How was the book?

According to Swan her intention to write the books was following ”the book is intended as an exploration of the broader concepts, features, and functionality of Bitcoin and blockchain technology, and their future possibilities and implications; it does not support, advocate, or offer any advice or prediction as to the industry’s viability.”

What are the key learnings of the book? 

What is Bitcoin and Blockchain?

• ”Bitcoin is digital cash. It is a digital currency and online payment system in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Bitcoin was created in 2009 (released on January 9, 20096) by an unknown person or entity using the name Satoshi Nakamoto.

• The Blockchain is the public ledger of all Bitcoin transactions that have ever been executed. It is constantly growing as miners add new blocks to it (every 10 minutes) to record the most recent transactions.”

 Pros:

• Economify: Blockchain can economify ways of making business i.e. lower the cost of transactions.

• Decentralize: Blockchain can carry platform agnostic information and decentralize the information.

• Programmable: With blockchain one can make smart, programmable contracts.

• Push technology: ”One of the great advantages is that blockchain is a push technology (the user initiates and pushes relevant information to the network for this transaction only), not a pull technology (like a credit card or bank for which the user’s personal information is on file to be pulled any time it is authorized).”

Cons:

• Latency: Bitcoin and the Ethereum network transaction block can take minutes, even tens of minutes.

• Size: One blockchain takes huge amount of data. Bitcoin blockchain is currently 173 GB in size. 

• Throughput: Blockchain is extremely slow technology compared to technology such as Visa-credit card is deploying. Currently Bitcoin can process approx. 3 transaction per second and the Ethereum network can process 6 tps. Visa can process 2.000 transaction per second and 10.0000 tps in peak-hours.

What is Blockchain in large?

• ”The blockchain is most centrally an information technology.

• The blockchain as decentralization is a revolutionary new computing paradigm.

• The blockchain is the embedded economic layer the Web never had.

• The blockchain is the coordination mechanism, the line-item attribution, credit, proof, and compensation rewards tracking schema to encourage trustless participation by any intelligent agent in any collaboration.

• The blockchain “is a decentralized trust network.

• The blockchain is Hayek’s multiplicity of private complementary currencies for which there could be as many currencies as Twitter handles and blogs, all fully useful and accepted in their own hyperlocal contexts, and where Communitycoin issuance can improve the cohesion and actualization of any group.

• The blockchain is a cloud venue for transnational organizations.

• The blockchain is a means of offering personalized decentralized governance services, sponsoring literacy, and facilitating economic development.

• The blockchain is a tool that could prove the existence and exact contents of any document or other digital asset at a particular time.

• The blockchain is the integration and automation of human/ machine interaction and the machine-to-machine (M2M) and Internet of Things (IoT) payment network for the machine economy.

• The blockchain and cryptocurrency is a payment mechanism and accounting system enabler for M2M communication.

• The blockchain is a worldwide decentralized public ledger for the registration, acknowledgment, and transfer of all assets and societal interactions, a society’s public records bank, an organizing mechanism to facilitate large-scale human progress in previously unimagined ways.

• The blockchain is the technology and the system that could enable the global-scale coordination of seven billion intelligent agents.

• The blockchain is a consensus model at scale, and possibly the mechanism we have been waiting for that could help to usher in an era of friendly machine intelligence.”

The key question is distinguishing the economic principles needed for the different range of functions with which blockchain technology could be helpful. However, not every operation is one of value registration and exchange.

Blockchain can ”economify” transactions and make smart contracts. The ambition is to lower demurrage. Within the notion of currency is the idea of a demurrage currency. Demurrage means carrying cost —that is, the cost to carry an asset. Blockchain technology could become the seamless embedded economic layer the Web has never had, serving as the technological underlay for payments, decentralized exchange, token earning and spending, digital asset invocation and transfer, and smart contract issuance and execution.

”A 2010 communication from Satoshi Nakamoto indicates that “the design supports a tremendous variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third-party arbitration, multiparty signature, etc. If Bitcoin catches on in a big way, these are things we’ll want to explore in the future, but they all had to be designed at the beginning to make sure they would be possible later.”

Roadmap of Blockchain:

• Blockchain 1.0: Currency “Internet of Money,”

• Blockchain 2.0: Contracts

• Blockchain 3.0: Justice Applications Beyond Currency, Economics, and Markets Blockchain

Internet of Money:

• ”The world is already being prepared for more pervasive Internet-based money: Apple Pay (Apple’s token-based ewallet mobile app) and its competitors could be a critical intermediary step in moving to a full-fledged cryptocurrency world in which the blockchain becomes the seamless economic layer of the Web.

• It may become the “Internet of Money,” connecting finances in the way that the Internet of Things (IoT) connects machines.

• Alternative currencies make sense based on an economic argument alone: reducing worldwide credit card merchant payment fees from as much as 3 percent to below 1 percent has obvious benefits for the economy, especially in the $ 514 billion international remittances market, where transaction fees can run from 7 to 30 percent.

• The core functionality of blockchain currencies is that any transaction can be sourced and completed directly between two individuals over the Internet.”

