What we do right now, in the early stages of the blockchain revolution, will have a lot to do with what this new technology looks like to future generations.
Though the initial design of such a system was set in motion when Bitcoin inventor, Satoshi Nakamoto, released a nine-page white paper that summoned an incentive-based blockchain structure into existence, how that decentralized system will incorporate changes going forward is at least as important as how it operates right now.
The salient point is that in the present we have the potential to design the future we want rather than sitting back and letting the cosmic dice land however they may.
Blockchain: The New Global Infrastructure
We may be closer to the world of The Matrix than we realize. For example, US citizens spend about 11 hours daily in front of some kind of connected device, and this number is expected to continue to show double-digit annual growth.
At present, the majority of this expanse of time is devoted to highly centralized networks like YouTube, Facebook, and Google, and power among this handful of titans who control the data continues to consolidate. It’s not a stretch to say that such networks, as currently constructed, do not serve our best interests.
As the decentralized juggernaut that is blockchain technology emerges as the new global infrastructure, this might be our one best chance to design a more equitable power structure into the system this time around.
The Big Bang All Over Again
How many times do we get to see a new government ushered into existence and watch as it experiments with various forms of governance. The analogy to blockchains is appropriate, except this technology allows for hundreds of systems and policies to be tried simultaneously and either discarded or accepted to maybe be modified at some future point.
The growth process will almost certainly be painful and ugly to watch but humanity might find itself learning from scratch what works and what doesn’t more quickly than ever before. There are two factors at play here in this concept of blockchain governance.
#1. Incentives: The reward structure built into Bitcoin mining has been a ridiculous success that has advanced this cryptocurrency forward to the tune of a $150 billion market cap and a network ten thousand times more powerful than the top 500 supercomputers in use today. Expect the future balance of power to swirl around this idea.
#2. Coordination Mechanisms: With the idea of 100 percent agreement between all parties using a particular blockchain not realistic, the process of affecting change falls to whichever parties are best able to convince others of the wisdom of any given position.
The Status Quo
So where do we stand when it comes to governance of the world’s current two largest blockchains, Bitcoin and Ethereum? In regard to each, how have incentives and coordination mechanisms worked together and what has been the result so far? At present, the development of both companies has been similar.
As the first standalone blockchain, it’s unavoidable to look to Bitcoin as an example governance. Thus far, the checks and balances system has worked in a manner similar to the US government. Developers can submit requests for changes and miners decide whether or not to implement them.
If they don’t like certain changes, users can revolt and move to another cryptocurrency blockchain. And like the US government, it is not unreasonable to say the system will eventually grind to a halt based on the unequal distribution of incentives.
Miners tend to want changes that increase their income through ever-higher transaction fees, while developers eventually realize working on the blockchain itself yields nothing for them, so they drift off to different projects.
The group with the greatest vested interest is the one containing early core developers who become adverse to new technology for fear it will restrain Bitcoin’s gonzo upward price run. If this system gets too far out of whack, we’ll be back in a centralized monopoly before you know it.
Will Blockchains Survive?
Just like the original internet designers may not have realized they were creating systems which would, to a large extent, define the future of humanity, blockchain technology gives rise to a similar conundrum. Will we be able to intelligently guide the evolution of blockchains, or will the whole thing explode into a petty mess like a bad episode of Survivor?
With blockchain technology, it’s not too much of a stretch to say that, on one hand, we’re creating systems with the power to generate freedom and prosperity for eternity.
On the other hand, hopefully without sounding like too much of a tech paranoid, remember Terminator 3: Rise of the Machines?