Blockchain and the End of Humanity?
I’ve tried hard in my life to avoid being an alarmist (although I did use a catchy title to get people to read this post!). What I’ve learned in my 40 years is things are rarely as bad as they seem, especially when given time for new ideas to settle into our minds. While I’ll admit I hid in a cabin in the northern California woods during Y2K, similar bouts of world-ending fever haven’t occurred in my life. With a seasoned perspective, I’ve managed to rise above the hype and limit the number of times I’ve been baited by hyperbolic predictions.
Then came along Trent McConaghy on a rainy afternoon in New York City at the world’s largest blockchain conference, Consensus 2017. If you don’t know about blockchain, you’re not alone. Coindesk, the organization which hosted the conference, has a nice summary you can read here. Put very simply, there are two major components of the blockchain movement: crypto-currency and distributed ledgers. The former is well-known. Think Bitcoin. The latter is where many technologists argue the world is about to change. Distributed ledgers allow transactions between entities to be digitally recorded on a “block” in an open ledger that other members of the blockchain can see and verify. Each block is tied to the one before it, creating a chain of transactions which are time-stamped and supposedly immutable. The transparency of the blockchain and the consensus of each node in the chain that a transaction is legitimate is what allows for a decentralized system of record-keeping.
Blockchains can be private or public. But their fundamental purpose is to record transactions in a decentralized and transparent manner where there is no need for an intermediary like a government entity. While the movement of crypto-currency between individuals or businesses is an obvious example, blockchains can also be used to document a variety of transactions such as transfers of digital assets. For example, an investor could buy a digital share of stock with crypto-currency and have the ownership of that stock transferred from the seller to the buyer via entries on the blockchain. It doesn’t take much imagination to see what can happen when assets can be transferred on a blockchain without a third-party intermediary. For those who love free markets and decentralization, blockchain represents a huge opportunity to operate outside the reaches of government regulation. Imagine a world where transactions weren’t subject to “red-tape,” regulatory fees, or even government corruption.
So, back to Trent McConaghy and the potential for blockchain to end it all for humanity. I walked into his presentation with full awareness of how blockchain could make financial transactions more efficient. What I didn’t see is that blockchain is not a novel mechanism to improve our current free market society, it’s a different style of economic system altogether. And that has major implications. Consider the following. Throughout the history of mankind, there have been two requirements for civilization to function: a store of value (e.g., money) and a system of trade (e.g., bartering, purchasing, etc.). Whether it was a pelt traded for food or US dollars used to buy a house, humanity is built on stores of value used to conduct transactions. When there is no intermediary or human intervention in conducting transactions and the legitimacy of each transaction can be digitally memorialized on the blockchain, then who is to say this new economic system is only for humans?
In an example Trent gives in a blog post, a person could create an AI by virtue of writing a piece of self-executing code which could design and sell digital art online while accumulating digital wealth with each transaction. Crypto-currency would allow the AI to sell its art online in exchange for ownership of the intellectual property to that art (similar to how things operate in the “physical” world). And the entire transaction would take place with no human intervention but would be recorded as a valid blockchain transaction. And with the proliferation of machine learning in fintech, the AI could pump out a lot of diverse art with very limited incremental cost. As Trent told us in his presentation, such a system could lead to the creation of AI millionaires. And it could be impossible to turn off the AI.
This example may seem far-fetched. After all, turning crypto-currency into fiat currency like US dollars which can purchase physical assets requires interaction with the “real-world.” But consider a world where the conversion of something like Bitcoin to US dollars is unimportant because large numbers of asset classes can be obtained with crypto-currency itself using the blockchain to record the transaction. What if the deed to a house wasn’t recorded with a county registrar office but instead home purchases were simply transfers of digital assets on the blockchain made through the use of crypto-currency? Could the AI described above (the one building wealth through the sale of digital art) save enough Bitcoin to purchase your home? I know, sounds crazy, right?
To me, the potential threat from blockchain could occur when two things happen. First, crypto-currency will need to challenge fiat currency as a store of value. Personally, I don’t think that is impossible. After all, the world’s foremost fiat currency, the US dollar, is essentially based on nothing but a promise of value from a government mired in nearly $20 trillion of debt. Second, there will need to be a critical mass of transactions moving from traditional centralized ledgers to distributed ledgers. Given the lack of security of existing record-keeping systems (e.g., the endless number of security breaches in the retail industry such as credit card theft), this also doesn’t seem impossible. Will it take time? Absolutely. I don’t see an AI buying my house anytime soon and I don’t see humanity perishing at the hands of distributed ledgers! But it’s worth remembering what blockchain has created is not only a path for humans to act in a decentralized economic system, it’s also created a new economic system where the players don’t necessarily need to be human. And that should give us all pause.