Meet the New Middleman

Blockchain software is a database, the code required to run that database, and the program’s ability to track changes within it, all in one. Transactions are logged, “chained” together with time stamps, and distributed widely to all users of the system. This makes altering any particular transaction a matter of altering all of the records of every transaction—which, if not impossible, is at least highly unlikely.

For this reason, blockchains are seen as secure ways to trade value and execute contracts without any direct human policing. There are three main themes developing around blockchains, and they appear ready to forever change the course of our still-young information age.

Bitcoin and Cryptocurrencies

Bitcoin is perhaps the most famous example of a blockchain application. It is a nonrenewable, finite resource, the value of which fluctuates depending on its relative standing to traditional currencies, and, most obviously, the amount that users are willing to pay for it (or its fractions, the smallest of which is called a satoshi).

Bitcoin is a planned currency, which will increase until the year 2140. At that time, all bitcoins that will ever exist will have been created, and the bitcoin system will function as a blockchain ledger for existing transactions. Bitcoin and other blockchain-based cryptocurrencies are similar to gold or emeralds in this way; there is an estimable and non-increasing amount of the good, and all trade for or through that good is affected by knowledge of the amount of it that has been mined and the amount of it that is yet unmined (or unreleased). This is making money out of math. With the accountant now automated and built into the transaction, and the transaction chain containing the value itself, we might prepare to say goodbye to banks as we know them.

Ethereum and Smart Contracts

The Ethereum project is a cryptocurrency engine with wide applications for transactions beyond currency. Using a unit of transaction called ether, Ethereum allows for the potential blockchaining of transactions as diverse as civic voting, contract bidding, and patent licensing. The key idea around ether is smart contracting, and Ethereum sells itself as a system for making contracts that need no brokering. Similar to cryptocurrencies, smart contracts are distributed databases that contain the record of all changes to the database and, where possible, auto-executable terms of contract. But instead of a currency value, these smart contracts trade in sophisticated to-do lists and if-then actions. If Person A accesses more than X amount of data through Device B, then the amount of ether billed will increase by Q percent, for example. Or whenever you trade bitcoin for pipe tobacco, an extra night is added on to your partner’s vacation at your expense (maybe this just incentivizes cash transactions?).

This has implications for law and will also have to lean heavily on the Internet of Things. Smart contracts are where legal code and computational code bleed together. They could even do away with the need for artificial intelligences (AIs) practicing law—see ROSS and Peter, for example—before the AIs even get a firm foothold in the business. The “lawyer” is integrated into the contract itself, along with the means for the contract’s execution. Law (i.e., legal code, built from precise terminology) can be treated with (and as) “code” to compute relationships without the need of even an artificial middleman.

Distributed Governance and the Obviation of the State

Blockchains give us decentralized currencies and smart contracts, so why do we need governments? They provide basic services and defense (or offense) at varying scales. The mayor of Mize, Miss., is much more limited in scope and ability than, say, the prime minister of Turkey. If blockchains were scaled up to give access to a majority of earth’s population, then the terms of a law, the voting on the law, and the automated execution of that law into policy might all be rolled into one system (Vinay Gupta, inventor of the hexayurt and strategist for Ethereum, speaks on this frequently). Whether or not that system erodes international or intranational boundaries will depend on the particular issue of governance being decided. If it is about building an oil pipeline near a river, then it may not involve national or international bodies. If it is about one country taking another country’s fishing territories by force, then it may go directly to international bodies—all of this would have to be worked out in the code. The theme of blockchains and the changes they may bring are still volatile, but they could follow from widespread adoption of smart contracts. Decentralized autonomous organizations (DAOs) are paving the way right now.

Are You Blockchainable?

In broad terms, these new applications represent an acknowledgement of the abstract powers of blockchain “databases” for managing contracts of all kinds. Cryptocurrencies and smart contracts represent a type of dynamic dataset that isn’t siloed in a relational database, but is instead distributed across machines. Its systems track the changes in the chain and the movement of blocks by way of time stamps, making blockchains a very different creature from traditional databases and from other non-SQL (NoSQL) databases, because the blockchain doesn’t autogenerate metadata about the documents within the sets. Instead, it manages the chain of metadata for small packets of data, guarding the provenance of each contract or unit of currency for security.

This may lead us to ask ourselves what we do that can be accomplished by a blockchain. What if, until strong AI exists, the only nonblockchainable things you can do are those that require the interpretation of qualities?

If strong AI is strong enough to interpret qualities too, then everything changes. So interpret those qualities with great care and high emotional intelligence, brothers and sisters. Let’s interpret qualities for as long as we can.