Blockchain Ecosystem. Driving mass adoption E-Book

Nicola Attico

• Herausgeber: goWare & Guerini Next
• Kategorie: Fachliteratur
• Sprache: Englisch

Veröffentlichungsjahr: 2020

Beschreibung

Beyond Bitcoin and the world of cryptocurrencies, blockchain is an extraordinary technology that is revealing a surprising transformative power impacting all the industries. Blockchain requires a paradigm shift toward disintermediation and antifragility, which is today even more necessary for business and society.
In this book, the reader will find a representation of the entire blockchain ecosystem from a pragmatic point of view that encompasses actual cases of organizations, companies, and communities that are already working hard to realize it.
To understand an ecosystem so mutable and fragmented and not get lost in its complexity, it is essential to focus on the most crucial factor:  the impact that these technologies can have on our lives in all the world.
A new financial platform, a new way of distributing goods, a new approach to social media, a new market for fine art, a new kinds of governance (yes, also political) are some of the domains impacted by the blockchain that the book analyzes. This revolution is not happening only in Silicon Valley but in multiple hubs around the world, including New York, Zug, Shangai, London, Hong Kong, Dubai, Singapore, Tallin, and more.
Moreover, the Author covers the impact of blockchain on the world of work both for traditional companies that seek to incorporate the new technology in their business model and for native blockchain organizations and communities, which are driving the technology towards mass adoption.

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2nd updated edition, in English: May 2020

ISBN: 9788868963439

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Back Cover

Beyond Bitcoin and the world of cryptocurrencies, blockchain is an extraordinary technology that is revealing a surprising transformative power impacting all the industries. Blockchain requires a paradigm shift toward disintermediation and antifragility, which is today even more necessary for business and society.

In this book, the reader will find a representation of the entire blockchain ecosystem from a pragmatic point of view that encompasses actual cases of organizations, companies, and communities that are already working hard to realize it.

To understand an ecosystem so mutable and fragmented and not get lost in its complexity, it is essential to focus on the most crucial factor: the impact that these technologies can have on our lives in all the world.

A new financial platform, a new way of distributing goods, a new approach to social media, a new market for fine art, a new kinds of governance (yes, also political) are some of the domains impacted by the blockchain that the book analyzes. This revolution is not happening only in Silicon Valley but in multiple hubs around the world, including New York, Zug, Shangai, London, Hong Kong, Dubai, Singapore, Tallin, and more.

Moreover, the Author covers the impact of blockchain on the world of work both for traditional companies that seek to incorporate the new technology in their business model and for native blockchain organizations and communities, which are driving the technology towards mass adoption.

. . .

Nicola Attico is an author, speaker, and consultant who works in the field of digital transformation, automation, and blockchain. He is the author of various articles, books, and blogs about blockchain and its transformational potential. After earning his MSc in Physics, he was a researcher at the University of Pisa and a visiting scientist at MIT in Cambridge. Nicola Attico is following the evolution of the blockchain space since the early days striving for linking business with technology. The first edition of “Blockchain” is a best-selling book praised for his “scientific wisdom and technological passion”.

To Marilena & Elia

Table of contents

Cover

Title Page

Copyright Page

Back Cover

Foreword

Introduction

Introduction to the first edition

Part I Blockchain, a new global infrastructure

Chapter 1 Bitcoin and the blockchain 1.0

Chapter 2 Blockchain 2.0

Chapter 3 Blockchain 2.0, besides Ethereum

Part II A new financial system

Chapter 4 Currency

Chapter 5 Payments

Chapter 6 Exchange

Part III Blockchain applications

Chapter 7 Supply chain

Chapter 8 Decentralized digital markets, beyond Amazon and the Silk Road

Chapter 9 The impact on social media

Chapter 10 Advertisement

Chapter 11 Gaming

Chapter 12 Real estate

Chapter 13 Energy

Chapter 14 Prediction markets

Chapter 15 Data Marketplaces and Decentralized Artificial Intelligence

Chapter 16 Blockchain and Art

Part IV The decentralized web

Chapter 17 A vision for the Web 3.0

Chapter 18 Decentralized File Systems

Chapter 19 Decentralized databases

Chapter 20 Identity on the blockchain

Chapter 21 Browsers and Wallets

Chapter 22 Oracles

Chapter 23 Blockchain computing

Part V Governance

Chapter 24 Decentralized Autonomous Organizations

Chapter 25 Voting and democracy

Chapter 26 Crypto Nations

Conclusions

Bibliography

Foreword

On October 31st, 2008, amid the financial crisis —just after the bursting of the real estate bubble and the bankruptcy of Lehman Brothers— a paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System, appeared on the cryptography mailing list metzdowd.com. The article was signed with the pseudonym “Satoshi Nakamoto.”

