State of Blockchain 2017: Smartnetworks and the Blockchain Economy

Melanie Swan
Philosophy & Economic Theory
New School for Social Research, NY NY
melanie@BlockchainStudies.org
Blockchain Keynote
UC Berkeley, Berkeley CA, June 8, 2017
Slides: http://slideshare.net/LaBlogga
State of Blockchain 2017:
Smartnetworks and the Blockchain Economy

8 June 2017
Blockchain 1
Melanie Swan
 Philosophy and Economic Theory, New School
for Social Research, New York NY
 Founder, Institute for Blockchain Studies
 Singularity University Instructor; Institute for Ethics and
Emerging Technology Affiliate Scholar; EDGE
Essayist; FQXi Advisor
Financial Markets Background Economic Theory Leadership
New Economies research group
Source: http://www.melanieswan.com, http://blockchainstudies.org/NSNE.pdf, http://blockchainstudies.org/Metaphilosophy_CFP.pdf
https://www.facebook.com/groups/NewEconomies

8 June 2017
Blockchain
Blockchain
2
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
 To inspire us to build
this world

8 June 2017
Blockchain
Agenda
1. What is blockchain?
2. What is happening now?
 Bitcoin/blockchain networks
 Blockchain applications
3. What is the (possible) future?
3

8 June 2017
Blockchain
Thesis
Blockchain: no other technology can
1. Uplift 2 billion people out of
poverty overnight
 Intermediary-free remittances
2. Produce an orderly transition to
the automation economy
 Humans and machines in
collaboration
3. Transform the only sectors not yet
re-engineered for the Internet era
 Economics and governance
4
Source: Blockchain Singularities :http://www.slideshare.net/lablogga/blockchain-singularities-65443340

8 June 2017
Blockchain
Two fundamental eras of network computing
5
Source: Expanded from Mark Sigal, http://radar.oreilly.com/2011/10/post-pc-revolution.html
I. Transfer Information II. Transfer Value
6 7
2020s 2030s
Simple networks Smart networks

8 June 2017
Blockchain
What is Blockchain? Software
 eWallet software: send money via web
 Digital payment system like Paypal
 Secure data transfer: better VPN, EDI
 Register or ledger of money/account
balances: giant google doc on the web
 Permanent Internet-based ledger system
for executing transactions
 Secure-write access, all-read access
 Secure transfer of assets (like money
and information), computationally,
without an institutional intermediary
6
Source: VPN: Virtual Private Network EDI: Electronic Data Interchange
Email protocol (SMTP)
tells the web how to send
email, blockchain tells the
web how to send money

8 June 2017
Blockchain
Blockchain revolution is just beginning
7
Decentralized
Networks
BlockchainBitcoin
Application Software Protocol Secure Value Transfer
Risk of change over time
 30-40 years for “Information Internet” roll-out
 15 years alone for email as a wide=spread enterprise application
 Longer for the “Money Internet” given the sensitivities of
money and asset transfer
LowHigh

8 June 2017
Blockchain
Smartnetworks
Pushing more complexity through the Internet pipes
8
Information
Smartnetworks: high-performance intelligent scalable network computing
CC: Creative Commons license; Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
Distribution ofTransfer of
 “Rich information” quanta modulated with attributes
 Provenance (source), interest level (quadratic voting), relevance
(PageRank), remuneration; (like CC license with more parameters)
Cash
Smart
Assets
20171990 2025e 2050e 2075e
Instantiation of
Smart
Resources
Smart
Entities
2090e
Simple networks Smartnetworks
Applications
Transfer of Value, Confirmation of Identity,
Registration of Preference (Voting)
Smart
Contracts
Economics Governance

8 June 2017
Blockchain
Scalability and financial inclusion
 Hierarchy does not scale
 Next leap-frog tech: fintech
 Like cell phones vs. POTS, it
does not make sense to build
out brick-and-mortar banks in a
world of digital finance
 Decentralized networks +
digital finance = the power of
the printing press in banking,
credit, and money
 Access to credit and financial
services as a basic human right
(4 billion under-banked)
9
Source: POTS: Plain Old Telephone Service, http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491

8 June 2017
Blockchain
Long-tail economics and governance
 One size does not fit all
 Any two parties can meet and transact on the blockchain
10
One size
fits all
Personalized
Long-tail Systems
 Long-tail economics
 “Amazon or eBay of money”
 Personalized banking, credit,
mortgages, securities
 Long-tail governance
 “Amazon or eBay of government”
 Personalized governance
services, pay for consumption

