Blockchain: Blueprint for a New Economy

The potential benefits of the blockchain

are more than just economic—they

extend into political, humanitarian,

social, and scientific domains—and the

technological capacity of the blockchain

is already being harnessed by specific

groups to address real-world problems.

For example, to counter repressive

political regimes, blockchain technology

can be used to enact in a decentralized

cloud functions that previously needed

administration by jurisdictionally bound

organizations. This is obviously useful

for organizations like WikiLeaks (where

national governments prevented credit

card processors from accepting

donations in the sensitive Edward

Snowden situation) as well as

organizations that are transnational in

scope and neutral in political outlook,

like Internet standards group ICANN and

DNS services. Beyond these situations

in which a public interest must transcend

governmental power structures, other

industry sectors and classes can be freed

from skewed regulatory and licensing

schemes subject to the hierarchical

power structures and influence of

strongly backed special interest groups

on governments, enabling new

disintermediated business models. Even

though regulation spurred by the

institutional lobby has effectively

crippled consumer genome services, 3

newer sharing economy models like

Airbnb and Uber have been standing up

strongly in legal attacks from

incumbents. 4

In addition to economic and political

benefits, the coordination, record

keeping, and irrevocability of

transactions using blockchain technology

are features that could be as fundamental

for forward progress in society as the

Magna Carta or the Rosetta Stone. In this

case, the blockchain can serve as the

public records repository for whole

societies, including the registry of all

documents, events, identities, and assets.

In this system, all property could

become smart property; this is the

notion of encoding every asset to the

blockchain with a unique identifier such

that the asset can be tracked, controlled,

and exchanged (bought or sold) on the

blockchain. This means that all manner

of tangible assets (houses, cars) and

digital assets could be registered and

transacted on the blockchain.

As an example (we’ll see more over the

course of this book), we can see the

world-changing potential of the

blockchain in its use for registering and

protecting intellectual property (IP). The

emerging digital art industry offers

services for privately registering the

exact contents of any digital asset (any

file, image, health record, software, etc.)

to the blockchain. The blockchain could

replace or supplement all existing IP

management systems. How it works is

that a standard algorithm is run over a

file (any file) to compress it into a short

64-character code (called a hash) that is

unique to that document.5 No matter how

large the file (e.g., a 9-GB genome file),

it is compressed into a 64-character

secure hash that cannot be computed

backward. The hash is then included in a

blockchain transaction, which adds the

timestamp—the proof of that digital

asset existing at that moment. The hash

can be recalculated from the underlying

file (stored privately on the owner’s

computer, not on the blockchain),

confirming that the original contents

have not changed. Standardized

mechanisms such as contract law have

been revolutionary steps forward for

society, and blockchain IP (digital art)

could be exactly one of these inflection

points for the smoother coordination of

large-scale societies, as more and more

economic activity is driven by the

creation of ideas.

Blockchain 1.0, 2.0, and 3.0

The economic, political, humanitarian,

and legal system benefits of Bitcoin and

blockchain technology start to make it

clear that this is potentially an extremely

disruptive technology that could have the

capacity for reconfiguring all aspects of

society and its operations. For

organization and convenience, the

different kinds of existing and potential

activities in the blockchain revolution

are broken down into three categories:

Blockchain 1.0, 2.0, and 3.0. Blockchain

1.0 is currency, the deployment of

cryptocurrencies in applications related

to cash, such as currency transfer,

remittance, and digital payment systems.

Blockchain 2.0 is contracts, the entire

slate of economic, market, and financial

applications using the blockchain that

are more extensive than simple cash

transactions: stocks, bonds, futures,

loans, mortgages, titles, smart property,

and smart contracts. Blockchain 3.0 is

blockchain applications beyond

currency, finance, and markets—

particularly in the areas of government,

health, science, literacy, culture, and art.

What Is Bitcoin?

Bitcoin is digital cash. It is a digital

currency and online payment system in

which encryption techniques are used to

regulate the generation of units of

currency and verify the transfer of funds,

operating independently of a central

bank. The terminology can be confusing

because the words Bitcoin and

blockchain may be used to refer to any

three parts of the concept: the underlying