Harvard Business Review has an article by Joichi Ito, Neha Narula and Robleh Ali about the potential of the Blockchain in reconfigure modern economies, provocatively titled The Blockchain Will Do to the Financial System What the Internet Did to Media. Leaving aside for a moment the fact that we still don’t entirely understand what the Internet is doing to the media ecosystems, and certainly cannot tell what the end results of the transformations are, this piece is a compelling read, presenting a quasi-evangelist vision of how technology can change economies.
The argument put forward by the authors rests on two main pillars: the primacy of computer programming (‘code’), and the importance of standardisation. On the first, the paper sees the blockchain code as literally the building block of the economic:
[BitCoin] offers a compelling vision of a possible future because the code describes both a regulatory and an economic system. For example, transactions must satisfy certain rules before they can be accepted into the Bitcoin blockchain. Instead of writing rules and appointing a regulator to monitor for breaches, which is how the current financial system works, Bitcoin’s code sets the rules and the network checks for compliance. If a transaction breaks the rules (for example, if the digital signatures don’t tally), it is rejected by the network. Even Bitcoin’s “monetary policy” is written into its code
The second involves the need to harmonise protocols, in order to foster the economic potential of the code:
The internet and its layers took decades to develop, with each technical layer unlocking an explosion of creative and entrepreneurial activity. Early on, Ethernet standardized the way in which computers transmitted bits over wires, and companies such as 3Com were able to build empires on their network switching products. The TCP/IP protocol was used to address and control how packets of data were routed between computers. Cisco built products like network routers, capitalizing on that protocol, and by March 2000 Cisco was the most valuable company in the world. In 1989 Tim Berners-Lee developed HTTP, another open, permissionless protocol, and the web enabled businesses such as eBay, Google, and Amazon.
Nothing immensely groundbreaking there, but it is clear that specific ideas of how the economy should be are built into the blockchain, but that these are yet to crystallise. The blockchain economy is a ‘work in progress’.