8 June 2017
Blockchain
Personalized
governance
services
Crypto-enlightenment
11
“One ought to think autonomously,
free of the dictates of external
authority” - Immanuel Kant
Kant, I. "Answering the Question: What Is Enlightenment?" (German: Beantwortung der Frage: Was ist Aufklärung?). 1784.
Hayek, F. The De Nationalization of Money. 1976. (paraphrased)
“Multiple private currencies should
compete for customer business”
- Friedreich Hayek
Personalized
economic
services

8 June 2017
Blockchain
Agenda
12

8 June 2017
Blockchain
How does blockchain work?
13
 eWallet app: holds keys, not money
 Using PKI (public key infrastructure): electronic wallet
software issues a public-private key pair (public address is a
32-character alphanumeric code)
 Scan public address (QR Code) & submit transaction
 Private key confirms access and funds availability,
transaction validated and posted to blockchain

8 June 2017
Blockchain
Why is it called blockchain?
Ledger (chain) of sequential transaction blocks
 Each new block starts by calling the last block, so a
cryptographic chain of transactions is created
 Every 10 minutes, the latest block of submitted
transactions is validated (by cryptographic mining) and
posted to a single distributed ledger
14
Source: Satoshi Nakamoto whitepaper: https://bitcoin.org/bitcoin.pdf, https://blockexplorer.com
Block 10 Block 11 Block 12

8 June 2017
Blockchain
How robust is the p2p software network?
15
p2p: peer to peer; Source: https://bitnodes.21.co, https://github.com/bitcoin/bitcoin
 7340 Global Nodes running full Bitcoind (6/17); 100 gb
Run the software yourself:

8 June 2017
Blockchain
What is Bitcoin mining?
16
 Mining is the software-based accounting
function to record transactions, fee-based
 Mining hardware/software “finds new blocks”
 Network regularly issues random 32-bit nonces
(numbers) per specified cryptographic parameters
 Mining software constantly makes nonce guesses
 At the rate of 2^32 (4 billion) hashes (guesses)/second
 One machine at random guesses the 32-bit nonce
 Winning machine confirms and records the
transactions, and collects the rewards
 All nodes confirm and append the new block of
transactions to their copy of the distributed ledger
 “Wasteful” effort deters malicious players
Sample
code:
Run the software yourself:

8 June 2017
Blockchain
CyptoCurrency Market Capitalizations (6/17)
17
Source: https://coinmarketcap.com
 S&P 500: $19tn; Bitcoin: $41bn (over $2500)

8 June 2017
Blockchain
ICOs (Initial Coin Offerings)
$36m
18
Sources: http://icorating.com, https://tokenmarket.net/blockchain/all-assets
$5m
 $200m raised in ICOs 2016
$12m
$25m
30 sec
15 min
Recent ICOs completed in 2017

8 June 2017
Blockchain
Bitcoin vs. other payment networks
19
Source: Statista / Coinmetrics, http://www.altcointoday.com/bitcoin-ethereum-vs-visa-paypal-transactions-per-second
1,667
7
Average daily transaction volume ($US mn)
Average
transaction
volume per
second
 Visa: 2,000 transactions/sec; Bitcoin: 7/sec
 Visa: $18bn/day; Bitcoin: $300mn/day

8 June 2017
Blockchain
Scalability
 Transactions/block: 400 (2014) vs 2,000 (2017)
 Current Bitcoin block size limit: 1 mb
 Change proposals
 SegWit (Segregated Witness): 2-4 mb
 Emergent Consensus / Bitcoin Unlimited: no limit
 (Former): BIP 100 (adjustable block size), BIP 101 (8 mb)
 Second-layer solutions: batch posting to blockchain
 Factom, Storj, Lightening Network
 Democracy: 5 constituencies decide
 Developers, miners, exchanges, wallets, merchants
20
Segregated Witness: move non-critical “witness” data off the blockchain; BIP: Bitcoin Improvement Proposal
Source: http://www.coindesk.com/data/bitcoin-number-transactions-per-block
Bitcoin
transactions
per block
(https://coin.dance/blocks)

