By Thomas Marckx - The Ledger - Cronos
Hi there, you might have experienced it as well. Some bearded guru-type IT-guy is explaining Blockchain technology and the first thing they start to discuss is Bitcoin. If you’re lucky, he uses small and understandable words; if not, before too long you’re drowning in hash-functions, merkle-roots, game theory-based consensus algorithms and bidirectional channels. I’ve seen too many presentations where the speaker loses his audience at lightning speed. This occurs because the potential of blockchain is not technological, it’s economics … stupid.
In the beginning … no sorry, too much grandeur. Mankind has always traded amongst each other. First within their own clan or tribe, later between settlements and finally all around the world thanks to globalization. Our wealth is nothing but the sum of goods and services, produced by a society. It’s the total of all types of human actions where assets are interchanged. These transactions of proprietary – just a fancy words property – are done according to predefined rules between partners; AKA a contract. The execution of a contract can result in a difference of interpretation and might need to include many middlemen or 3th parties. This leads to higher costs, slower transaction times and increasing litigation. If only we could automate this … if only.
No no no, there are no robots on the blockchain – yet – but we can transform a classic contract into a smart one, written in code. Mostly it comes down to something like: “if (you give me stuff) then (I give you money) else (problems)”. We can deploy this code as a transaction on a blockchain 2.0 network – like Ethereum or Hyperledger Fabric. In se, we just created a decentralized program which will run exactly the same on the different peers of the network. What? Sorry … don’t leave … I’ll make it simpler. We’ve made a program – the smart contract – which runs on the entire network, like a supercomputer. Just like you can’t tamper with a transaction once it’s placed on the blockchain, no malicious person can manipulate the code. The contract – the trade rules, remember – can now execute itself and interact with other services on the internet. If we add a clause that the code can only run when both parties have digitally signed it. Thus, we automated the execution of a contract.
Many middlemen we encounter today can be replaced by these smart contracts. It’s even theoretically possible to create a contract with all the business rules of a bank, replacing classical ones – more or less – completely. We can create companies and organizations which operate without the steering of humans and which become sentient economical entities. The Decentralised Automated Organisation (DAO) is born.
Get ready to compete with your toaster ;-).
We at TheLedger. (part of the Cronos Group) live on the blockchain – not literally. We’re setting up full-stack systems, including blockchain tech. We’re also doing evangelical spreading-the-word work and give workshops in different technologies. But mainly, our goal is to help companies further automate their business processes.
About the author
| Thomas Marckx is a Cloud and Blockchain developer at TheLedger (Cronos). Having always a big interest in economic theory and computer science, the potential of blockchain is pretty clear for him. Besides developing, he also spends time explaining these new technologies to companies, students and enthusiasts in general.
The TheLedger is a Blockchain consulting in Belgium and The Netherlands - part of the Cronos Group.