• Gartner estimates the Internet of Things will comprise 26 billion devices and a $ 1.9 trillion economy by 2020.9 A corresponding “Internet of Money” cryptocurrency is needed to manage the transactions between these devices, 10 and micropayments between connected devices could develop into a new layer of the economy.

• Cisco estimates that M2M (machine-to-machine) connections are growing faster than any other category (84 percent), and that not only is global IP traffic forecast to grow threefold from 2012 to 2018, but the composition is shifting in favor of mobile, WiFi, and M2M traffic.

• Some examples of interdevice micropayments could be connected automobiles automatically negotiating higher-speed highway passage if they are in a hurry, microcompensating road peers on a more relaxed schedule. Coordinating personal air delivery drones is another potential use case for device-to-device micropayment networks where individual priorities can be balanced.

Decentralization:

• Bitcoin and blockchain technology, as a mode of decentralization, could be the next major disruptive technology and worldwide computing paradigm (following the mainframe, PC, Internet, and social networking/ mobile phones), with the potential for reconfiguring all human activity as pervasively as did the Web.

Blockchain 2.0: Contracts

”Whereas Blockchain 1.0 is for the decentralization of money and payments, Blockchain 2.0 is for the decentralization of markets more generally, and contemplates the transfer of many other kinds of assets beyond currency using the blockchain, from the creation of a unit of value through every time it is transferred or divided.

• The key idea is that the decentralized transaction ledger functionality of the blockchain could be used to register, confirm, and transfer all manner of contracts and property.

• All financial transactions could be reinvented on the blockchain, including stock, private equity, crowdfunding instruments, bonds, mutual funds, annuities, pensions, and all manner of derivatives (futures, options, swaps, and other derivatives).

• Digital identity can be confirmed with the blockchain through securely encoded driver’s licenses, identity cards, passports, and voter registrations.

• Private records such as IOUs, loans, contracts, bets, signatures, wills, trusts, and escrows can be stored.

• For example, to protect an idea, instead of trademarking it or patenting it, you could encode it to the blockchain and you would have proof of a specific cargo being registered with a specific date time stamp for future proof.

• Crowdfunding …..The idea is that peer-to-peer fundraising models such as Kickstarter can supplant the need for traditional venture capital funding for startups.

• The blockchain can be used for any form of asset registry, inventory, and exchange, including every area of finance, economics, and money; hard assets (physical property); and intangible assets (votes, ideas, reputation, intention, health data, and information).

• Each party must trust the other party to fulfill its side of the obligation. Smart contracts feature the same kind of agreement to act or not act, but they remove the need for one type of trust between parties. This is because a smart contract is both defined by the code and executed (or enforced) by the code, automatically without discretion.

• We should think of smart contracts as applications that can themselves be decentralized, autonomous, and pseudonymously running on the blockchain. Thus, the blockchain could be one potential path to artificial intelligence (AI) in the sense that smart-contract platforms are being designed to run at graduated stages of increasing automation, autonomy, and complexity.

Applications of the blockchain contract could include expiry, ownership, dataprivacy. Or for Veikkaus ”the simplest smart contract might be a bet between two parties about the maximum temperature tomorrow. Tomorrow, the contract could be automatically completed by a software program checking the official temperature reading (from a pre-specified external source or oracle (in this example, perhaps Weather.com), and transferring the Bitcoin amount held in escrow from the loser to the winner’s account.” Even library could be arranged by blockchain!

In fact, three elements of smart contracts that make them distinct are autonomy, self-sufficiency, and decentralization:

• Autonomy means that after it is launched and running, a contract and its initiating agent need not be in further contact.

• Second, smart contracts might be self-sufficient in their ability to marshal resources —that is, raising funds by providing services or issuing equity, and spending them on needed resources, such as processing power or storage.

• Third, smart contracts are decentralized in that they do not subsist on a single centralized server; they are distributed and self-executing across network nodes .

”One blockchain infrastructure project aiming to deliver a Turing-complete scripting language and Turing-complete platform is cakked Ethereum. Ethereum is a platform and a programming language for building and publishing distributed applications. More fundamentally, Ethereum is a foundational general-purpose cryptocurrency platform that is a Turing-complete virtual machine (meaning that it can run any coin, script, or cryptocurrency project).”

Blockchain 3.0: Justice Applications Beyond Currency, Economics, and Markets Blockchain

Real-time digital identity verification services could be quite crucial; already the worldwide market size for identity authentication and verification is $ 11 billion annually. => “Login with Bitcoin”.

A key point of Bitcoin neutrality is that the real target market for whom Bitcoin could be most useful is the “unbanked,” individuals who do not have access to traditional banking services for any number of reasons, estimated at 53 percent of the worldwide population. Even in the United States, 7.7 percent of households are forecast to be unbanked or underbanked.

Bitcoin could trigger extremely fast uptake in underbanked markets, continuing the trend of 31 percent of Kenya’s GDP being spent through mobile phones.