8 June 2017
Blockchain
Blockchain risks?
ISSUE
21
Regular global technical meetings (Satoshi Roundtable);
vociferous debate/proposals (democratic power struggle)
PoW: not scalable, PoS: validator model too complicated
Cybersecurity Hacks
Mt Gox, Ethereum DAO, Bitfinex
Silk Road, drug dealers,
terrorists, criminals
Scalability
Block size, Consensus method
Mining Centralization
51% Attack
RESPONSE
Temporary; mining is collusive; attack unsustainable, cannot
steal coins, confirm transactions or change protocols
Building resilient system constantly under open
attack 24/7 (remember early Internet DNS attacks)
Blockchains are a universal technology available to
all; non-criminal activity predominates
PoW: Proof of Work (mining), PoS: Proof of Stake (validated voting) – mechanisms for establishing ledger state consensus
Early Internet: “this will never scale, insecure, not resilient;” Yahoo, AltaVista down for days due to DNS attacks
Technology Risk
Perception Risk
Regulatory Risk, Economic Risk
Government regulation,
bans; Exchange rules
Governments modernizing economic infrastructure
with blockchains too; licensing, open dialogue

8 June 2017
Blockchain
Agenda
22

8 June 2017
Blockchain 23
Blockchain: Fintech and beyond
AssetsImmediate
cash transfer
Applications
Payments
Money
Remittance
Financial
instruments
Unified ledger
Mortgages, loans
Titling: house, auto
Inventory
Commercial trade
Payments
Financial
Services
Logistics &
Supply Chain
Energy, IoT
Healthcare
Government
Humanitarian
Non-profit
Industry adoption
Time
Complexity
Stocks, bonds
Goods transfer
Assurance, provenance
Identity
Driver’s License
Passport, Visa
Contracts
Registries
Marriage licenses
Public Documents
Birth/death registries
BoL, Forfeiting
Insurance
Cash Smart Assets Smart Contracts

8 June 2017
Blockchain 24
Source: http://futurememes.blogspot.com/2016/10/blockchain-fintech-programmable-risk.html
Stock Transaction
Real Estate Purchase/Sale
Health Insurance Billing
2. Steps that can be automated with blockchain
1. Steps with human decision-making
Energy Contract
International Trade Shipment
 Reengineering economics and governance
 Any complex transaction has two kinds of activities
Blockchain automation economy
Economics Governance

8 June 2017
Blockchain 25
 Secure information exchange
 Asset confirmation and transfer
 Automated coordination
 Example: fleet management of drones,
autonomous driving, robotics, clinical trial
patients, cellular therapeutics
 Blockchain: automated, secure
coordination system with remuneration
and tracking
Key blockchain functionality
Source: Swan, M. Philosophy of Social Robotics: Abundance Economics. Sociorobotics, 2016.
http://www.melanieswan.com/documents/SocialRobotics.pdf.

8 June 2017
Blockchain
Financial services
 Shared ledger
 Instantaneous transaction
validation (t=0, not t+3)
 Settlement, clearing,
 Custody, insurance
 Secure, lower risk, cheaper
 Financial assurity
 Securities asset registries
 Automated clearing
 Quoting, deal placement
 Billing, settlement
26
Source: https://www.cbinsights.com/blog/financial-services-corporate-blockchain-investments
Shared Ledger

8 June 2017
Blockchain
Supply chain and logistics
 Asset transfer and customs clearing
 Provenance, assurance, release
 Inventory management
 Custody, insurance, damage
 Automated tracking and notification
 Pallets, trailers, containers
 Trade finance and documentation
 Track purchase orders, change orders,
receipts, shipment notifications
 Custody and product certification
 Link physical goods to serial numbers,
bar codes, RFID tags
27

8 June 2017
Blockchain
Energy
 Blockchain energy projects
 Enerchain: trading (NE Europe)
 BTL Interbit blockchain energy
platform: trading (Vancouver CA)
 PONTON: DSO, TSO, aggregator,
generation power-balancing (Austria)
 Automatic markets
 “Energy Internet” - smart buildings
on regional energy smartgrids
 Smart resource self-pricing
 Load-balancing
 Source fungibility: wind, solar power
 Energy price and trade validation
28
Sources: https://www.newscientist.com/article/2079334-blockchain-based-microgrid-gives-power-to-consumers-in-new-york,
https://enerchain.ponton.de/index.php/16-gridchain-blockchain-based-process-integration-for-the-smart-grids-of-the-future

8 June 2017
Blockchain
 EMR (electronic medical record)
 Personal health records
 Users key-permission doctors to records
 Digital health wallet
 Identity + EMR + health insurance + payment
 Health insurance billing chains
 Automated claims processing
 Price-quoting for medical services
 Health Data Research Commons
 Biobanks, QS (DNA.bits), genome files
29
Source: http://futurememes.blogspot.fr/2014/09/blockchain-health-remunerative-health.html
Healthcare
Digital health wallet

