Copyright

HarperCollinsPublishers

1 London Bridge Street

London SE1 9GF

www.harpercollins.co.uk

First published in the US by St Martin’s Press 2018

This UK edition published by HarperCollinsPublishers 2018

FIRST EDITION

© Paul Vigna and Michael J. Casey 2018

Cover photograph (Locks) © Tatiana Popova/Shutterstock.com

Cover design by Rob Grom

A catalogue record of this book is available from the British Library

Paul Vigna and Michael J. Casey assert the moral right to be identified as the authors of this work

All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the nonexclusive, non-transferable right to access and read the text of this e-book on screen. No part of this text may be reproduced, transmitted, downloaded, decompiled, reverse engineered, or stored in or introduced into any information storage retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of HarperCollins e-books.

Find out about HarperCollins and the environment at www.harpercollins.co.uk/green

Source ISBN: 9780008301774

Ebook Edition © March 2018 ISBN: 9780008301781

Version 2018-03-01

Dedication

For Liz, Jenny, Sarah, and Di

—MC

For my mom and dad

—PV

Contents

Cover

Title Page

Copyright

Dedication

A Note from the Authors

Preface

Introduction: A Society-Building Tool

1. The God Protocol

2. “Governing” the Digital Economy

3. The Plumbing and the Politics

4. The Token Economy

5. Enabling the Fourth Industrial Revolution

6. The Old Guard’s New Makeover

7. Blockchains for Good

8. A Self-Sovereign Identity

9. Everyone’s a Creator

10. A New Constitution for the Digital Age

Notes

List of Searchable Terms

Acknowledgments

Other Books By

About the Publisher

A Note from the Authors

Throughout this book you will see a distinction between “bitcoin” written with a lowercase “b” and “Bitcoin” with an uppercase “B.” The former refers to bitcoin’s status as a currency, the latter is a reference to the overarching system and protocol that underpins that currency and other uses for the Bitcoin blockchain ledger.

Addressing an inconsistency in popular parlance, we generally employ three distinct usages of the word “blockchain”: “The blockchain,” which refers to Bitcoin’s original distributed ledger; “a blockchain”— or, pluralized, “blockchains”— to cover a variety of more recent distributed ledgers that share Bitcoin’s chain-of-blocks structure; and “blockchain technology,” referring to the overall field. We also use “distributed ledger technology” to encompass both blockchain and non-blockchain distributed ledgers. We mostly avoid the popular construct of “blockchain” as a non-countable noun. We view a blockchain, like any ledger, as a distinct, identifiable thing, not a process. The book’s title uses the definite article form to acknowledge the catalytic role that the original Bitcoin blockchain played in unleashing this field.

Preface

In The Age of Cryptocurrency, we explored the digital currency bitcoin and its promise of a fairer global payments system, one that functions without banks and other financial intermediaries. As that book was going to print, Bitcoin’s wider application—how its core operating system can help resolve problems of trust between individuals and businesses when they trade assets, enter into contracts, assert claims to property, or share valuable or sensitive information—came to the fore. Within companies, governments, and the media, a groundswell of interest, including a fair bit of hype, turned toward what became known as “blockchain technology.”

In resolving longstanding problems of trust and enabling a community to track its transactions without entrusting that record-keeping process to a central intermediary, the blockchain idea promised a way to bypass the various gatekeepers who control society’s exchanges of value. It could, for instance, let a neighborhood of “prosumers”—households that both consume power and produce it with solar panels on their roofs—trade energy among themselves within a decentralized marketplace and without a profit-driven utility company setting the rates. Similarly, property owners, buyers, and mortgage lenders would not have to trust an unreliable government registry as the only record of deeds and liens when a more trustworthy one could be built on an immutable database managed by a decentralized network with less risk of corruption, human failure, or theft. These are just some of the many new applications that attracted people’s attention to this innovative idea.

