Eliminating Intermediaries: Blockchain’s Potential to Unlock the Future

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We are living in a transition between the end of the current economic model, which is in a state of crisis, and the awakening of a distributed, collaborative, and shared economy — access, reputation, and a sense of community are the currencies of the future

by Gustavo Nogueira cover Russell Leng translated by Pronoia Tradutória

For most people, the purpose of buying a drill is not to own the drill as an object itself, but to solve a need to make some holes in a wall. Having access to a drill (belonging to a relative or a friend, bought collectively by the residents of a building, or borrowed using a subscription service that offers access to a range of tools whenever needed) would therefore provide the same benefit at an equal cost, or less even, wouldn’t it? This example is the basis for what Kevin Kelly, co-founder of Wired magazine, considers one of the key factors in the transition to a potential new economic environment: the understanding that access is more relevant than ownership.

Services like Uber and AirBnb operate using business models that consider access more important than ownership: Uber is currently the world’s largest taxi company, and it does not own any vehicles. AirBnb is the world’s largest hotel booking company, and it does not own any property. But they provide access to an entire fleet of cars and a variety of accommodation around the world.

In the midst of a deep crisis of confidence in established models – public institutions, political parties, brands, and conventional companies, etc. – we are starting to look for new perspectives. We are living in a transition between the end of the current economic model and the awakening of new economies, more open to collaboration and sharing. This is the argument posited by author Rachel Botsman in her book “What’s Mine is Yours: the Rise of Collaborative Consumption.”. In a collaborative economy, it is essential that all services involve communities that are formed around a certain purpose, and whose reputations are continuously maintained. Rachel states that the currencies of this new economy are transparency and trust.

Access, community, purpose, reputation, transparency, trust: these are the foundations for building a new, incorruptible way of performing and recording financial transactions – or transactions involving virtually anything of value – based on exponentially evolving technologies. This new method is implemented using a digital protocol: the blockchain.

Baran Networks

The essence of the blockchain is trust, states Ronaldo Lemos, director of the Rio de Janeiro Technology and Society Institute (ITS). The model of centralized organization, in which those who possess the resources, labor, means of production, information, etc. dominated the market, is being replaced by a decentralized network in which communities use technological platforms to participate in the economy (supplying and demanding), and access is the driving force. This is the case for Uber and AirBnb.

But what if the decentralized model is still an intermediary solution? These companies could quickly become new centralizers. Uber and AirBnb, while providing access and battling various competitors, are completely dominating many markets.

We are still only halfway there. Conceptually, the mathematical studies conducted by Paul Baran and the network diagrams he designed in 1964 indicate that the distributed model is the natural evolution for the survival of a centralized and later decentralized network, in which all points are directly connected and accessible to each other.

In 2004, Napster used a distributed model, with all users of the system being responsible for sharing the available files. Current P2P (peer-to-peer) services operate the same way, such as the torrent file distribution protocol, which has undoubtedly impacted and transformed the way that music, film, and entertainment is consumed. But how can we apply this model on a larger scale and in greater complexity in order to direct new market, economic, political, and social paradigms?

Who is Satoshi Nakamoto?

In short, blockchain is a computer-independent distributed database that uses consensus to validate the actions taken by each machine. The data is reliable because it is validated by the community itself, and once inserted, is recorded in virtual data blocks that are permanently associated with the previous blocks, making it essentially incorruptible. In practice, the technology has the potential to make financial institutions or other intermediaries redundant in the sale of goods and services.

The model was created by Satoshi Nakamoto, but no one knows for sure who he/she/they are, since his/her/their identity has never been revealed, and the person or people behind the model have never confirmed that they designed it. Even more interesting than the question of who developed the platform is the realization that through technology, we have the power to transform the economic structure of the entire world, just like the rise of the internet.

Beyond Bitcoin: other uses and applications of blockchain

Bitcoin is the best-known application of blockchain technology, and they both emerged together, so the two are often interpreted as synonyms. It should be noted that this digital currency has significant value (at the time of this publication, 1 bitcoin, represented by the symbol ฿ or BTC, was worth around one thousand dollars) and is already accepted as a form of payment in various locations around the world. To start using this currency, simply create a digital wallet, where your data will remain securely encrypted.

Blockchain platforms can be used in a range of applications, from distributed currencies like Bitcoin, where all transactions are validated by the community of users with no need for a financial institution, to crowdfunding companies that offer virtual pre-sales of their future products, and even in starting virtual organizations where members make transparent decisions through votes based on their share.

New initiatives that use blockchain are constantly emerging.

The potential uses and business models vary according to the complexity and level of automation, from the creation of smart contracts (which automatically enforce all of their obligations), to autonomous agents operating on a network, transparent and open network enterprises (ONE), and even more complex models, such as distributed autonomous organizations (DAO). Ethereum is one of the main spaces where these applications can be built.

