Blockchain Revolution

THE BIG SEVEN: OPEN NETWORKED ENTERPRISE BUSINESS MODELS
There are countless opportunities to construct open networked enterprises that disrupt
or displace traditional centralized models, potentially evolving into nascent distributed
autonomous enterprises. Consider how the distributed model will disrupt or replace
the eight functions of financial services—everything from retail banking and stock
markets to insurance companies and accountancies. Incumbent and new entries alike
can construct new business architectures that can innovate better, create better value at
lower cost, and shift and enable producers to share in the wealth they create.
Blockchain technology takes some of the new business models described in
Wikinomics to a new level.
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Let’s look at how we can expand peer production,
ideagoras, prosumers, open platforms, the new power of the commons, the global
plant floor, and the wiki (social) workplace by adding in native payment systems,
reputation systems, uncensorable content, trustless transactions, smart contracts, and
autonomous agents—the key innovations of the blockchain revolution.
1.
The Peer Producers
Peer producers are the thousands of dispersed volunteers who brought you open
source software and Wikipedia, innovative projects that outperform those of the
largest and best-financed enterprises. Community members participate for the fun of
it, as a hobby, to network, or because of their values. Now, by enabling reputation
systems and other incentives, blockchain technology can improve their efficiency and
reward them for the value they create.
Peer production communities can be “commons-based peer production,” a phrase
coined by Harvard Law professor Yochai Benkler.
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Sometimes called social
production, also Benkler’s term, this system means that goods and services are
produced outside the bounds of the private sector and are not “owned” by a
corporation or individual. Among the countless examples are the Linux operating
system (owned by no one but now the most important operating system in the world),
Wikipedia (owned by the Wikimedia Foundation), and the Firefox Web browser
(owned by the Mozilla Foundation). Peer production can also refer to activities in the
private sector where peers collaborate socially to produce something but the good is
not socially owned.
Peer production as a business model matters for two reasons. First, sometimes
peers collaborate voluntarily to produce goods and services where a corporation acts

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as curator and achieves commercial benefit. Readers create the content on the Reddit
discussion platform, but they don’t own it. Reddit is the tenth-biggest site in the
United States in terms of traffic. Second, companies can tap into vast pools of external
labor. IBM embraced Linux and donated hundreds of millions of dollars’ worth of
software to the Linux community. In doing so, IBM saved $900 million a year
developing its own proprietary systems and created a platform on which it built a
multibillion-dollar software and services business.
Experience shows that long-term sustainability of volunteer communities can be
challenging. In fact, some of the more successful communities have found ways to
compensate members for their hard work. As Steve Wozniak said to Stewart Brand,
“Information should be free, but your time should not.”
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In the case of Linux, most of the participants get paid by companies like IBM or
Google to ensure that Linux meets their strategic needs. Linux is still an example of
social production. Benkler told us, “The fact that some developers are paid by third
parties to participate does not change the governance model of Linux, or the fact that
it is socially developed.” This is more than so-called open innovation that involves
cooperation between firms and sharing certain intellectual property, he said. “There is
still substantial social motivation for many contributors and as such it’s a hybrid
model.”
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Further, many of these communities are plagued with bad behavior,
incompetence, saboteurs, and trolls—people who sow discord by posting
inflammatory, incorrect, or off-topic messages to disrupt the community. Reputation
in these communities is typically very informal, and there is no economic incentive
for good behavior.
With blockchain technology peers can develop more formal reputations for
effective contributions to the community. To discourage bad behavior, members could
ante up a small amount of money that either increases or decreases based on
contribution. In corporate-owned communities, peers could share in the value they
create and receive payment for their contributions as smart contracts drop transaction
costs and open up the walls of the firm.
Consider Reddit. The community has revolted over centralized control but still
suffers from flippant, abrasive members. Reddit could benefit from moving to a more
distributed model that rewards great contributors. ConsenSys is already working on a
blockchain alternative to Reddit that does just that. By offering financial incentives,
the ConsenSys team thinks it can improve the quality of Redditlike conversations,
without centralized control and censorship. The Ethereum platform provides
incentives, perhaps in real time, to produce high-quality content and behave civilly
while contributing to collective understanding.

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Reddit has a system in place, called Reddit “Gold”—a token that users can buy
and then use to reward people whose contributions they value. The money from
tokens goes to site maintenance. The gold has no intrinsic value to users. So with a
real, transferable, blockchain-based coin incentive, Reddit members could actually
begin to get paid for making the site more robust.
Wikipedia, the flagship of social production, could benefit as well. Right now all
persons who edit articles develop an informal reputation based on how many pieces
they have edited and how effective they are, as measured by highly subjective terms.
The Wikipedia community debates constantly over incentive systems, but
administering some kind of financial compensation to seventy thousand volunteers
hasn’t been feasible.
What if Wikipedia went on the blockchain—call it Blockapedia. In addition to the
benefits of entries time-stamped into an immutable ledger, there could be more formal
measures of one’s reputation that could help incent good behavior and accurate
contributions. Sponsors could fund, or all editors could contribute money to, an
escrow account. Each editor could have a reputation linked to the value of her
account. If she tried to corrupt an article, stating for example that the Holocaust never
happened, the value of her deposit would decline, and in cases of defamation or
invasion of privacy, she would lose it and even face civil or criminal action. The true
events of the Second World War could be established in many ways, for example, by
accessing unchangeable facts on the blockchain or through algorithms that show
consensus regarding the truth.
The size of your Blockapedia security deposit could be proportional to your
previous reputation on Wikipedia or similar platforms. If you’re a brand-new user and
have no reputation, you’ll put up a larger security deposit to participate. If you’ve
edited, say, two hundred articles on Wikipedia successfully, your deposit might be
small.
This is not necessarily about moving Wikipedia to a for-hire compensation model.
“It’s simply a case of providing real-world economic gain or loss depending on the
accuracy and veracity of the information you’re providing,”
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said Dino Mark
Angaritis, CEO of the blockchain-based Smartwallet. Defacing Blockapedia hurts
your formal reputation but you also lose money.
But Wikipedia works pretty well right now, right? Not quite. Andrew Lih, writing
in The New York Times, pointed out that, in 2005, there were months when more than
sixty editors were made administrator, a position with special privileges in editing the
English-language edition. In 2015, the site has struggled to promote even one editor
per month. Being a voluntary global organization, there are internal tensions. Worse,
editing content on a mobile device is difficult. “The pool of potential Wikipedia
editors could dry up as the number of mobile users keeps growing.” Lih concludes

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that the demise of Wikipedia would be unfortunate. “No effort in history has gotten so
much information at so little cost into the hands of so many—a feat made all the more
remarkable by the absence of profit and owners. In an age of Internet giants, this most
selfless of websites is worth saving.”
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Overall, peer production communities are at the heart of new, networked models
of value creation. In most industries, innovation increasingly depends on dense
networks of public and private participants and large pools of talent and intellectual
property that routinely combine to create end products. As IBM embraced Linux,
firms can even tie into self-organizing networks of value creators like the open source
movement to cocreate or peer-produce value.