It’s a brisk Sunday morning in the year 2030. You walk into your local grocery store and pick up some milk. With a wave of your hand, your smartwatch detects the translucent cryptography on the milk carton and performs a hash function. The milk is now instantly, irrefutably yours.
There’s a real possibility that, in the future, we’ll not only stop trading physical currency for things but also completely reimagine the concept of ownership. Even though the Internet has reshaped our lives in many ways, there has never been a way to truly “own” something digital without a central authority. Everything you own online, from money to your identity, requires an impartial third party mediator. It’s the only way we have to actually prove that it’s yours. If you think about it, technically, all of your online property is either leased or rented. Until recently.
A blockchain is a massive, fraud-resistant distributed ledger that could be the new infrastructure of the future. The open ledger uses consensus algorithms to transparently record and verify any transactions without a third party. It replaces the middleman with mathematics. Because the blockchain infrastructure is decentralized, there’s a lot less friction and time wasted than traditional, centralized processes.
Blockchain tech is the symbol of technology outpacing services traditionally performed by archaic institutions, like the government. The efficiency of blockchain’s technology has demanded the attention from folks in every industry—from engineers to bankers to lawyers. It’s remained unhacked to date.
To many skeptics, decentralizing technology sounds like hippie, anti-authority nonsense. To others, it’s just an overhyped geek fantasy. But visionaries closest to innovations are often the best predictors of a better future. Much like the Internet was in the 90’s, the blockchain network is currently ahead of its time. Remember back in 1995 when Newsweek published: “Why the Internet Will Fail,” citing issues like “reading on a screen is a chore.” Similar skepticism for blockchains and decentralized virtual currency abounds (here, here and here).
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Despite its radicalism, blockchain’s potential to eradicate much of today’s inefficiencies and insecurities in establishing ownership of assets has proven to be hard to ignore. Although it’s too soon to know exactly where it’ll take us, early adopters of the blockchain will be the biggest beneficiaries. As pioneers build a new ecosystem, demand for blockchain engineers will boom exponentially. But, chances are, you won’t learn this in school. As blockchain technology starts to permeate our society, engineers will need strong fundamentals of cryptography, distributed databases and network security, which aren’t always prioritized in computer science programs today.
Safer, Cheaper and Faster
A combination of decades’ old algorithms, the blockchain is the underlying technology that enables the virtual exchange of Bitcoin currency. It uses proof-of-work (PoW) protocols, or processing time in the form of puzzles, to verify ownership. Best of all, it’s immutable. Meaning, once a block (or transaction) is created, it can never be altered. It’s the secret sauce for security because it’s mathematically hard to be dishonest on the blockchain. But this technology is not just restricted to Bitcoin–other blockchains can support virtually any value. Here are three examples of many:
|Name||What does it do?|
|Ethereum||Uses a new digital currency called Ether and a programming language called Etherscript to write agreements without a third party to verify.|
|Namecoin||Stores identity information more securely using cryptography. It uses the same proof-of-work algorithm as Bitcoin. Aims to replace the DNS system.|
|SmartContracts||Technology that exists on some blockchains. Creates disclosure agreements at very low costs of only a few cents. The best part about SmartContracts is that you can create decentralized programs for anything, like Uber or Dropbox.|
Blockchains are complicated and nuanced, but the underlying theory is simple. Blockchains use PoW to achieve true consensus by multiple parties. To verify that something is–in fact–true, blockchains use the longest chain rule. In other words, the longest chain represents the truth. Andreas M. Antonopoulos, Bitcoin developer and evangelist, explains how PoW helps keep blockchain transactions secure:
- On a blockchain, miners incur financial cost (exerting energy for hash function) to secure the blockchain using PoW.
- If miners play by its rules, they get rewarded.
- Miners are incentivized financially to play by the rules.
Theoretically, it doesn’t pay to cheat. Of course, there are still some weaknesses to the theory. For instance, Ghash.io is a pool of Bitcoin miners whose hashrate has come close to achieving 51% of influence. Large mining pools are currently the biggest threat to the blockchain concept because they could potentially centralize the entire system:
“If mining became even more centralized than it is already, Bitcoin would still function, and it might even gain mainstream adoption, but it wouldn’t really be Bitcoin. It would have the name “Bitcoin”, but it would essentially be a very inefficient form of PayPal,” says Greg Slepak, blockchain instructor at Blockchain University.
When engineers hammer down a solution to the 51% attack to keep the system decentralized, blockchain will have a really great shot at going mainstream.
