economists have been exploring people's
behavior for hundreds of years
how we make decisions how we act
individually and in groups how we
exchange value they've studied the
institutions that facilitate our trade
like legal systems corporations
marketplaces but there is a new
technological institution that will
fundamentally change how we exchange
value and it's called the blockchain now
that's a pretty bold statement but if
you take nothing else away from this
talk I actually want you to remember
that while blockchain technology is
relatively new it's also a continuation
of a very human story and the story is
this as humans we find ways to lower
uncertainty about one another so that we
can exchange value now one of the first
people to really explore the idea of
institutions as a tool in economics to
lower our uncertainties about one
another and be able to do trade was the
Nobel economist Douglas North he passed
away at the end of 2015 but worse
pioneered with called new institutional
economics and what he meant by
institutions were really just formal
rules like a constitution and informal
constraints like bribery these
institutions are really the grease that
allow our economic wheels to function
and we can see this play out over the
course of human history if we think back
to when we were hunter-gatherer
economies we really just traded within
our village structure we had some
informal constraints in place but we
enforced all of our trade with violence
or social repercussions as our societies
grew more complex and our trade routes
more distant we built up more formal
institutions institutions like banks for
currency governments corporations these
institutions helped us manage our trade
as the uncertainty and the complexity
grew and our personal control was much
lower eventually with the internet we
put these same institutions online we
built platform marketplaces like Amazon
eBay Alibaba just faster institutions
that act as middlemen to facilitate
human economic activity as Douglas north
saw it institutions are a tool to lower
uncertainty so that we can connect and
exchange all kinds of value in society
and I believe we are now entering a
further and radical evolution of how we
interact and trade because for the first
time we can lower uncertainty not just
with political and economic institutions
like our banks or corporations or
governments but we can do it with
technology alone so what is the
blockchain blockchain technology is a
decentralized database that stores a
registry of assets and transactions
across a peer-to-peer network it's
basically a public registry of who owns
what and who transacts what the
transactions are secured through
cryptography and over time that
transaction history gets locked in
blocks of data that are then
cryptographically linked together and
secured this creates an immutable
unforgeable record of all of the
transactions across this network this
record is replicated on every computer
that uses the network it's not an app
it's not a company I think its closest
in description to something like
Wikipedia we can see everything on
Wikipedia it's a composite view that's
constantly changing and being updated
we can also track those changes over
time on Wikipedia and we can create our
own wiki's because at their core they're
just a data infrastructure on Wikipedia
it's an open platform that stores words
and images and the changes to that data
over time on the blockchain you can
think of it as an open infrastructure
that stores many kinds of assets it
stores the history of custodianship
ownership and location for assets like
the digital currency Bitcoin other
digital assets like a title of ownership
of IP it could be a certificate a
contract real world objects even
personal identifiable information there
are of course other technical details to
the blockchain but at its core that's
how it works it's this public registry
that stores transactions in a network
and is replicated so that it's very
secure and hard to tamper with which
brings me to my point of how blockchains
lower uncertainty and how they therefore
promised to transform our economic
systems in radical ways so uncertainty
is kind of a big term in economics but I
want to go through three forms of it
that we face in almost all of our
everyday transactions we're blockchains
can play a role we face uncertainties
like not knowing who we're dealing with
not having visibility into a transaction
and not having recourse if things go
wrong so let's take the first example
not knowing who we're dealing with say I
want to buy a used smartphone on eBay
the first thing I'm going to do is look
up who I'm buying from are they a power
user do they have great reviews and
ratings or do they have no profile at
all reviews ratings checkmarks
these are the attestations about our
identities that we cobble together today
and use to lower uncertainty about who
we're dealing with
but the problem is they're very
fragmented think about how many profiles
you have blockchains
allow for us to create an open global
platform on which to store any
attestation about any individual from
any source this allows us to create a
user controlled portable identity more
than a profile it means you can
selectively reveal the different
attributes about you that help
facilitate trade or interaction for
instance that a government issued you an
ID or that you're over 21 by revealing
the cryptographic proof that these
details exist and are signed off on
having this kind of portable identity
around the physical world and the
digital world means we can do all kinds
of human trade in a totally new way so