The zeitgeist of public awareness had two big impacts on our lives. The first was that one of us—Michael Casey—got so excited about blockchain technology’s potential to change the world that he quit a twenty-three-year career in journalism to work on it full time. Less than six months after The Age of Cryptocurrency was published, Mike left The Wall Street Journal for MIT’s Media Lab. The lab’s frenetic director, Joichi Ito, who is commonly known as Joi, had recognized parallels between Bitcoin’s emergence and the software development he’d witnessed during the early days of the Internet. Sensing a similar enthusiasm for a new, decentralizing architecture, Ito hatched a plan to bring powerful academic and financial resources to the vital task of developing this nascent technology. The result was MIT’s Digital Currency Initiative, a center where leading academics and students in the fields of cryptography, engineering, and finance could collaborate with Fortune 500 strategists, innovative startups, philanthropists, and government officials to design the digital architecture of a new “Internet of Value.” When Mike received an offer to join this initiative, he saw a once-in-a-lifetime opportunity to get in on the ground floor of an economic revolution.

The second impact is the book you are reading. In The Age of Cryptocurrency, we focused primarily on a single application of Bitcoin’s core technology, on its potential to upend currency and payments. Since the book’s publication, though, we have learned there’s a risk in writing about technology: it changes, while the words on the page do not. So much has changed in three years, in fact, that we were compelled to write another book. The Truth Machine expands the conversation we began in 2015 and takes it to a level higher. It explores how Bitcoin’s technology and its various offshoots point to a general redesign of social organizations, fostering many more alternative applications.

In the modern economy, to control information is to control the world. This is seen in the ever-growing influence of tech behemoths like Google and Facebook, constantly accumulating data that’s pertinent to who we are and how we interact with each other. In this twenty-first-century economy, power is defined by whoever has authority to collect, store, and share data. Currently, that authority is centralized. It is concentrated among a narrow number of giant tech companies. If you’re wondering why that’s problematic, just think of the influence that Facebook’s hidden algorithm, which prioritizes the company’s business model above all other objectives, has had on our politics. In incentivizing the creation and sharing of often-dubious information to trigger dopamine releases among social networks of like-minded people, its algorithm played an instrumental role in the bombshell U.S. elections of 2016.

The ideas behind the blockchain have now unleashed a struggle to turn that structure of concentrated power on its head, to figure out how the capacity to control and manage information might shift to a decentralized system that no one controls. It lets us imagine a world that’s not dominated by Google, Facebook, or, for that matter, the NSA, one where we, the people, the core components of global society, get to say how our data is managed.

We felt it was important to get that message across. The Truth Machine is our attempt to convey it.

Introduction

A SOCIETY-BUILDING TOOL

Sixty miles east of Amman, in a 5.6-square-mile block of dry, stony ground carved out of the Jordanian desert, lies the UN High Commission for Refugees’ Azraq camp. Teeming with 32,000 desperate Syrians living in pre-fabricated shelters—rows and rows of white, corrugated steel cabins arranged in a military-like grid—Azraq poses the logistical challenges of a small city. Yet UNHCR and the other aid agencies that give the refugees food, shelter, and a modicum of hope can’t count on the kinds of institutions and infrastructure that normal cities use to ensure order, security, and functionality for their residents.

All refugee camps are, by definition, short on what political scientists call “social capital,” the networks of long-established relationships and bonds of trust that allow communities to function, to engage in social interaction and exchange. But Azraq can seem especially devoid of it. There are police in Azraq, but they are Jordanian. They are not of the people, not of the community. And while the crime rates in Azraq are lower than those in nearby Zaatari camp, where 130,000 Syrians live in conditions that a UN review once described as “lawless,” this hot, dry, stony place is hardly welcoming. When Azraq was set up in 2014 as an alternative to Zaatari’s chaos, refugees complained that it lacked life. Electricity was sparse, which meant they couldn’t charge their cellphones, cutting them off from family and friends. The lack of a functioning, trustful community also heightened the refugees’ fears of being abducted by the extremist organization Islamic State. Many initially refused to move to Azraq camp, and although the numbers have increased more recently, Azraq is still far below the 130,000 capacity for which it was built.

It’s fitting then that this pop-up city, in real need of some functioning social capital, is now the scene of a radical experiment in new models of community governance, institution-building, and the management of resources. At the heart of that effort is blockchain technology, the decentralized ledger-keeping system that underpins the digital currency bitcoin and promises a more reliable, immediate way to trace transactions. The World Food Program (WFP), a UN agency that feeds 80 million people worldwide, is putting 10,000 Azraq refugees through a pilot that uses this system to better coordinate food distribution. In doing so, the WFP is tackling a giant administrative challenge: how to ensure, in an environment where theft is rampant and few people carry personal identifying documents, that everyone gets their fair share of food.

