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Stop Defining The Blockchain In Terms Of Today's Commercial Internet

Droga5 head of digital strategy George Bennett on how business should approach the blockchain’s particular brand of economic deliverance.

Stop Defining The Blockchain In Terms Of Today's Commercial Internet

[Photo: Flickr user Phillip Capper]

When the internet first emerged in the early 1990s, we had no language to describe it, no pre-established lexicon. So we fell back on what we knew. In 1994, in a now infamous segment of The Today Show, Bryant Gumbel wondered aloud about the internet, "What, do you write to it like mail?"

The business world is especially adroit at defining nascent technological paradigms in terms of a soon-to-be-obsolete status quo. A year before Gumbel’s musings, Michael Schrage wrote a visionary piece in Adweek admonishing advertisers for failing to see the revolutionary potential of the internet, but not before describing it as "light years more interactive than QVC."

Then in 1995, as if to rebuff Schrage, Barry Diller delivered a keynote address at the American Magazine Conference entitled "Don’t Repackage—Redefine!" in which he warned against "the tendency to colonize, to define new technologies in terms of the old." And while much of what Schrage said about the internet turned out to be correct, his incremental, commercial conception of the internet’s potential is indicative of why so many businesses fail to take early advantage of historical technological shifts.

Why do we insist on defining the new in terms of the old? Of course, most of us struggle to apprehend technological concepts that lie far beyond the boundaries of our own experience. Indeed, for as long as humans have been around, we have endeavored fruitlessly to describe the workings of the mind itself using metaphors of our age’s dominant technological paradigm: the mind is clay and mud infused with spirit; the mind is governed by hydraulic flows, the mind is a mechanical machine, the mind is a computer.

But more fundamentally, we are often led astray by our inexhaustible hope that new technologies will solve our old problems rather than create new ones. And the oldest problem for business is growth.

[Photo: Flickr user Lwp Kommunikáció]

Bill Gates, who rejected the "information highway" metaphor due to its connotations of state-owned infrastructure, suggested in 1995 that we think of the internet instead as "the ultimate market" or "the world’s central department store." And Schrage’s own words read like an infomercial for the internet-as-miracle-product: "Looking for the next great commercial medium? The internet, which already exists in cyberspace, is poised to become an ad-friendly link among millions of PC users."

Gates’ perspective, along with Schrage’s article and its ecclesiastical title, "The Ultimate Network," evoke the same promise of financial salvation used more recently to describe the blockchain. The blockchain has been variously described as The Next Generation Internet, The Internet of Value, The Internet of Trust, The New Cloud, a Collective Brain, an Eternity Wall… And for the true believers, the blockchain’s proof-of-work breakthrough means we have at last found a technological replacement for God himself, at least on the dollar bill.

How might businesses tap into the blockchain’s particular brand of economic deliverance? Here’s Jean-Paul Edwards, writing in Digital Marketing Magazine:

"Relevant sections of personal data held in the blockchain can be shared with the right brands. The brands you trust would be held on the blockchain. This could see major household purchases such as a vehicle, or a dishwasher, being shared with your trusted brands that can let you know about associated services and goods that are right for you, from insurance to cleaning tablets, while you—the consumer—remain anonymous and in control."

In this scenario, the blockchain supposedly emancipates consumers from the tyranny of corrupt corporate gatekeepers. Finally "in control" of their personal data, they are now free to spend their time and resources not in productive enterprise or at leisure, but proactively managing and brokering their data to a carefully curated list of brands, in return for more personalized advertising. Edwards continues:

"The blockchain might be applied to the use and management of a car . . . The car would also link driving behavior with insurance provider details enabling automatic insurance cover based on driving performance. All these elements could combine to tailor the advertising shown on a mobile or home TV. The blockchain provides a secure, distributed platform for all this data."

Here, the revolutionary blockchain is reduced to a kind of glorified commercial cloud, perhaps delivering some processing and security benefits on the back-end, but otherwise functioning as a decidedly un-revolutionary database of monetizable information about consumers. Is this the best we can hope for from the blockchain paradigm shift?

Thankfully, no. To its most ardent proponents, the blockchain represents nothing less than the possibility of a free global society of individuals and communities between whom value and information flow justly and abundantly, unencumbered by exploitative intermediaries, coercive state power, and the insidious shortcomings of centralized infrastructure, be it public or private.

But today, with the open, non-commercial internet continuing to lose ground to the closed, commercial one, Schrage’s prediction that "the rise of the internet may well be a driving force in making tomorrow's PCs even more TV-like" reads as an ominous warning to the coming blockchain era. In response, business leaders should stop focusing on ways to use blockchain technology to prop up old business models, and start focusing on how to seize the radical potential of the blockchain to create equally radical forms of value.

[Photo: Flickr user Massmatt]

One of the more provocative applications of the blockchain is its potential to unlock undocumented value in the developing world. Peruvian economist Hernando de Soto, whose book The Mystery of Capital is often cited on this topic, has asserted that 5 billion people lack access to adequate record-keeping infrastructure such as land titles, resulting in over $10 trillion in assets susceptible to unlawful expropriation and corruption. De Soto evocatively refers to these assets as "dead capital."

But what about "dead" labor? Workers in the developing world (and beyond) are vulnerable to the misrepresentation and underreporting of their labor. This form of cost externalization, which has obvious economic, social, and environmental consequences, could be addressed with a blockchain solution. Using a tool like Factom, a worker’s labor contribution could be encoded immutably on a blockchain, effectively ensuring that the finished goods associated with that labor bear the imprint of the true cost of their production.

Similarly, the blockchain could be used to create a public record of adherence to regulatory standards as a product moves through a supply chain. For instance, Fairtrade International has stringent record-keeping requirements which could be better managed and audited on a transparent, blockchain-based platform. Going further, with such a system in place, consumers could independently verify that the premiums they pay for Fair Trade products are actually being used for social good. Taken to its logical conclusion, this type of blockchain implementation amounts to something like digital DNA, in which a product’s genesis is forever etched into an unalterable record.

Coming full circle, the blockchain could ultimately serve as a better technical architecture for the internet itself. Recent attacks on the internet’s core infrastructure are reason enough to begin assessing how an alternative approach might outperform our current systems, and organizations such as NameCoin are already experimenting with a blockchain-based DNS system that could replace our vulnerable, centralized model.

Moreover, the giants of today’s internet wield immense commercial and political power at global scale, and yet the administrative institutions meant to govern them (for example, ICANN in the US, CNNIC in China) are bounded by nation-state localities. This asymmetry creates gaps in our collective ability to both secure the internet and protect it from censorship and manipulation. The blockchain, with its ability to create a distributed, transnational system of checks and balances, could become the foundation for a new model of global internet administration, a model bearing a striking resemblance to the Internet as we once envisioned it.


George Bennett is head of digital strategy at award-winning agency Droga5.

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