8 June 2017
Blockchain
Politics: governance services
30
 Blockchain weddings (Bitcoin, Ethereum)
 Public document registries
 Titling Registries
 Local government RFPs for home, auto, land
 Legal services: register and attest
 Contracts, IP, agreements, wills registries
 Proof of Existence: hash + timestamp + blockchain record
 Voting
 Quadratic voting (interest), PageRank (relevance)
 Delegative democracy, random sample elections
 Opt-in personalized governance services
 Composting vs education
Sources: http://merkle.com/papers/DAOdemocracyDraft.pdf, http://www.proofofexistence.com/, https://bitnation.co/ , World’s First
Blockchain Marriage: David Mondrus and Joyce Bayo, 10/5/14, ConsenSys wedding : Kim Jackson and Zach LeBeau, 11/2/15

8 June 2017
Blockchain
Humanitarian
 Refugee identity system
 Phone access: smartphone eWallet, SMS
 Object access: card, paper wallet, pendant,
ring, keychain, tattoo, implantable chip
 Biometric access: word phrase, fingerprint,
iris, facial scan
 Financial inclusion, access to learning
 Smart contracts for literacy
 Bitcoin MOOCs “Kiva for literacy”
 Open-source FICO scores
 Decentralized credit bureaus
 Remittance, blockchain-tracked aid
31

8 June 2017
Blockchain
Agenda
32

8 June 2017
Blockchain 33
Better horse or new car?
FutureTech

8 June 2017
Blockchain
Blockchain smartnetworks thesis
 High-performance intelligent
scalable network computing
 Any complex operation in the future
performed via smartnetwork
 Some kind of technology like
blockchain required
 Key blockchain properties
 Secure authentication of participants
 Conduct of transactions
 Automated coordination of arbitrarily-
many items
 Remuneration, tracking, auditability
34
Source: Swan, M. Blockchain Singularities :http://www.slideshare.net/lablogga/blockchain-singularities-65443340

8 June 2017
Blockchain
Smartnetworks
Advanced applications
 Friendly AI
 Deep thinker registries
 Thinking chains
 Brain-computer interface cloudminds
 Bio-cryptoeconomy
 A nanorobot in every cell
 Medical nanorobotic cell repair
 Runaway nanotech and synbio plagues
 Unavoidable “signing” per detectable origins
 Blockchains in space
 Terraforming, asteroid mining, cargo tracking
35
Source: Swan, M. Blockchain Singularities :http://www.slideshare.net/lablogga/blockchain-singularities-65443340

8 June 2017
Blockchain
Reinventing economics and governance
 How to redesign industry
sectors not yet reinvented
for the Internet era?
 Economics
 Finance
 Governance
 Need smartnetworks for
secure value transfer
 Information
 Assets
 Money
 Contracts
36
Personalized governance services
Personalized economic services
One size
fits all
Personalized
Long-tail Systems

8 June 2017
Blockchain
Economics and Finance
37
Economics Finance
Source: http://www.slideshare.net/lablogga/blockchain-payment-systems, http://www.slideshare.net/lablogga/blockchain-financial-
networks
Organizing assumption:
uncertain future value of assets
Finance = access to
capital, credit, assets
Organizing assumption:
production and consumption of
scarce material goods
Economics = access to
producing and consuming goods
Past, Present Future
Time
 Systems for organizing access to resources
 Organizing assumptions no longer true in the world of
zero marginal cost, rival goods, and digital distribution

8 June 2017
Blockchain 38
Reinventing Economics
Technological Unemployment
 Definition: jobs outsourced to technology
 Estimate: Half (47%) of employment is at risk of automation in
the next two decades – Carl Frey, Oxford, 2015
 Why are there still so many jobs in a world that could be
automating more quickly? – David Autor, MIT, 2015
 Blockchain Economics challenge: orderly transition to
the Automation Economy
 UBI + access to education, opportunity, fulfillment
UBI: Universal Basic Income; Source: Swan, M. "Automation Economy: An Abundance Philosophy of Economics" In
Surviving the Machine Economy. Eds. Hughes, LaGrandeur, Palgrave Macmillan. 2017.
Economics

8 June 2017
Blockchain
Reinventing Economics
Blockchain Economics
39
 Economies of the Future: Production and consumption
of intangible social goods in addition to material goods
 Trust, recognition, freedom, belonging, acknowledgement
A
B
C
Source: Swan, M. "Automation Economy: An Abundance Philosophy of Economics" In Surviving the Machine Economy. Eds.
Hughes, LaGrandeur, Palgrave Macmillan. 2017. UBI: Universal Basic Income
Survive
Thrive
Economics