Among those participating in this project was forty-three-year-old Najah Saleh Al-Mheimed, one of the more than 5 million Syrians forced to flee their homes as the brutal, ongoing civil war has all but destroyed their country. In early June 2015, with mounting food shortages and reports of girls being kidnapped by militias in nearby villages, Najah and her husband made the drastic decision to leave her hometown of Hasaka, where their families had lived for generations. “It was an ordeal that I pray to God no human will ever witness,” she said in an interview conducted on our behalf by WFP staffers working in the Azraq camp.

In leaving behind her home, her assets, her circle of neighbors and family, and her ties to what was once a more coherent Syrian nation, Najah was also losing something extremely powerful that the rest of us take for granted: a societal system of trust, identity, and record-keeping that ties our past to our present, anchors us as human beings, and lets us participate in society. The amalgamation of information that goes into proving that we can be trusted as a member of society has historically depended upon institutions that record and affirm our life events and credentials—bank accounts, birth certificates, changes of address, educational records, driver’s licenses, etc.—and keep track of our financial transactions. To lose all of that, as refugees often do when thrust into “statelessness,” is to be put in a highly vulnerable position, one that’s inherently easy for the worst of the world’s criminals and terrorist organizations to exploit. If you are unable to prove who you are, you are at the mercy of strangers. Among all the work that agencies such as the UNHCR and the WFP do, this core function—the creation of stand-in societal institutions—is just as important as the food they provide. In dusty tent cities filled with dislocated people around the world, these humanitarian agencies must undertake the challenging task of recreating systems of social trust. They are reconstructing societies, building them all over again. And it turns out that blockchain technology provides a tool for doing just that.

It’s in this realm, where human beings must depend on reliable institutions to keep track of their social interactions and provide proof that their claims are valid, that blockchain technology comes into its own. With this system we would no longer have to trust institutions to maintain transaction records and vouch for us, since blockchain-based programs comprise an intricate set of features that result in something that’s never existed before: a transaction record that is visible to all and can be verified at any moment, but that is not controlled by any one central authority. This means two things: nobody can alter the data to suit their own ends, and everybody has greater control over their own data. You can see how this could be an empowering idea for millions of Syrians living a scorched-earth existence.

Just as the blockchain-distributed ledger is used to assure bitcoin users that others aren’t “double-spending” their currency holdings—in other words, to prevent what would otherwise be rampant digital counterfeiting—the Azraq blockchain pilot ensures that people aren’t double-spending their food entitlements. That’s a pretty important requirement in refugee camps, where supplies are limited and where organized crime outfits have been known to steal and hoard food for profit. And it means that refugees like Najah will always be able to prove that their accounts are legitimate. That would end the periodic and disturbing disruption to provisions that many have experienced under the cash-voucher system. In that system, any inconsistency tends to flag a concern to administrators, who often feel compelled to cut off the person’s access to food until it is resolved.

Under this new pilot, all that’s needed to institute a payment with a food merchant is a scan of a refugee’s iris. In effect, the eye becomes a kind of digital wallet, obviating the need for cash, vouchers, debit cards, or smartphones, which reduces the danger of theft. (You may have some privacy concerns related to that iris scan—we’ll get to that below.) For the WFP, making these transfers digital results in millions of dollars in saved fees as they cut out middlemen such as money transmitters and the bankers that formerly processed the overall payments system.

So whenever a refugee spends some level of his or her digital “cash” to buy flour, that transaction automatically registers on a transparent ledger that can’t be tampered with. That ever-present, ever-updating, extremely reliable record-keeping model means WFP administrators can have full visibility of the flow of transactions at any time, even though the WFP has no centralized record of its own. The organization can support a camp-wide payment system without having to take on the centralized role of a bank or payment processor.

