“The Business of Blockchain”
On April 18, I spent a fascinating day at the MIT Media Lab attending the Business of Blockchain conference. It brought together numerous speakers and attendees from industry, banking, academia, and government to discuss developing applications for the technology that got its start with Bitcoin, and how those applications might change the world. The conference was an interesting contrast with the original evangelists of Bitcoin and blockchain, who often saw the technology as a step toward an anarchic or utopian world that would make governments and large corporations obsolete. Here instead were the representatives of those governments and large corporations, trading ideas on how they might use the technology. Further development of blockchain could lead to big changes even if it doesn’t upend the status quo many of these representatives have an interest in protecting.
Brian Behlendorf of the Hyperledger Project began the day by making what I saw as the most important point: there is lots of space between fully centralized systems (such as the ways we’ve traditionally made transactions) and fully decentralized systems (such as the fully public and “permissionless” Bitcoin blockchain). In the case of Bitcoin, anonymized data are available for anyone to see, and anyone can make or verify transactions (the “mining” process where people are paid in new bitcoins for the computing power needed to verify each link on the blockchain). Most of the applications discussed throughout the day involved some but not all of the Bitcoin blockchain’s attributes. For example, a blockchain might be open to the public to make transactions but require permission from a central operator or consortium to verify transactions. Or the code might be open source and publicly available, but permission would be required to make transactions. Given the diversity of organizations currently interested in blockchain, different attributes will make sense in different cases.
Sandra Ro of the CME Group discussed her collaboration with the U.K.’s Royal Mint to create a digital gold-backed currency. I’ve written about this project and its exciting potential before, and it is now in a testing phase with a select group of financial institutions. The digital currency is fully backed by gold bullion kept in Wales and is fully redeemable upon request. This platform is an example of the intermediate cases between fully centralized and decentralized: only the Royal Mint can issue the currency, and individuals can initially only access the market through brokers (Ro said they intend to make it more open with time). Still, this would appear to be a step in the right direction for those who favor currencies backed by hard assets. I’ll have another full post soon about what I learned from this talk.
Other speakers focused on nonfinancial applications of blockchain, such as supply chain management, the arts, and nonprofits. At one point during the day, an attendee commented that the powers that be will inevitably try to suppress this new technology with so much potential for change. I found the question illuminating but misguided—the “powers that be” were sitting right there at the table. Like the internet, blockchain technology appears to be too powerful to suppress. Instead, big banks, other firms, and governments are looking for ways it can be useful to them. While it would have been interesting to hear more voices from outside the establishment, the conference was informative and indicated that even if blockchain applications are in their infancy, the technology is here to stay.
Max Gulker
Max Gulker is a former Senior Research Fellow at the American Institute for Economic Research. He is currently a Senior Fellow with the Reason Foundation. At AIER his research focused on two main areas: policy and technology. On the policy side, Gulker looked at how issues like poverty and access to education can be addressed with voluntary, decentralized approaches that don’t interfere with free markets. On technology, Gulker was interested in emerging fields like blockchain and cryptocurrencies, competitive issues raised by tech giants such as Facebook and Google, and the sharing economy.
Gulker frequently appears at conferences, on podcasts, and on television. Gulker holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxg_econ.
