so on. There really wasn't all that much to see. We stood around watching it for a minute or two, and then it was OK, job done, let's have a beer.”

Dr Gavin Wood (left), Alex Tapscott (right)

    While Tapscott and Wood experienced the birth of the Ethereum blockchain in different ways, both agree that the potential for its technology to change our lives is immense. “It's captured the imagination of people in every single industry, not just in financial services but in manufacturing, shipping, supply chain, retail, even music and art, and surprisingly even in government” says Tapscott, whose book, Blockchain Revolution, co-authored with his father Don and published last year, paints a vivid picture of a future powered by blockchain. Apple co-founder Steve Wozniak has called it « mind-blowing ».
  “It's a critical technology that's going to have a lot of impact over the next five, ten, twenty years, much like the internet did. It's something that could disrupt the world in a really fundamental way,” says Wood, who has now left Ethereum and started a new company. Parity, which creates technology that allows companies to make the most of blockchain.

    But what exactly is a blockchain? Perhaps the easiest way to understand it is to see it as a giant, open ledger that allows things of value to be stored or transferred between individuals anonymously and with total trust. Because the ledger isn't stored in one single place but is shared across a huge network of personal computers, its records are also almost immune to hacking.

    It was in 2008 that one or more people hiding behind the pseudonym ‘Satoshi Nakamoto’ devised the first blockchain, which allowed the creation of bitcoin, the world's first cryptocurrency. In the years that followed, blockchain and bitcoin became pretty much synonym and the potential for the technology was seen as being mainly in the financial sphere, all but eliminating the traditional middlemen of the banking system.

   “In late 2014, early 2015 there was an inflection point when all of a sudden a lot of companies in the financial services industry began to wake up to the years potential threat and the potential opportunity of this technology” says Tapscott. “The potential threat meaning that maybe this blockchain could enable new models for doing financial services that would cut the banks out of their business. And maybe it could also present huge opportunities for them to significantly streamline or cut costs inside their own organisations.”
  A report at the beginning of this year by Accenture and McLagan looking at the potential for blockchain technology for eight out of ten of the world' biggest investment banks suggested they could reduce infrastructure costs by 30 per cent, meaning an annual saving of between £6bn and £9bn. In April, Bank of England governor Mark Carney made similar noises. “New technologies could transform wholesale payments, clearing and settlement,” he said. “In particular distributed ledger technology (ie blockchain) could yield significant gains in the accuracy, efficiency and security of such processes saving tens of billions of pounds of bank capital and significantly improving the resilience of the system.”

Vitalik Buterin on TechCrunch in 2015

    But now blockchain is breaking into whole new areas beyond fintech, and it's mainly thanks to one man. Vitalik Buterin was born in Russia, but grew up in Toronto from the age of six after his parents emigrated. At school he was quickly identified as a gifted child with a particular talent for maths and programming and an uncanny ability for mental arithmetic. He came across bitcoin when he was just 17 and began writing for bitcoin publications. And then he had the idea for new blockchain, one that would cut out the middlemen not just in finance but in just about any business you could conceive of. And he decided to call it Ethereum.
  Buterin looks like a classic geek: T-shirt, spindly arms and a haircut he seems to have attempted himself with a pair of blunt scissors. All kinds of myths surround him for instance, that he learnt to speak fluent Mandarin in just a few months, that all of his worldly possessions fit into one suitcase and, perhaps most bizarrely, that he eats whole lemons, including the rind. He speaks in a slightly robotic monotone, like a personification of AI but what he says tends to be highly lucid and visionary.
  “He's a really fascinating guy, he's a bit of an enigma but at heart he's just a really sweet genius,” declares Tapscott, who is based in Toronto and knows Buterin well. “What he's built is pretty radical in almost every single way. But the way he explains it, when you hear him, it's like, gee, why didn't this already exist? It makes so much sense.”

    The key game changer in the Ethereum blockchain is the introduction of so-called ‘smart contracts’. These are essentially self-operating computer programs that mimic the logic of a traditional contract, but with guaranteed execution and enforcement of payments. It means anything of value can be easily exchanged with absolute trust. The implications are immense because essentially any centralised service can now be decentralised. Musicians and artists can control the sale and use of their work, people wanting to hire out their home or car can do it directly, rather than going through an intermediary such as Airbnb or Uber, individuals can buy or sell excess solar power generated by their homes, the list is long. Many see this s the beginning of new, decentralised internet.
  “For thirty years we've had the internet of information and now we have the internet of value,” says Tapscott. It's a peer-to-peer platform that enables anyone. anywhere to move, store and manage anything of value, from money to financial assets to titles and deeds and even votes in a way that's trusted and where you don't have to rely on an intermediary like a bank or a government or a credit card company or anyone else.”
  “Unlike the bitcoin blockchain. Ethereum offers a user-friendly platform for developers to build a wide range of applications using its technology. These so-called ‘decentralised apps' (dApps) run exactly as programmed without any possibility of downtime, censorship or third-party interference,” as the Ethereum spiel puts it. The Ethereum website currently lists more than 350 dApps in various stages of development, including “blockchain powered insurance solutions", "blockchain revolution in the recruitment industry", "a blockchain solution for musicians to license their works" and even today something called Studbook, which is described as “Tinder for horses”.