”Attorneys, clients, and public administrators could use the Proof of Existence blockchain functionality to prove the existence of many documents including wills, deeds, powers of attorney, health care directives, promissory notes, the satisfaction of a promissory note, and so on without disclosing the contents of the document. With the blockchain timestamp feature, users can prove that a document (like a will) they will be presenting to a court in the future is the same unaltered document that was presented to the blockchain at a prior point in time.”

Blockchain Government

The idea of using blockchain technology to provide services traditionally provided by nation-states in a decentralized, cheaper, more efficient, personalized manner. An example of personalized governance services might be that one resident pays for a higher-tier waste removal service that includes composting, whereas a neighbor pays for a better school package. Personalization in government services, instead of the current one-size-fits-all paradigm, could be orchestrated and delivered via the blockchain. The world’s first blockchain-recorded marriage occurred at Disneyworld, Florida, on October 5, 2014. The same services a traditional “fiat” government carries out could be delivered in a cheaper, distributed, voluntary way by using blockchain technology. The blockchain lends itself well to being a universal, permanent, searchable, irrevocable public records repository.

Blockchain Health in the future. There might be different kinds of blockchains (ledgers) for recording and tracking different kinds of processes, and exchanging and providing access to different kinds of assets, including digital health assets. Notary Notary-type proof-of-existence services are a common need in the health industry. Proof of insurance, test results, prescriptions, status, condition, treatment, and physician referrals are just a few examples of health document–related services often required. Health documents can be encoded to the blockchain as digital assets, which could then be verified and confirmed in seconds with encryption technology as opposed to hours or days with traditional technology. The private-key functionality of the blockchain could also make certain health services and results delivery, such as STD screening, more efficient and secure.

Blockchain health could create more of a two-way market for all health services. Doctors and health practices could bid to supply medical services needed by patient-consumers. Just as Uber drivers bid for driver assignments with customers, doctor practices could bid for hip replacements and other needed health services —for example, in Healthcoin —at minimum bringing some degree of price transparency and improved efficiency to the health sector.

Blockchain in Learning: Bitcoin MOOCs and Smart Contract Literacy Blockchain-based smart contracts could have myriad uses. One possibility is smart literacy contracts. Bitcoin MOOCs (massive open online courses) and smart literacy contracts encompass the idea of opening up emerging-market smart-contract learning to all individuals worldwide the same way that traditional MOOCs opened up educational courses to all individuals worldwide. A key part of the value chain is having a reporting mechanism (enabled and automated by Ethereum smart contracts, for example) to attest to learner progress. Satisfying the learning contract could then automatically trigger the disbursement of subsequent funds for the next learning modules.

Altcurrencies: More broadly, we are living in an increasingly multicurrency society with all kinds of monetary and nonmonetary currencies. First, there is currency multiplicity in the sense of monetary currency in that there are many different fiat currencies (USD, CNY, EUR, GBP, etc.). Second, there are many other nonfiat, non-blockchain-based currencies like loyalty points and airline miles; one estimate is that there are 4,000 such altcurrencies.

A demurrage currency. It would be an action-inciting currency, a stimulatory currency, because it gets you to do something. Fitbit is a demurrage (action-inciting) health currency, a currency that prompts you to take action. The demurrage (incitory) mechanism is that perhaps in the evening, you see a notification on your Fitbit or smartwatch telling you that you have taken 19,963 steps today, thus encouraging you to reach 20,000; the way that Fitbit and smartwatch present information is a demurrage mechanism that encourages you to take action.

How should we change according to the book?

We should define a Blockchain startegy before we get into the Blockchain hype. Especially we should list what NOT to do:

• ”Not all processes need an economy or a payments system, or peer-to-peer exchange, or decentralization, or robust public record keeping.

• Further, the scale of operations is a relevant factor, because it might not make sense to have every tiny microtransaction recorded on a public blockchain; for example, blog-post tip-jar transactions could be batched into sidechains in which one overall daily transaction is recorded.

• Sidechains are more broadly proposed as an infrastructural mechanism by which multiblock chain ecosystems can exchange and transfer assets.

• With M2M/ IoT device-to-device communication, there are many open questions about the most effective ways to incorporate market principles (if at all) to coordinate resources, incentivize certain goal-directed behavior, and have tracking and payments remuneration.

• Even before we consider the potential economic models for M2M/ IoT payments, we must work out general coordination protocols for how large swarms of devices can communicate, perhaps deploying control system and scheduling software for these machine social networks, adding new layers of communication protocols like a “chirp” for simple microcommunications.

• Second key question is that the blockchain is not for every situation is because we do not want to “economify” everything. We do not want to reduce the qualitative aspects of life to a purely and nakedly economic situation. The idea of a remunerative coin accompanying many more situations and making the economics of situations more explicit

• Not all of the ideas described need a blockchain; they do not require sequential, public, and distributed data storage. They could instead be implemented through other technology such as cloud storage or distributed computing models more generally.”

What should I personally do? 

Keep learning about Blockchain and it’s applications.

Summary

The book in six words – ”Economify, Decentralize, Programmable and Push”.