To grasp the significance of this event, we must go back to twenty years earlier. Around the middle of 1988, a group of young programmers with a precise political conscience wrote The Crypto Anarchist Manifesto. They wrote: “A specter is haunting the modern world, the specter of crypto anarchy.” In March 1993, A Cyberpunk’s Manifesto spread these ideas further. It was already apparent to these young experts something obvious today. The personal computer —including the smartphone, the miniature PC that we all have in our hands— while on one side is an instrument for being oneself and being free citizens, on the other, is an instrument for control and supervision. Any behavior can be traced. The data produced by everyone becomes wealth in the hands of large global players. The citizen’s sphere is continuously subject to the threat of violation. So: “Privacy is necessary for an open society in the electronic age.” Cyberpunks —but it is perhaps better to use the more precise definition: Cypherpunks— offer an answer: “Privacy in an open society requires cryptography.”

Thus cryptography, the art of which these young programmers are passionate enthusiasts, will no longer be an instrument in the hands of governments and public bodies, oligarchies, and large enterprises. Cryptography will become an instrument to protect individual freedom. Encryption becomes a mask that guarantees anonymity: citizens can selectively reveal what is needed, when and to whom they want. “We, the Cypherpunks, are dedicated to building anonymous systems. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.”

Several voices have arisen to criticize the fact that those who made Bitcoin available twenty years later did not reveal their identity. Various investigations have tried in vain to show who is hiding behind the pseudonym “Satoshi Nakamoto.” But these are the voices of journalists looking for scoops, or worse, representatives of entities that do not intend to give up checking and supervising. Still, various tracks link “Satoshi Nakamoto” to the Cypherpunks, which already twenty years earlier had supported the political virtue of anonymity. The choice to remain anonymous should, therefore, be understood as a choice of seriousness and consistency.

The project is ambitious and utopian. Taking for granted that every citizen has her personal computer, it is a question of allowing them to exchange goods and services, and of being rightly rewarded for this, without any intervention by “financial institutions serving as trusted third parties.”

So here comes the blockchain: it is the ledger, the permanent unmodifiable register of all transactions. A ledger that does not reside on any single central server. Instead, it is distributed on the computers of all the network participants.

Since October 2008, only twelve years have passed. The success of Bitcoin as a currency, and the reputation gained by the blockchain as an alternative to the traditional databases, can reasonably have surprised the original proponents themselves. A technological experiment —founded on cryptography and politically oriented in an anti-oligarchic sense— has turned into a technology of enormous importance, comparable in its potential to the Internet and the World Wide Web.

Reasonably, those who ride the new wave —financial speculators, developers, startuppers— often ignore the story. Indeed, they consider it negligible. They don’t care about the precursors. And yet, only by going back to its origins —as the author of the book always rightly does— you can fully grasp the potential of a technological system. The same trusted third parties —financial institutions, public entities—, all committed today to develop their blockchain, will benefit from remembering the intentions from which the original blockchain was born.

Therefore this book constitutes a practical approach to this subject. The author, like a Cyberpunk, is driven by a passion for computer science intended as a substrate for a new social life. But his enthusiasm is mitigated by scientific education. Nicola Attico graduated in physics, maintains the gaze of the researcher, moving with excellent skills in an overabundant mass of information that accumulates daily. He describes with equanimous respect radically different technical choices, without ever let the excesses of partisan opinions influence yourself. In this way, he expertly describes the new ecosystem that every manager and citizen will have to understand. Therefore, each reader will have the opportunity to form his personal opinion.

Francesco Varanini

Introduction

“Unthinking respect for authority is the greatest enemy of truth.” Albert Einstein (1900)

The blockchain —born as a byproduct of Bitcoin’s original invention in 2008— has gone through a significant hype cycle, with its peak corresponding to the cryptocurrencies market bubble in 2017 and its trough to the burst at the beginning of 2018.

Over the last couple of years, during a period of high volatility of the crypto market, the blockchain community has experienced a phase of maturation in which the use cases have gradually consolidated across all major industries. Significant projects begin to emerge –for example, in the world of finance and supply chain– although still in the absence of a substantial mainstream adoption.

The future of this technology is in a definition phase, and its success depends on a paradigm shift that is not going to happen overnight. Still, the impact that the blockchain can and will have from both an economic and social perspective is extraordinarily significant.

Blockchain is a big challenge started by a small community after the 2008 financial crisis, accepted and signed by ever-wider parts of the business and society joining the bandwagon. Although the number of actors ready to bet on the importance of the new model is steadily growing, the real adoption has not taken place yet. A mass effect must happen for the blockchain to become truly valuable to the community.

For many actors —incumbents and startups— who want to join the conversation, it is vital to understand the real state of the ecosystem. Mature projects (Ethereum, Hyperledger Fabric, Hyperledger Indy, and others) and more experimental ones (for example, IOTA, Cosmos, Polkadot) have different perspectives. Scalability, performance, and interoperability issues also need to be addressed. It is still very uncertain how the market will evolve in the future, and competition is intense.