By contrast, the UNHCR’s identity program, which is integrated into the WFP’s blockchain solution, is maintained as a centralized database. That has raised some concerns among critics. Such systems are susceptible to hacking because, by accumulating large amounts of data in one big “honeypot,” they offer what’s known as a single attack vector. In this case, such risks could in theory put this particularly vulnerable group of human beings at risk—it’s not hard to imagine the worst if a database of biometric identifiers ever fell into the hands of an ethnic cleansing–minded institution like ISIS. People in the blockchain space, who are often fierce advocates of privacy, are among the most vocal about these concerns, and some are trying to figure out how to use the same technology to decentralize control over self-identifying information so that people aren’t vulnerable to break-ins of these big data honeypots. But until such “self-sovereign” solutions are available, the WFP and the UNHCR have made a determination that the risks are for now outweighed by the benefits of a seamless, cashless system.

According to WFP spokesman Alex Sloan, the pilot has already shown success: it has saved money and created a much more efficient way of dealing with inconsistencies in refugees’ accounts. It’s so successful, in fact, that the agency is looking to extend the service to a larger population of 100,000 refugees. In the not too distant future, Sloan says, 20 million food program beneficiaries who receive disbursements in cash could be eligible for the blockchain program. With the world facing the biggest refugee crisis in history, a result of greed, of the brutal pursuit of self-serving power, and of failed Western policies to contain it, we owe it to these people to bring some security back into their lives—to provide them with a platform of trust upon which to rebuild. Perhaps blockchain technology offers the best chance of delivering that.

The World Food Program’s Azraq experiment is just one example of how international agencies are exploring blockchain solutions to the problems of the world’s neediest. In early 2017, a group of blockchain enthusiasts at the UN’s New York headquarters launched a Web site calling on other UN employees to work with them. The group rapidly grew to eighty-five UN staffers worldwide, and they are now working on multiple pilots addressing blockchain for development, in partnership with governments such as Norway’s. At the World Bank, a new blockchain lab was created with fresh funding in June 2017 to explore how the technology could tackle poverty alleviation through incorruptible property registries and secure digital identities. The Inter-American Development, in concert with MIT Media Lab’s Digital Currency Initiative, is looking at how poor Latin American farmers might be able to obtain credit on the basis of reliable, blockchain-proven records from commodity warehouses. Non-profit international organizations such as the World Economic Forum and the Rockefeller Foundation are also diving into this area.

What do these decades-old international organizations see in an arcane digital technology built by the crypto-libertarians and Cypherpunks who gave us Bitcoin? It’s the prospect that this decentralized computing system could resolve the issue of social capital deficits that we discussed in the context of the Azraq refugee camp. By creating a common record of a community’s transactions and activities that no single person or intermediating institution has the power to change, the UN’s blockchain provides a foundation for people to trust that they can securely interact and exchange value with each other. It’s a new, more powerful solution to the age-old problem of human mistrust, which means it could help societies build social capital. That’s an especially appealing idea for many underdeveloped countries as it would enable their economies to function more like those of developed countries—low-income homeowners could get mortgages, for example; street vendors could get insurance. It could give billions of people their first opening into the economic opportunities that the rest of us take for granted.

But it’s not just in developing countries, or in the realm of non-profit charity and development work, that blockchain technology shows potential. Far from it. In the developed world, too, and within the boardrooms of plenty of Fortune 500 for-profit companies, there is a scramble to unleash what many believe could be a major force for economic growth. That’s because the blockchain is seen as capable of supplanting our outdated, centralized model of trust management, which goes to the heart of how societies and economies function.

Until now, we have relied on institutions such as banks, government registries, and countless other intermediaries to sit in the middle of our economic exchanges with each other. These “trusted third parties” maintain records on our behalf so that the rest of us have enough trust in the system to interact, exchange items of value, and, hopefully, build vibrant, functioning societies. The problem is that these fee-charging institutions, which act as gatekeepers, dictating who can and cannot engage in commercial interactions, add cost and friction to our economic activities. They also have a habit of failing us—we can think of the crisis of 2008 as a case of banks breaching their duty to maintain honest records—or of exploiting their toll-collecting power to price gouge and demand exorbitant rents. What’s more, there are plenty of situations in which it’s simply not economically viable for these costly, inefficient institutions to resolve whatever particular trust deficit is preventing people from doing business with each other. So, if we bypass those intermediaries, we will not only save money but also open up previously impossible business models.

