Forget Bitcoin; It's the Blockchain That Might Change Everything

CC BY 2.0. Vitalek Buterin in Copenhagen with phone/ Lloyd Alter

When in Copenhagen for the INDEX: Design to Improve Life awards in September, I listened to Vitalik Buterin explain Ethereum, which is described:

Ethereum is a world-changing technology that represents nothing less than the second generation of the Internet. It holds the potential to transform law, governance, finance, trade and social organization by removing the middlemen for global transactions and putting people back in control of their own data.

I tried to talk to Buterin and learn how Ethereum worked, but it was hard. He is not just from a different planet, but a different universe, perhaps a different dimension. I came home determined to understand blockchains and bitcoins and Ethereum before I wrote about it.

Time passed and I did not write about it, but Bitcoin is suddenly in the news because of the incredible amount of energy used for "mining." According to Motherboard, each transaction "now sits at around 215 KWh of electricity. That's more than enough to fill two Tesla batteries, run an efficient fridge/freezer for a full year, or boil 1872 litres of water in a kettle." According to Inhabitat, bitcoin miners heat their houses for free. And right now, everyone is talking about how the price of a bitcoin is rising to new heights. It was time to try and understand this again. (Melissa tried to explain bitcoin here on MNN).

Actually, Bitcoin is fundamentally not very interesting, it is primarily about money. But blockchain, the underlying concept that also powers Vitalik's Ethereum, is very interesting indeed. On theEthereum website they summarize Ethereum as "a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference."

book cover blockchain revolution

© Blockchain Revolution book cover

Don and Alex Tapscott try to explain it in "Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World" and the title is apt. The Tapscotts describe the blockchain as a Ledger of Everything.

This new digital ledger of economic transactions can be programmed to record virtually everything of value and importance to humankind: birth and death certificates, marriage licenses, deeds and titles of ownership, educational degrees, financial accounts, medical procedures, insurance claims, votes, provenance of food, and anything else that can be expressed in code.

They interview Vitalik and write:

Buterin created Ethereum as an open source project when he realized that blockchains could go far beyond currency and that programmers needed a more flexible platform than the bitcoin blockchain provided. Ethereum enables radical openness and radical privacy on the network. He views these not as a contradiction but as “a sort of Hegelian synthesis,” a dialectic between the two that results in “volunteered transparency.”

It, and blockchains in general can be used for anything, to track everything from the food that we eat: "Cows can become blockchain appliances, enabling farmers to track what the cows eat, which medications they’ve had, and their complete health history." Seriously- we could follow the provenance of every ingredient in every product.

But it could also apply to green buildings and urban design.

The greenest of buildings will run on the Ledger of Things. Imagine the data on elevator usage and flow of people through the building, how these will inform an architect’s design of public and private spaces. Spare residential space can list itself and negotiate through the Ledger of Everything to help tourists, students, managers of homeless shelter programs, and others find space that meets their needs. These ideas apply to all types of residential, hotel, office, factory, retail/wholesale, and institutional real estate.

Or, architects and builders could blockchain the entire process of building, tracking every material back to its source, proving that they are healthy and green. It has always been a complaint of mine, the lack of transparency in the construction industry. But with blockchain, there could be a continuous record of everything that cannot be changed, all based on records that cannot be modified, going right back to the original source of every product, every component.

So the blockchain is a distributed ledger representing a network consensus of every transaction that has ever occurred. Like the World Wide Web of information, it’s the World Wide Ledger of value— a distributed ledger that everyone can download and run on their personal computer.

© PWC/ how Blockchain works

Like Bitcoin, Ethereum uses a lot of energy to test transactions, to run its "proof of work algorithms." As explained by Alex Hern in the Guardian,

The reason for the mining requirement, which is essentially asking a computer to continue rolling a dice until it rolls a few thousand sixes in a row, is that it ensures that no single person can dictate what happens on the network. ...Because the problem is so processor-intensive and so randomly rewarded, it’s prohibitively expensive – in electricity and computing power – to attempt to fake it. But it’s also a vast use of electricity, worldwide.

Ethereum uses about a fifth as much electricity as Bitcoin, but it is still a lot, and it is looking to change to another system, described as "an energy-efficient proof-of-stake algorithm called Casper." The Tapscotts write that "The smartest technologists on the planet are working on creative solutions to the energy problem, with more efficient devices and use of renewable energy."

It's all about trust

Buterin notes that right now, we depend on trust- on people, corporations and contracts, but that corporations have limited liability and cannot really be trusted. With Ethereum, you have a trustworthy and transparent record of everything. The Tapscotts describe Buterin's vision:

Ethereum is his tool to effect positive change in the world. “I see myself more as part of the general trend of improving technology so that we can make things better for society.”

Ultimately, it is all about "radical openness and radical privacy"- and we could use a lot more of both. I will be honest and admit that I still do not truly understand how it works, but I like what it does.