Seven banks claim to have moved real money using blockchain technology on a trial basis in 2016. Santander, for example, claimed to be the first UK bank to use blockchain technology for international transfers of between £10 and £ 10,000 a day.

In the next Office suite update, Microsoft plans to include Bitcoin support in Excel spreadsheets. With this new feature, the user will be able to format bitcoin-related data, such as currency style, natively in the software. This is not the first time that Microsoft has worked with Bitcoin and blockchain. The Xbox gaming platform has accepted payments in Bitcoin since 2014 and Azure, Microsoft’s cloud platform, already offers blockchain-based application services on its operating platform.

Chun Kwang Young

In 2016, Walmart supermarkets began testing the use of blockchain to track pork products in China. The company hopes that it will help them address occurrences of contamination more quickly and efficiently.

Everledger,a technology startup based in London, uses blockchain to replace paper authenticity and provenance certificates with digital versions in the diamond market. The intention is not only to prove the origin of the stones, but also to help the final consumer prove their authenticity in the event of sale or theft.

Rasmus Nilausen

Another potential use of blockchain is to provide greater transparency in elections, especially regarding financial donations to political candidates. The creators of the Voto Legal app, from São Paulo, want to give voters real-time access to information regarding who is contributing to a campaign and how much money they are donating.

With the aim of reducing bureaucracy, Brazilian company OriginalMy allows users to register documents using blockchain. A digital signature can then be used instead of going to a notary public to have a signature legally recognized or to make certified copies of a document, for example. Because the information cannot be deleted or altered, there is permanent proof that a given document existed at a given time.

Blockchain also offers possibilities for decentralized forms of government. BitNation is a startup that aims to create a decentralized governance model in which people pay for and use services independently of their citizenship. This can include deeds, corporate mergers, and other services that are traditionally provided by the government. In early 2015, the platform validated its first ID card, verifying the existence of Janina Lowisz.

Using blockchain, the BitNation system provided cryptographic evidence of Lowisz’s existence: the first small step towards independent citizenship.

No technology is neutral — all technology is ambiguous

When those creating supply and those creating demand are directly connected, intermediaries are eliminated. In the future, businesses based on centralizing the means of production, suppliers, or information will no longer make sense, and this will place more importance on those with real value to add to the system. This is why blockchain is seen as a potential trigger for economic and social revolution.

It is a desirable but incomplete situation. In order to fulfill the opportunities that emerge alongside these technologies, we have to stop focusing on scarcity and start respecting abundance. If we want to create change, we need to take the first step. We cannot face the world through a paradigm of scarcity, which teaches us that there are not enough possessions, resources, and opportunities for all. This notion leads to competition to maintain stock and a scarcity of supply, resulting in cost increases and excluding those who cannot afford to pay… Such logic fuels a vicious self-fulfilling prophecy, where someone always has to go without.

Ana Teresa Barboza

By adopting a more open culture, sharing assets, processes, and knowledge, we can begin to operate under a paradigm of abundance. Such a paradigm states that there is enough for everyone. We collaborate to create, the flow increases, costs decrease, and everyone can afford what they need.

At the same time, we must try not idealize blockchain as a utopian solution. Fear is not the only emotion common to those who see themselves as an audience for new technologies; they are often somewhat blinkered when it comes to these technologies. Every technology must be seen as a tool for action, and we are the agents of any change we want to create with it.

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New self-managed organizational network

Economist Oswaldo Oliveira founded Laboriosa 89 to test the organizational model of the abundance paradigm. The experiment was successful, and he then created Organização Próspera ("Prosperous Organization"), which is not an entity, but a method of production that uses blockchain and cryptocoins to manage its finances.

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Every year, ThoughtWorks, an innovative software company that seeks to promote social change, releases a report on the latest technologies. The 2016 version is available for download in English and other languages.

Blockchain Democracy

A government of the people, by the people, and for the people is possible through the collaborative nature of blockchain, which values the power of the masses and makes intermediaries like banks and the government itself redundant.

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Gabi Guerra questions the extent to which the opportunities that emerge alongside new technologies have actually been fulfilled. We have to reflect on who creates new technologies and who holds power over them.

Major global banks launch blockchain platforms

While banks were previously suspicious of blockchain technology, they now accept that this protocol offers more transparency, security, and efficiency than the traditional system. Instead of remaining on the fringes of the financial industry, blockchain is taking center stage.

Capital Markets and Blockchain

A study published by Aite Group consultants states that US$ 75 million was spent on initiatives involving blockchain in 2015 alone, and spending is expected to reach US$ 400 million by 2019. Follow the link to find out more.

IBM and Blockchain

Informative page with blockchain studies and services offered by IBM, demystifying marginal use and promising to transform business.

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