The Internet put us on this disintermediating path some time ago, well before the blockchain came along. But it’s worth noting that at the heart of each new Internet application that cuts out some incumbent middleman there has typically been a technology that helps humans deal with their perennial mistrust issues. Who would have thought a decade ago that people would feel comfortable riding in the car of some stranger they’d just discovered on their phones? Well, Uber and Lyft got us over that trust barrier by incorporating a reputation scoring system for both drivers and passengers, one that was only made possible because of the expansion of social networks and communication. Their model showed that if we can resolve our trust issues with technology and give people confidence to transact, those people are willing and able to go into direct exchanges with complete strangers. These ideas are setting us on a path to a peer-to-peer economy.

What blockchain technology says is, “Why stop at Uber?” Why do we even need this particular company, which takes 25 percent from each ride and has a reputation for abusing its “God’s View” knowledge of passengers’ rides? How about a totally decentralized solution, such as the Tel Aviv–based, blockchain-powered ride-sharing application Commuterz? In that case no one owns the platform, which like Bitcoin is just based on an open-source software protocol that anyone can download. There’s no Commuterz, Inc. taking 25 percent. Instead, users own and trade a native digital currency system that incentivizes them to share rides to reduce traffic congestion and lower the cost of transportation for all.

The broad idea is that by deferring the management of trust to a decentralized network guided by a common protocol instead of relying upon a trusted intermediary, and by introducing new, digital forms of money, tokens, and assets, we can change the very nature of social organization. We can encourage new approaches to collaboration and cooperation that weren’t possible before, transforming a wide array of industries and organizational settings. Indeed, the breadth of blockchain’s potential is captured in the breadth of the ideas under consideration. Here is sampling of possible use cases, and it is by no means an exhaustive list:

 Inviolable property registries, which people can use to prove that they own their houses, cars, or other assets;

 Real-time, direct, bank-to-bank settlement of securities exchanges, which could unlock trillions of dollars in an interbank market that currently passes such transactions through dozens of specialized institutions in a process that takes two to seven days;

 Self-sovereign identities, which don’t depend on a government or a company to assert a person’s ID;

 Decentralized computing, which supplants the corporate business of cloud computing and Web hosting with the hard drives and processing power of ordinary users’ computers;

 Decentralized Internet of Things transactions, where devices can securely talk and transact with each other without the friction of an intermediary, making possible big advances in transportation and decentralized energy grids;

 Blockchain-based supply chains, in which suppliers use a common data platform to share information about their business processes to greatly improve accountability, efficiency, and financing with the common purpose of producing a particular good;

 Decentralized media and content, which would empower musicians and artists—and, in theory, anyone who posts information of value to the Net—to take charge of their digital content, knowing they can track and manage the use of this “digital asset.”

Blockchain technology could help achieve what some commentators are calling the promise of “Internet 3.0,” a re-architecting of the Net to assert the core objective of decentralization that inspired many of the early online pioneers who built the Internet 1.0. It turned out that simply giving networks of computers a way to share data directly wasn’t enough to prevent large corporate entities from taking control of the information economy. Silicon Valley’s anti-establishment coders hadn’t reckoned with the challenge of trust and how society traditionally turns to centralized institutions to deal with that. That failure was clear in the subsequent Internet 2.0 phase, which unlocked the power of social networks but also allowed first-mover companies to turn network effects into entrenched monopoly power. These included social media giants like Facebook and Twitter and e-marketplace success stories of the “sharing economy” such as Uber and Airbnb. Blockchain technologies, as well as other ideas contained in this Internet 3.0 phase, aim to do away with these intermediaries altogether, letting people forge their own bonds of trust to build social networks and business arrangements on their own terms.

The promise lies not just in disrupting the behemoths of the Internet, however. Lots of large, twentieth-century, for-profit companies believe this technology can help them unlock value and pursue new money-making ventures, too. Some see big opportunities, others a major threat. Either way, many incumbent businesses now feel compelled to at least experiment with and explore the development of this technology to see where it goes.