8 June 2017
Blockchain
Reinventing Finance
Any asset as a service
40
Source: Blockchain Fintech: Programmable Risk and Securities as a Service, http://futurememes.blogspot.com/2016/10/blockchain-fintech-
programmable-risk.html
CD, DVD
ownership
Music and video
streaming
Entertainment as
a Service
Hard
Asset
Service
Auto, home ownership
Uber, Lyft, Gett, Juno, Via
Airbnb, HomeAway, VRBO
Transportation, Living
Space as a Service
Securities ownership
Securities as a service:
Rent access to
consumable benefits of
owning securities:
dividends, capital
appreciation
Securities as
a Service
 “Assets as a Service”
 Access to the consumable benefits of
the asset, without the requirement of
ownership
 Works if trust that the asset will have
future availability
Finance

8 June 2017
Blockchain
Reinventing Finance
Risk asymmetries
41
Finance
Source: Blockchain Fintech: Programmable Risk and Securities as a Service, http://futurememes.blogspot.com/2016/10/blockchain-fintech-
programmable-risk.html
HFT (high-frequency trading,
hedge funds, securities, FX)
RTB (real-time bidding for
advertising)
Energy Markets (automatic
load-balancing)
Logistics (automated freight
networks)
No risk-return recalibration of
systemic and non-systemic risk
Need to reassess risk-return
parameters
• No UBI mechanism
including full population
Tighter risk correlation means entire
global economy as giant HFT
Automated control of cryptographic
assets on smartnetworks
Automatic Markets Concentrated Risk
 Automatic markets trade together and concentrate risk
 Programmable risk, not just programmable instruments

8 June 2017
Blockchain
Blockchain Economics and Finance
42
Source: http://www.slideshare.net/lablogga/blockchain-payment-systems, http://www.slideshare.net/lablogga/blockchain-financial-
networks
1. Abundance instead of Scarcity
2. Fulfillment economy instead of
Labor economy
3. Intangible assets instead of
Tangible goods
1. Assurity instead of Insufficiency
2. Access instead of Ownership
3. Programmable risk instead of
Monolithic risk
 Mindset shifts for rethinking economics and finance
Economics FinancePast, Present Future
Time

8 June 2017
Blockchain
Agenda
43

8 June 2017
Blockchain
Blockchain Strategies
Leadership Edge
 Start or join industry consortium
 Implement digital ledgers
 Automate transfer of money, assets, bids,
quotes, RFPs, ERP, supply chain
 Value chain process mapping
 Revenue-generating
 Offer blockchain-based services to clients
 Example: banks targeting larger customer base
through blockchain-based eWallet solutions
 Cost-saving
 Finance, treasury, accounting, GL/AR/AP
 Quality assurance, regulation, compliance,
audit
44

8 June 2017
Blockchain
Thesis
Blockchain: no other technology can
1. Uplift 2 billion people out of
poverty overnight
 Intermediary-free remittances
2. Produce an orderly transition to
the automation economy
 Humans and machines in
collaboration
3. Transform the only sectors not yet
re-engineered for the Internet era
 Economics and governance
45
Source: Blockchain Singularities :http://www.slideshare.net/lablogga/blockchain-singularities-65443340

8 June 2017
Blockchain
Conclusion
 Blockchain is a fundamental IT for
secure value transfer over networks
 For any asset registered in a cryptographic
ledger, the whole Internet is a VPN for its
confirmation, assurity, and transfer
 Reinvent economics and governance
for the digital age
 Long-tail structure of digital networks
allows personalized economic and
governance services
 Smartnetworks are a new form of
automated global infrastructure for
large-scale next-generation projects
46
Personalized
Long-tail Systems
One size
fits all
IT: Information Technology

Melanie Swan
Philosophy & Economic Theory
New School for Social Research, NY NY
melanie@BlockchainStudies.org
Blockchain Keynote
UC Berkeley, Berkeley CA, June 8, 2017
Slides: http://slideshare.net/LaBlogga
State of Blockchain 2017:
Smartnetworks and the Blockchain Economy
Thank you! Questions?

State of Blockchain 2017: Smartnetworks and the Blockchain Economy

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (20)

Similar to State of Blockchain 2017: Smartnetworks and the Blockchain Economy

Similar to State of Blockchain 2017: Smartnetworks and the Blockchain Economy (20)

More from Melanie Swan

More from Melanie Swan (20)

Recently uploaded

Recently uploaded (20)

State of Blockchain 2017: Smartnetworks and the Blockchain Economy