What is the Crux of Blockchain?

January 22, 2018 | By Lara Fishbane

The more momentum blockchain has gained in the social good space, the more eager pundits have been to question the very ground it stands on. Blockchain has, time and time again, been labeled a technology solution looking for a problem to solve.

What I’ve always found interesting about these claims, though, is that blockchain was developed to solve a particular problem: trust. Satoshi Nakamoto’s original whitepaper outlines the dangers of over- and misplaced trust in financial institutions before introducing the electronic payment system that eliminates the need for it. The idea is that if people are able to transact directly, they do not need to rely on potentially corrupt and costly intermediaries.

After all, intermediaries are themselves an imperfect solution to the trust problem. The fundamental issue is that people, who do not necessarily trust each other, want to transact in a way that protects both of them. And so rules are established to ensure honesty and, consequently, protection: be who you say you are, send what you say you will, do not send what you are not in possession of. The problem is that humans, in practice, stray from rules. The intermediary steps in to create systems and repercussions that dissuade noncompliance.

But what happens when the intermediary strays? When, in fact, intermediaries are just groups of people who are as likely to veer from the rules as the rest of us? When, in fact, they are an opaque structure that profits off of our dependence on them? Enter Bitcoin. The perfect intermediary. Code that is open source and transparent. Code that is, by nature, disinterested in profiting off of us. Code that acts predictably and cannot stray. Code that makes it so we cannot stray, cannot go back on our word (immutable), and can see what everyone else is doing (transparent).

All of this makes Bitcoin exciting. People see an immutable, secure public ledger that everyone can trust and the potential for good seems boundless. Just think of all the potential for data integrity and storage! But there is a clumsiness here, a misconception. The bitcoin blockchain isn’t fundamentally about data storage; it’s about how people transact. The ledger and all of its characteristics just create a system whereby people can only transact in ways that are truthful. There is no way for bad data to enter the system and no way to corrupt it.

And yet, there is something truly compelling about blockchain technology’s potential beyond Bitcoin. An immutable ledger introduces the possibilities in the social sector such as secure land records in communities with no formal claims to land, an identity system for those who have been denied by financial institutions, and so many other applications. But unlike Bitcoin, these blockchains are not truth machines. There is no magical mechanism that prevents false property titles, fraudulent identity claims, or incorrect provenance information from being added to the immutable ledger.

Absent a truth mechanism, an intermediary is likely still needed to vet and authenticate information. It is once again the intermediary’s job to ensure that the information can be trusted. Here it might seem that blockchain leaves us off where we began, once again dependent on a potentially corrupt intermediary. However, what blockchain technology can do is decrease the likelihood of an intermediary acting in corrupt ways while also increasing the agency of the end user. This potential comes down to the design of the blockchain.

Immutability can prevent an intermediary from corrupting information on the system and transparency can be used to trace the passage of information. Though immutability and transparency may seem like design flaws in a system that handles personal information, the system can also be designed to protect and empower users. There can be a redress process that protects user interest and transparency of metadata, rather than compromising potentially sensitive information.

What blockchain really introduces is the opportunity for a power shift. It can give users tools to trust the intermediary so they do not have to do so blindly. It can also distribute the power of any one intermediary through a multi-actor system, and give users ultimate control over their own data and how it’s used. The design of the blockchain can open the potential for a transformative paradigm shift.

However, there is also the danger that blockchain technology opens users to new risks and might put them at the hands of a more opaque and corrupt system. Hence, the Beeck Center for Social Impact + Innovation is working to develop an actionable framework for mitigating these privacy and ethical concerns through design choices. We want to ensure that the decision makers in the blockchain space have a toolset for driving social good with this promising technology while reducing harm to the user.