In finance, the very industry that Bitcoin was designed to make redundant, bankers are waking up to the possibility that blockchain-related technologies could replace the cumbersome processes by which securities and money are transferred, cleared, and settled between banks. Using a reliable, distributed ledger that a consortium of banks can update simultaneously in real time could reduce back-office costs and unshackle large amounts of new capital for investment. That’s great news for investment banks such as Goldman Sachs, but not so great for custodial banks like State Street or clearinghouses like the Depository Trust & Clearing Corporation, whose business model is based on handling those back-office functions. Still, the institutions on both sides of that disruption story all feel compelled to engage in research and development in this field.

R3 CEV, a New York–based technology developer, for one, raised $107 million from more than a hundred of the world’s biggest financial institutions and tech companies to develop a proprietary distributed ledger technology. Inspired by blockchains but eschewing that label, R3’s Corda platform is built to comply with banks’ business and regulatory models while streamlining trillions of dollars in daily interbank securities transfers.

The non-finance corporate world is also getting engaged. Hyperledger is a distributed ledger/blockchain-design consortium looking to develop standardized, open-source versions of the technology for businesses to use in areas such as supply-chain management. Coordinated by the Linux Foundation, it brings together the likes of IBM, Cisco, Intel, and Digital Asset Holdings, a digital ledger startup led by former J.P. Morgan powerhouse Blythe Masters.

One mark of the business world’s enthusiasm is seen in the trajectory of media company CoinDesk’s Consensus conference, the marquee annual event for businesses interested in blockchain technology. It went from a turnout of 600 at the inaugural conference in 2015 to 1,500 attendees in 2016 to 2,800 in 2017 with a further 10,500 registered viewers of an online livecast. The attendees in 2017 came from ninety-six countries, and a cross-section of more than ninety sponsors and exhibitors was broad enough to include consulting firm Deloitte, the research arm of Toyota, the Australian government’s trade office, and Cryptonomos, a startup marketplace for digital tokens.

But lest you think this technology has been entirely consumed by corporate suits and international development staffers, the months during which we worked on this book also coincided with a get-rich-quick mania that dwarfed even the 2013 surge in Bitcoin’s price. This gold rush, spawned by a new blockchain-based crowdfunding tool for startups that’s known as the ICO—initial coin offering—had all the hallmarks of the dot-com bubble of the late 1990s. Much like two decades earlier, the boom was characterized by both a risky, speculative furor and a sense that underneath the money madness lay a transformative new technology and new business paradigm.

The startups behind this ICO trend are touting a host of new decentralized applications that could disrupt everything from online advertising to medical research. Integral to those services are special tokens that are pre-sold to the public as a way to both raise money and build a network of users—kind of like Kickstarter, but in which contributors have the potential to make quick money in secondary trading markets. At the time of writing, the highest amount raised by one of these pre-sale ICOs was $257 million by Protocol Labs, which sold a token called Filecoin that’s designed to incentivize people to provide hard-drive space for a new decentralized Web. While it’s quite possible that many ICOs will fall afoul of securities regulations and that a bursting of this bubble will burn innocent investors, there’s something refreshingly democratic about this boom. Hordes of retail investors are entering into early stage investment rounds typically reserved for venture capitalists and other professionals.

Not to be outdone, Bitcoin, the granddaddy of the cryptocurrency world, has continued to reveal strengths—and this has been reflected in its price. Despite a bitter fight between developers and the “miners” that validate transactions on the Bitcoin network, a feud that led the currency to split into two separate coins with different software codes, bitcoin’s price surged to a record high of $11,323 in late November 2017, taking its market capitalization to almost $190 billion according to CoinDesk’s Bitcoin Price Index. That marks a price gain of more than 4,800 percent since The Age of Cryptocurrency was published in January 2015 and a return of almost 19 million percent since bitcoin was first tradable on a semi-liquid exchange in July 2010. If you’d invested $6,000 in bitcoin, you’d be a millionaire right now. Such results give credence to cryptoasset analysts Chris Burniske and Jack Tatar’s description of bitcoin as “the most exciting alternative investment of the 21st century.”

