A while ago, I found a position for myself that gives me some detachment. A detachment to relinquish all titles and postures.
In ancient Egypt, to be fluent in hieroglyphs was to be invested with the power of the gods: only a select few scribes and priests had access to this complex and arcane world of symbols and high status.
What’s more, they guarded their knowledge jealously – often deliberately adding a theatrical gloss of ritual and intrigue for good measure.
It was much the same for the Cistercian and Benedictine monks tasked with copying out the gospels in bewilderingly unpunctuated calligraphy, sat at their benches in echoing gothic corridors. Later still, it was the alchemists of the early Enlightenment who operated under the cloak of secrecy, using a coded language of allusion and formulae to keep the Philosopher’s Stone from falling into the wrong hands.
Doesn’t it sound quite a lot like Blockchain?
As flattering as it may be to feel to be part of an exclusive international philosophers’ club, we need to accept that Blockchain will never fly unless we bring it down to earth.
Crypto-believers need to stop daydreaming about armchair-based revolutions and start making Blockchain relevant to the real world …Even if that means giving up some pretensions to ‘oracle status’. Anti-establishment postures are not a valid statement nor a governance at all.
Don’t get me wrong: I genuinely believe we are on the edge of a financial revolution - I just think the time has come to switch our gaze from ‘Unicorn Island’ to the more mundane realm of everyday business!
Accordingly, we shouldn’t be looking for guidance and endorsements from crypto-celebrities and conspiracy theorists. Rather, we need to refocus on how money is derived from the cultural realm. Jack Weatherford wrote a splendid book that covers this topic.
The key thing to understand is that the financial world has arisen from our cultural realm (as indeed have all systems of knowledge and interaction). Financial conventions and instruments are our financial language and our financial institutes are the academies of Financial Linguistics built to avoid financial Babylon.
(By the way, don’t be fazed if blockchain articles written in IT language intimidate you: Hard times are quickly forgotten in times of plenty. :) )
In other words: Financial systems are like a common set of languages and conventions that are necessarily grounded in everyday life: Without this grounding in the real-world, it’s just the stuff of legends, hucksters and mad scientists.
Lets begin to develop a different voice to articulate well the importance of blockchain without any bent or distortion or being marginalised. In this new blog-series, I want to start from this ‘real world’ premise and build up a real-life financial case for blockchain. It’s a model I’ve had in production for some time now...
I want to try to give blockchain a fresh voice, free from the jargon and sensationalisation that has done little to advance constructive development (or understanding!) so far.
The idea is to try to talk about Blockchain and its applications in a way that doesn’t need a math Ph.D or an I.T. M.Sc. …or a thesaurus!
Let’s start with the really fundamental terms – so important to get a clear understanding of these, without any jargon:
Actor: An entity that can act / perform (can be a person or a code).
Asset: Something of value. Can be a real or derivative currency, estate, medical record, equipment, owed money, skilled workers, etc.
Account: A record by which an actor holds assets.
Transaction: An exchange of assets between actors. e.g., Marie can send money to Peter and Peter can transfer ownership of his apartment to Marie.
Very straightforward definitions I reckon – but you’ll be amazed how often these crucial terms are used incorrectly or not defined or defined in a really complicated way.
For example, the term ‘smart contract’ has got to be the most atrocious term in the blockchain world. Ethereum, Bitcoin, Hyperledger... they all define ‘smart contract’ with so much marketing-glitter, it lost the art and loses any sense of either ‘smart’ or ‘contract’.
Let’s follow Jack Weatherford’s premise and see if we can do better by connecting the term to the real cultural realm:
Contract - A binding agreement between actors (and their accounts) relating to a certain asset between a specified start date and end date.
Smart - Ability to apply / perform adaptably.
Smart contract - A contract which is able to apply measurements and perform transactions adaptably.
Whatever terminology we construct, it is obligatory to make it evidential and validated. Plain and simple!
It’s tempting to raise our eyes (and our clients’ eyes) to the glittery heavens but losing sight of the real world will empty your application of practical value and will place it in the ever more crowded ‘Unicorn Island’, where bright ideas go to die.
Next point: If you want to trade with digitalised assets, you have to ensure you have taken care of legal implications. Covers, claims, legal disputes, custody, heredity, etc...
This memento demonstrates perfectly how crucial it is to have legal imprint in the systems we orchestrate...
Furthermore, our systems must be credible – that is, believable, which means it should also be understandable and with some basis of proof and reliability.
Creditability must be provided at different levels:
- data arrival: lawful timestamping
- data storage: immutable storage
- data processing: identifiable execution
Lawful timestamping requires qualified timestamps from a certified third party provider. This is to make the dates of events evidential (enough for legal base of argument).
Immutability means: unable to be changed. Regulations are always resolved on organisational level and never on technical level leaving the camouflaged opportunity open to any senior at a bank to change anything actually. Believe it or not, it is an every-day practice in any financial institute.
Identifiable execution means a verified and permissioned execution of any business action on the data stored.
Whatever system we build, it has to be designed to meet all the levels of creditability. If a smart contract is performing the transition of ownership of a flat, the process has to be legally clear and obedient to a court of law all the time.
Identification has a lot of angles to unfold, so I’m going to leave that to the next blog entry,