I've talked about how blockchains could
lower uncertainty and who we're dealing
with the second uncertainty that we
often face is just not having
transparency into our interactions say
you're going to send me that smartphone
by mail
I want some degree of transparency I
want to know the product I bought is the
same one that arrives in the mail and
that there's some record for how it got
to me this is true not just for
electronics like smartphones but for
many kinds of goods and data things like
medicine luxury goods any kind of data
or product that we don't want tampered
with the problem in many companies
especially those that produce something
complicated like a smartphone is they're
managing all of these different vendors
across a horizontal supply chain all of
these people that go into making a
product they don't have the same
database they don't use the same
infrastructure and so it becomes really
hard to see transparently
a product evolved over time using the
blockchain we can create a shared
reality across non trusting entities by
this I mean all of these nodes in the
network do not need to know
each other or trust each other because
they each have the ability to monitor
and validate the chain for themselves
think back to Wikipedia it's a shared
database and even though it has multiple
readers and multiple writers at the same
time it has one single truth so we can
create that using block chains we can
create a decentralized database that has
the same efficiency of a monopoly
without actually creating that central
authority so all of these vendors all
sorts of companies can interact using
the same database without trusting one
another it means for consumers we can
have a lot more transparency as a real
world object travels along we can see
its digital certificate or token move on
the blockchain adding value as it goes
this is a whole new world in terms of
our visibility so I've talked about how
block chains can lower our uncertainties
about identity and how they change what
we mean about transparency in long
distances and complex trades like in a
supply chain the last uncertainty that
we often face is one of the most
open-ended and it's renege a what if you
don't send me the smartphone can I get
my money back
block chains allow us to write code
binding contracts between individuals
and then guarantee that those contracts
will bear out without a third party
enforcer so if we look at the smartphone
example you could think about escrow you
are financing that phone but you don't
need to release the funds until you can
verify that all the conditions have been
met you got the phone I think this is
one of the most exciting ways that block
chains lower our uncertainties because
it means to some degree we can collapse
institutions and their enforcement it
means a lot of human economic activity
can get collateralized and automated and
push a lot of
human intervention to the edges the
places where information moves from the
real world to the blockchain I think
what would probably floor Douglas North
about this use of technology is the fact
that the very thing that makes it work
the very thing that keeps the blockchain
secure and verified is our mutual
distrust so rather than all of our
uncertainties slowing us down and
requiring institutions like banks or
governments or corporations we can
actually harness all of that collective
uncertainty and use it to collaborate
and exchange more and faster and more
open now I don't want you to get the
impression that the blockchain is the
solution to everything even though the
media has said that it's going to end
world poverty it's also going to solve
the counterfeit drug problem and
potentially save the rainforest the
truth is this technology is in its
infancy and we're going to need to see a
lot of experiments take place and
probably fail before we truly understand
all of the use cases for our economy but
there are tons of people working on this
from financial institutions to
technology companies startups and
universities and one of the reasons is
that it's not just an economic evolution
it's also an innovation in computer
science blockchains give us the
technological capability of creating a
record of human exchange of exchange of
currency of all kinds of digital and
physical assets even of our own personal
attributes in a totally new way so in
some ways they become a technological
institution that has a lot of the
benefits of the traditional institutions
we're used to using in society but it
does this in a decentralized way
it does this by converting a lot of our
uncertainties into certainties so I
think we need to start preparing
ourselves because we're about to face a
world where distributed autonomous
institutions have quite a significant
role thank you
Thank You Bettina I think in the stood
that it's coming it's it offers a lot of
potential and it's complex
what is your estimation for estimate for
the rate of adoption I think that's a
really good question my lab is pretty
much focused on going the enterprise and
government route first because in
reality blockchain is a complex
technology how many of you actually
understand how the internet works but
you use it every day
so I think we're sort of facing the same
John Sculley idea of technology should
either be invisible or beautiful and
blockchain is kind of neither of those
things right now so it's better suited
for either really early adopters who
kind of get it and can tinker around or
for finding those best use cases like
identity or asset tracking or smart
contracts that can be used at that level
of an enterprise for government thank
you that's all coming to Ted