   “There's been an explosion of developer interest,” says Tapscott. “Ethereum has captured the imagination of so many people, which is amazing. That includes major corporations. At the end of February the Enterprise Ethereum Alliance was launched in the USA, with the aim of connecting companies with Ethereum experts. “Together, we will learn from and build upon the only smart contract supporting blockchain currently running in real-world production - Ethereum - to define enterprise-grade software capable of handling the most complex, highly demanding applications at the speed of business,” it boasted. Its rapidly growing membership includes the likes of BP, Microsoft, Santander and UBS. Meanwhile Tapscott and his father have launched the Blockchain Research aimed at “exploring the strategic opportunities of blockchain” with the support of leading companies such as IBM and PepsiCo, not to mention the Canadian government.

Enterprise Ethereum Alliance (EEA) launch members

   For investors, the rise of Ethereum has launched a stampede the like of which has not been seen since the heady days of the dotcom bubble at the turn of the century. The price of ether, Ethereum's own cryptocurrency, was trading at just under $8 on 1 January this year. In May it reached a record high of $227 and at the time of writing, it stands at $178.The price of bitcoin has also seen a dramatic rise this year.
  “I've been contacted by a few people I went to school with recently,” says Wood. “They've noticed the markets are starting to look like a hockey stick and are wondering if it's time to get in. I think we're going through the beginnings or even coming up to the end of a bubble within crypto, particularly for the Ethereum network. But who's to say how it should be valued? It's very hard to call what a valid market value would be for this. It's fundamentally different to anything we've had before. And we're also seeing rampant speculation, a lot of people buying in because they believe it's going to be worth more in the future. Which is the smart money and which is the money that's going to be leaving in a week or two? I don't know.” 

   The price of cryptocurrencies has also been inflated by a new means of funding blockchain ventures. The traditional Initial Public Offering (IPO) has been replaced by an Initial Coin Offering (ICO). Essentially a kind of crowdsale it means people wanting to invest in new blockchain startups and platforms do so by buying and sending either bitcoin or ether. Ethereum itself launched this way, raising $18m in bitcoin. In recent times, ICOs have taken on a gold rush feel. At the beginning of April Cosmos, which plans to create a new form of blockchain architecture, raised $17m in just 28 minutes in an ICO. Later in the same month, Gnosis raised $12.5m in ten minutes for a decentralised platform for prediction markets.

   For Jessi Baker, founder of Provenance, which uses blockchain technology to provide transparency in the supply chain of goods, the strength of the bitcoin and ether prices is a good sign because it means the tech is here to stay. She started Provenance as a side project in 2013 while she was doing a PhD in computer science at University College London and has been working on it full time since April 2015. It was one of the first applications to be built using the Ethereum platform.
  “At pretty much every meeting I had with potential clients two years ago, nobody knew what blockchain was, nobody cared about it, and I think some people thought I was a little bit of a loony,” she says. “Now we're getting chased pretty aggressively. I'd say we're getting about 200 emails a day from people either asking questions or wanting to work with us.”
  Provenance has around 250 clients, ranging from big companies such as the Co-op to much smaller operations such as an independent wine producer in France. “I think we're starting to see the beginnings of what a decentralised internet could really be like and how trust could be brokered on it,” she says. “At the moment most of the applications are not sufficiently linked to the ecosystems of industry and government to really see how it's going to be transformational but I think you can kind of imagine. I'm probably very biased but I do believe it's the future of the internet.”

Jessi Baker, CEO of Provenance

    “There won't be some great jazz hands moment,” says Irra Ariella Khi, CEO of aviation security startup Vchain Technology. “A lot of it will just be a different kind of thing running in the background. We realise that at VChain all we're doing is improving current practices - but that’s quite valuable.” Chain uses the blockchain to decrease friction for passengers passing through through airports. Around 50 per cent of people make mistakes when entering their passenger information before they travel, which can lead to problems for on their journey and also cost airlines money. But if your personal information is validated via blockchain, mistakes and frequent airport checks no longer happen. IAG, the parent company of British Airways, recently invested in Vchain.

    Wood agrees that most of the initial changes brought about by blockchain will be largely invisible. Yes, banking and insurance processes may well change, but that's not going to affect our everyday lives - unless we work in the banking or insurance industries, in which case our jobs could well be threatened.
  “But eventually there will probably be all sorts of use cases that we can't imagine today,” Wood says. “We’re used to the old world, where transacting is expensive and slow, and when we get into the new world, when transacting is really fast and cheap, then there will be use cases that are unlocked - the same way that Facebook could have been implemented in 1995, but we didn't implement it because we didn't have the imagination.”
  According to Wood, it isn't just traditional transactional middlemen such as bankers and likely to be insurance brokers and notaries who are likely to be put out of work by blockchain technology - managers in all kinds of companies may no longer be needed. Perhaps one of the most fascinating aspects of Ethereum and smart contracts, and one that offers a real glimpse of the changed future, is the ability to create a so-called "democratic autonomous organisation". This means that a computer program is able to run a company without human intervention, including holding and using money.
  “This is fundamentally different to anything we've had before,” says Wood. “Programs can actually own money - to the point that no one else in the world could remove the money from that program unless it was programmed to allow that removal. It's a new thing and it's difficult to get your head around. Wow. In principle you could program a taxi company that bought cars and paid drivers to run the cars to make a profit in order to buy more cars. And you kind of end up with this huge company - until a flaw is found in the algorithm that it uses or the business process is found to be suboptimal and some newer algorithm is able to run a company better and put you out of business. The point is that the management, what would normally be the brains of a corporation, the control structures of a corporation, can now exist autonomously in the cloud, so to speak, without a master - it would be its own master. That a new thing. That's an odd thing.”
  And perhaps it's a scary thing. But it's the future. Sooner or later.

Blockchain Revolution by Don and Alex Tapscott is published by Portfolio Penguin, £14.99  


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