Blockchain Revolution

Breakthrough: The proof of work required to mint coins also time-stamps
transactions, so that only the first spend of a coin would clear and settle. Combined
with PKI, the blockchain not only prevents a double spend but also confirms
ownership of every coin in circulation, and each transaction is immutable and
irrevocable. In other words, we can’t trade what isn’t ours on the blockchain, whether
it’s real property, intellectual property, or rights of personhood. Nor can we trade what
we aren’t authorized to trade on somebody else’s behalf in an agency role, perhaps as
a lawyer or a company manager. And we can’t stifle people’s freedom of expression,
assembly, and religion.
Haluk Kulin of Personal BlackBox said it best: “In the thousands of years of
human social interaction, every time we’ve taken the right of participation from the
people, they have come back and broken the system. We’re discovering that, even in
digital, stealing their consent is not sustainable.”
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As the Ledger of Everything, the
blockchain can serve as a public registry through such tools as Proof of Existence
(PoE), a site that creates and registers cryptographic digests of deeds, titles, receipts,
or licenses on the blockchain. Proof of Existence doesn’t maintain a copy of any
original document; the hash of the document is calculated on the user’s machine, not
on the PoE site, thus ensuring confidentiality of content. Even if a central authority
shuts down Proof of Existence, the proof remains on the blockchain.
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So the
blockchain provides means of proving ownership and preserving records without
censorship.
On the Internet, we couldn’t necessarily enforce contractual rights or oversee
implementation. And so, for more complex transactions involving bundles of rights
and multiple parties, we now have the smart contract, a piece of special purpose code
that executes a complex set of instructions on the blockchain. “That intersection of
legal descriptions and software is fundamental, and the smart contracts are the first
step in that direction,” said Steve Omohundro, president of think tank Self-Aware
Systems. “Once the principles of how you codify law digitally become more
understood, then I think every country will start doing it. . . . Each jurisdiction would
encode its laws, precisely and digitally, and there would be translation programs
between them. . . . Getting rid of the friction of all legal stuff is going to be a huge
economic gain.”
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A smart contract provides a means for assigning usage rights to another party, as a
composer might assign a completed song to a music publisher. The code of the
contract could include the term or duration of the assignment, the magnitude of
royalties that would flow from the publisher’s to the composer’s bitcoin account
during the term, and some triggers for terminating the contract. For example, if the

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composer’s account received less than a quarter of a bitcoin in a consecutive thirty-
day period, then all rights would automatically revert to the composer, and the
publisher would no longer have access to the composer’s work registered on the
blockchain. To set this smart contract in motion, both the composer and the publisher
—and perhaps representatives of the publisher’s finance and legal teams—would sign
using their private keys.
A smart contract also provides a means for owners of assets to pool their
resources and create a corporation on the blockchain, where the articles of
incorporation are coded into the contract, clearly spelling out and enforcing the rights
of those owners. Associated agency-employment contracts could define the decision
rights of managers by coding what they could and couldn’t do with corporate
resources without ownership permission.
Smart contracts are unprecedented methods of ensuring contractual compliance,
including social contracts. “If you have a big transaction with a specific control
structure, you can predict the outcome at any period in time,” said Antonopoulos. “If I
have a fully verified signed transaction with a number of signatures in a
multisignature account, I can predict whether that transaction will be verifiable by the
network. And if it is verifiable by the network, then that transaction can be redeemed
and irrevocably so. No central authority or third party can revoke it, no one can
override the consensus of the network. That’s a new concept in both law and finance.
The bitcoin system provides a very high degree of certainty as to the outcome of a
contract.”
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The contract couldn’t be seized, stopped, or redirected to a different bitcoin
address. You need only to transmit the signed transaction to any of the bitcoin
network nodes from anywhere using any medium. Said Antonopoulos, “People could
shut down the Internet, and I could still transmit that transaction over shortwave radio
with Morse code. A government agency could try to censor my communication, and I
could still transmit that transaction as a series of smiley emoticons over Skype. As
long as someone on the other end could decode the transaction and record it in the
blockchain, I could effect the [smart contract]. So we’ve converted something that, in
law, is almost impossible to guarantee into something that has verifiable mathematical
certainty.”
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Consider property rights, both real and intellectual: “Ownership is just a
recognition by a government or an agency that you own something and they will
defend your claims on that ownership,” said Stephen Pair, CEO of BitPay. “That’s just
a contract that can be signed by whatever authority that will defend your rights for
you and they sign it over to your identity, and then once you have that, and that
ownership is recorded, you then can transfer it to other people. That’s very
straightforward.”
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Communities with shared resources could consider a spectrum of

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rights, borrowing from Nobel Prize–winning economist Elinor Ostrom’s pyramid of
rights, a pecking order of sorts. At the lowest level, there are authorized users who
may only access and withdraw resources; claimants who have those rights but can
also exclude others from access; proprietors who hold management rights beyond
access and exclusion; and owners who can access, use, exclude others, manage, and
sell the resource (i.e., right of alienation).
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Now consider the rights to privacy and publicity: “Our model is really rights
applied to the market,” said Kulin of Personal BlackBox. His company uses
blockchain technology to represent and enforce the rights of individuals to extract
value from their personal data. “The blockchain provides us a whole group of people
who are both mission-aligned and technology-aligned to create different ways that
enterprises can leverage these unique data sets rather than protect their data silos.”
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Simply put, people create better data than what a company can frack from them, and
consumers are much better at emotionally aligning with brands and influencing their
peers than companies are.