Figure1 - Comparison between Nasdaq Composite Index (IXIC) and Bitcoin (based on exchanges on the Coinbase exchange) from the early days till 2020

At the same time, it is also important to discern between projects that aim at decentralization in a radical way, such as Ethereum, and projects that arise in the context of the more traditional business world. These are the so-called Distributed Ledger Technologies, or DLTs, such as Hyperledger Fabric or R3 Corda. DLTs want to evolve how companies, consortia, and associations can interoperate and automate transversal processes. Both conversations are crucial, but they represent two different motions. The first points to a revolution of the entire economic and social world. The second aims to an evolution towards a greater organizational interdependence.

The evolution proposed by private blockchains has lights and shadows. The possibility for organizations to better interact can have positive outcomes, linked to a higher level of openness and collaboration, but also negative perspectives, if technology gives companies a more significant opportunity to self-determine at consumer disadvantage. In this sense, consumer associations need to understand this new technology deeply and should also look to blockchain as an essential bottom-up coordination tool.

Instead, the revolutionary approach of open blockchains implies a substantial transformation of today’s organizations, in a more disintermediated sense. In this scenario, successful market incumbents in every industry have a clear innovator’s dilemma. In this area, the most significant contribution comes from innovative startups, able to demonstrate and promote disruptive use cases. As a main example, the finance sector has seen a proliferation of companies dedicated to the so-called Decentralized Finance, or DeFi, which aims at the disintermediation of traditional financial institutions.

Blockchain success depends on an extremely delicate tradeoff that the potential end-user still struggles to perceive. In its most ambitious and revolutionary version, the blockchain can allow us to disintermediate many services in the hands of large corporations, and even the states —as Bitcoin has demonstrated for the currency. Disintermediation may prevent the establishment of arbitrary decision-making power that should be in the best users’ interest. In the evolutionary approach, the distributed ledgers want to help the incumbent organizations to function in a more coordinated way and allow a co-opetition process for the benefit of all.

Obviously, there is a clash between these two different positions. However, we are used to the fact that disruptive technologies can follow this type of divergent trajectories. This dynamic may remember the conflict between the initial hacker ethics of the Internet and the arrival of corporations. Despite this, the blockchain has a chance to transform businesses and, paradoxically, the open blockchain movement will most likely leverage the success of DLTs, in the same way as intranets were foundational in the consumers’ awareness of the global Internet.

The organizational perspective is the most crucial viewpoint to look at the blockchain. The technology promotes more open organizations and institutions, cross company processes, and the possibility of bottom-up coordination. We will cover the topics of Decentralized Autonomous Organizations and the Web 3.0, that are still on the rising part of the hype cycle, and can contribute to a wide organizational transformation of companies and consortia on a longer time horizon.

Also, a key variable is how regulators will play in defining the overall technology roadmap and evolution. To date, the approach of regulators has been quite inconsistent, severely hitting individual projects based on visibility, and letting others go without clear guidance. Going forward, regulators should adopt a more coherent approach to better convey the innovation coming from the field, and allow a better and faster evolution on the market. Like it has been for the Internet, blockchain projects and applications are intrinsically global and don’t fit very well with the fragmentation of the regulator landscape.

The goal of the book is to provide an overview of the most critical applications enabled by the blockchain. We will discuss the foundational use cases, which are at the basis of the philosophy and logic of the new decentralized platforms. Some of those, as we will highlight along the way, are ready for mass adoption, and users will come. Others represent possible –sometimes utopian– scenarios that could occur in the future, in one form or another, depending on how the technology will play out.

Introduction to the first edition

“This is your last chance. After this, there is no turning back. You take the blue pill—the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill—you stay in Wonderland, and I show you how deep the rabbit hole goes.” The Matrix (1999)

On September 15, 2008, Lehman Brothers collapsed, starting one of the worst economic crises since the Great Depression of 1929. Previously, the markets had passed through the infamous dot-com bubble, from which the technological giants of our days arose. During the dot-com bubble, the Nasdaq index —representing a significant part of the technology market— peaked in March 2000 over 5,000 dollars, and dropped almost 80% by October 2002. Nasdaq has recovered in the following years up to today’s values between 7,000 and 8,000 dollars.

Two thousand eight was the year of the invention of Bitcoin by Satoshi Nakamoto, one of the brilliant minds of our times who remained anonymous. Bitcoin, the first decentralized electronic money, still dominates the cryptocurrency market. In October 2018, about 2,000 altcoins —cryptocurrencies alternative to Bitcoin— were traded on the most important crypto exchanges. The crypto market has experienced a collapse of the capitalization from 550 billion dollars, in December 2017, to the current 90 billion, in September 2018. It is a net loss of more than 80%, comparable to the fall of the Nasdaq index during the dot-com bubble, which lost 78% of the value from the peak.

Figure 2 - Comparison between Nasdaq Composite Index (IXIC) and Bitcoin (BTC) from the early days till 2018