In essence, the blockchain is a digital ledger that’s shared across a decentralized network of independent computers, which update and maintain it in a way that allows anyone to prove the record is complete and uncorrupted. The blockchain achieves this with a special algorithm embedded into a common piece of software run by all the computers in the network. The algorithm consistently steers the computers toward a shared consensus on what new data to add to the ledger, incorporating all manner of economic exchanges, claims of ownership, and other forms of valuable information. Each computer updates its own version of the ledger independently but does so by following the all-important consensus algorithm. Once new ledger entries are introduced, special cryptographic protections make it virtually impossible to go back and change them. The computers’ owners are either paid in a digital currency, which incentivizes them to work on protecting the system’s integrity, or they do their work as part of a commitment to a consortium agreement. The result is something unique: a group of otherwise independent actors, each acting in pure self-interest, coming together to produce something for the good of all—an immutable record that everyone can trust and that’s not managed by a single, centralized intermediary.

A bunch of computers managing data with fancy math tools might not seem like a big deal. But as we’ll explain in the next chapter, record-keeping systems, and specifically ledgers, are at the heart of how societies function. Without them we wouldn’t generate sufficient trust to enter into exchanges, to do business, to build organizations and form alliances. So, the prospects of improving that core function and of not having to rely on a centralized entity to perform it have profound implications.

This model should enable true peer-to-peer commerce, eliminating middlemen from all sorts of business operations. And because it has the capacity to inspire trust in our data records so that individuals and businesses can engage in the economy without fear of being duped, it could herald a new age of open data and transparency. Essentially, it should let people share more. And with the positive, multiplier effects that this kind of open sharing has on networks of economic activity, more engagement should in turn create more business opportunities.

Blockchains point the entire digital economy toward something people are calling the Internet of Value. Whereas the first version of the Internet allowed people to send information directly to each other, in the Internet of Value people can send anything of value to each other, be it currencies, assets, or valuable data that was previously too sensitive to transmit online. If the first phases of the Internet created huge opportunities for wealth creation and new business models by helping people jump the fences and get on the playing field, this next one promises to remove the fences altogether. In theory, it means that everyone with access to a device and the Internet can participate directly in the global economy. Thus, the hope is that we will greatly expand the pool of open-source innovation from which all sorts of powerful ideas will emerge.

Think of how disintermediation has already transformed the global economy in the earlier Internet era and you get a sense of how sweeping this next phase could be. Consider, for example, how the outsourcing of technical advice, Web design, and even accounting services disrupted jobs in Western countries and fostered economic growth in places like Bangalore, India. Or think of how Craigslist, which allowed people to post ads for anything at zero cost on a site that had global reach, completely decimated the classified ads business and, ultimately, shuttered hundreds of local newspapers. If blockchain technology lives up to its promise to decentralize and disintermediate so much of our economy, these prior disruptions may seem minuscule by comparison.

As we’ll discuss in the pages ahead, there’s still much work to do to get this technology ready for prime time. In fact, it may never be scalable to the size needed to make a difference. Nonetheless, people across every industry are coming to recognize its potential power. They’re starting to realize that resolving trust barriers could allow all of us to do more with what we have: to deploy our assets, our ideas, our creativity into whatever productive endeavor takes our fancy. If I can trust another person’s claims—about their educational credentials, for example, or their assets, or their professional reputation—because they’ve been objectively verified by a decentralized system, then I can go into direct business with them. I can give them a job. I can collaborate on a joint venture. I can share sensitive business information with them. All without having to rely on middlemen like lawyers, escrow agents, and others who add costs and inefficiencies to our exchanges. These kinds of agreements are the stuff of economic growth. They fuel innovation and prosperity. Any technology that reduces friction and makes such collaborations happen should benefit everybody, in other words.

Still, there’s nothing to say this will assuredly play out in a way that’s best for the world. We’ve seen how the Internet was co-opted by corporations and how that centralization has caused problems—from creating big siloes of personal data for shady hackers to steal to incentivizing disinformation campaigns that distort our democracy. So, it’s crucial that we not let the people with the greatest capacity to influence this technology shape it to suit only their narrow interests. As with the early days of the Internet, there is much work to be done to make this technology sufficiently safe, scalable, and attendant to everyone’s privacy concerns.

Blockchains are a social technology, a new blueprint for how to govern communities, whether we’re talking about frightened refugees in a desolate Jordanian outpost or an interbank market in which the world’s biggest financial institutions exchange trillions of dollars daily. By definition, getting blockchain technology right requires input from all sectors of society. You can treat that as a clarion call to take an interest, to get involved.