Banks are also exploring blockchain technology to bolster their own services by shifting to distributed databases. Nine of the world’s largest banks are banding together to create a uniform financial ecosystem on the blockchain. This graphic created by Financial Times perfectly explains why finance professionals are crowding into conferences to make sense of this technology. Because of the distributed nature of blockchains, assets that move on a blockchain are far speedier and more economical than traditional, central ledgers.
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“It’s hard to see a world where that blockchain technology doesn’t end up changing the way we think about asset ownership,” Exchanges at Goldman Sachs podcast.
And it’s not just finance. A diverse range of industries are aiming to unravel the blockchain and benefit from its potential:
If blockchain radically changes our conception of ownership in the future, how long until we teach budding engineers how to build an ecosystem around blockchain technology? It’s virtually impossible for computer science programs to keep adding new technologies to its curriculums. Most would agree that truly understanding and building on the fundamentals of new technologies–like the blockchain–is better than piecing together black boxes. But even the notion of “fundamentals” seem to be expanding far too wide for brick-and-mortar universities. Curriculum-designing committees are constantly facing in the relatively new field:
Although the field of computer science continues to rapidly expand, it is not feasible to proportionately expand the size of the curriculum. As a result, CS2013 seeks to re-evaluate the essential topics in computing to make room for new topics without requiring more total instructional hours than the CS2008 guidelines – ACM & IEEE’s 2013 Joint Task Force
But blockchain technology is a convergence of several different disciplines, including distributed computing, cryptography, consensus algorithms and law…more than 20 years in the making. For the sake of simplicity, let’s focus on cryptography (the science of encryption) as a core CS fundamental that’s essential to understanding blockchain technology. In the Task Force curriculum recommendation:
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Cryptography is labeled a “Core-Tier2” course, which means it’s not as essential as “Core-Tier1” courses.
Given the tight space in curriculum, chances of students taking this course as part of their core fundamental curriculum is slim. But Ben Horowitz, cofounder of Andreessen Horowitz, says Bitcoin and blockchain may be the most important computer science breakthrough since packet switching. This is likely because of at least two reasons:
- The creator of Bitcoin formulated an incentive system for blockchain mining, which makes the paradigm practical. It’s a way to create trust between two competitive parties over an untrusted network. It’s a problem that’s never been solved in CS ever before.
- The computing power for hashing is enormous: In less than 10 minutes, they can do quadrillions of hashes. This hardware we have now wasn’t around 3 years ago.
It’s one thing to understand the fundamentals, but truly grasping the concept of blockchain requires hands-on learning. And the only way to really learn is by doing. Elite institutions like MIT and Princeton are riding at the tail of blockchain innovation by offering courses and workshops on the topic. For the rest of the 99% of the population, Blockchain technology is a tight knot we must unravel ourselves. Lively forums are filled with chatter daily for support in autodidactic learning. Technologies like blockchain will outpace traditional, centralized brick-and-mortar education. Instead, students will have to rely on distributed sources of learning online to educate themselves.
Slepak is one such software developer who saw a massive opportunity in blockchain technology when he first saw the infamous Bitcoin whitepaper in 2010. “Since then I’ve simply kept up to date using a computer and an Internet connection. That’s all you need,” he says. He’s now an instructor at Blockchain University and a pioneer of the discipline. “Anyone who wants to be really good at something only gets there by having an internal drive to learn the subject,” he says.
Here’s a list of resources to get your hands dirty:
- If you’re in the Bay Area, you could join the Blockchain University.
- Learn by doing: Play with Blockchain APIs (Bitcoin, Counterparty, Ripple, and Ethereum).
In Code We Trust
The traditional notion of ownership pre-dates computer science and the Internet. Blockchain technology, in the form of decentralized or distributed databases, invites a shift in our thinking. No longer do you need the store clerk to verify that you have–in fact–purchased this carton of milk. In a sense, we can bring the familiar notion of physical property to the digital world. There’s finally a way for someone to send a piece of digital property to someone else online–safely. The combination of consensus algorithms and cryptography are a much safer, faster and cheaper way to create a universal truth about the ownership of an asset.
Blockchain experts are still testing its theories–but the potential is worth exploring. Any big disruption warrants fear, inquisition and apprehension.
But, starting with financial institutions, distributed business models could pose a big enough threat to spur competition against the status quo. We’re just on page one of this story. If transferring ownership of assets becomes a distributed business model over the next decade, the new frontier will involve trusting in code instead of trusting in an authority. New technologies are generally built on decades of research rooted in fundamentals. But it’s up to our generation of optimistic, entrepreneurial builders to self-learn and apply innovative concepts to help build our future.
Special thanks to Greg Slepak for reading a draft of this piece and sharing his insights.
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There’s a real possibility that, in the future, we’ll not only stop trading physical currency for things but also completely reimagine the concept of ownership. Even […]