Blockchain Revolution

CHAPTER 2
BOOTSTRAPPING THE FUTURE:
SEVEN DESIGN PRINCIPLES OF THE BLOCKCHAIN
ECONOMY
reedom is predicated on privacy,” said Ann Cavoukian, executive director of the
Privacy and Big Data Institute at Ryerson University. “I first learned that thirty
years ago when I started going to conferences in Germany. It is no accident that
Germany is the leading privacy and data protection country in the world. They had to
endure the abuses of the Third Reich and the complete cessation of all of their
freedoms, which started with the complete removal of their privacy. When that ended,
they said, ‘Never again.’”
1
And so it is ironic—or totally fitting—that one of the first decentralized peer-to-
peer computational platforms to guarantee user privacy is called Enigma, also the
name given to the machine developed by German engineer Arthur Scherbius to
transcribe coded information. Scherbius designed Enigma for commercial use:
through his device, global companies could quickly and safely communicate their
trade secrets, stock tips, and other insider information. Within a few years, Germany’s
military forces were manufacturing their own versions of Enigma to broadcast coded
messages over radio to troops. During the war, the Nazis used Enigma to disseminate
strategic plans, details of targets, and the timing of attacks. It was a tool of suffering
and oppression.
Our contemporary Enigma is a tool of freedom and prosperity. Designed at MIT
Media Lab by Guy Zyskind and Oz Nathan, the new Enigma combines the virtues of
blockchain’s public ledger, the transparency of which “provides strong incentives for
honest behavior,” with something known as homomorphic encryption and secure
multiparty computation.
2
More simply put, “Enigma takes your information—any
information—breaks it up, and encrypts it into pieces of data that are randomly
distributed to nodes in the network. It doesn’t exist in one spot,” said Cavoukian.
“Enigma uses blockchain technology to embed the data and track all the pieces of

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information.”
3
You can share it with third parties and those parties can use it in
computations without ever decrypting it.
4
If it works, it could reshape how we
approach our own identity online. Imagine having a black box of your personal
information that you alone control and can access.
No matter how cool it may sound, there are reasons to tread cautiously on the
cryptographic frontier. First, it needs to bootstrap a large network of participants.
Second, “cryptography is an area where you never want to be using the newest and
greatest, because there is an entire history of an algorithm that everyone believes is
secure, that’s out there for four or five years, and some very inspired scientist will
come out and say, there’s a flaw, and the entire thing tumbles,” said Austin Hill of
Blockstream. “That’s why we generally prefer conservative, very well-established,
long-standing algorithms. This stuff is very, very well future-proofed, and bitcoin was
designed with that in mind.”
5
Still, the concept is worth taking very seriously, as it has profound implications
for privacy, security, and sustainability. “Enigma is offering what they say guarantees
privacy,” Cavoukian said. “That is a big claim, but that’s the kind of thing we
increasingly need in this connected, interconnected world.”
6
In our research, we came across a number of projects initiated on blockchain
technologies whose developers had similar aspirations for enabling basic human
rights—not only the rights to privacy and security, but also the rights to property,
recognition as a person under the law, and participation in government, culture, and
the economy. Imagine a technology that could preserve our freedom to choose for
ourselves and our families, to express these choices in the world, and to control our
own destiny, no matter where we lived or were born. What new tools and new jobs
could we create with those capabilities? What new businesses and services? How
should we think about the opportunities? The answers were right in front of us,
compliments of Satoshi Nakamoto.