Want to go beyond Bitcoins? We outline what is needed for a successful blockchain industry in 9 simple building blocks.
We view each one as critical infrastructure to enable sustainable commercial businesses to operate on a blockchain.
3. โข Growing ecosystem of blockchainโsโ
โข Made up of both increasingly specialised
private blockchains designed for enterprise
grade solutions and customisations
โข Or Sidechains off core bitcoin blockchain
protocol but that link in parallel
โข Promises blend of private / public chains
โข Need for ease of โcross-chainโ calls
1. Bridges
4. 2. On / Off Ramps
โข Regulation highly localised / emotionally led (fear
of crypto / Bitcoin in particular)
โข Encourages blockchains to start as decentralized
as possible then localise pragmatically
โข Leverage friendly jurisdictions with history in
innovative financial services industries (e.g. Isle of
Man)
โข Big opportunity for locales that move first to
become epicentre of physical economy
5. 3. Roles & Responsibilities
โข No clear successful business models for
decentralized economy as yet
โข If you donโt own code or data how do you
make money in a way you can protect?
โข Ethical and legal requirement for clear
definitions and responsibilities
โข Watch out for legal precedents and landmark
prosecutions that define space
6. 4. Identity
โข Semi / Pseudo Anonymity as current basis of
blockchain is limiting for commercial use without
some linkage into real world
โข Especially legal requirements like KYC (Know Your
Customer) #Finserv
โข Identification currently a duplication-of-work for
blockchain start-ups
โข ID with real world verification for people and
possessions a must
โข As well as universal ID for DApps login
7. 5. Reputation
โข Reputation in a โtrust-lessโ marketplace is a challenge
โข Need strong incentives and disincentives for behaviour.
โข Currently reputations siloed (best e.g. Dark markets)
โข Questions around Smart Contracts & their real world
enforcement
โข Universal reputation; individuals and collectives of
individuals beyond specific purpose
โข White-listing (building trust networks) vs. black-listing
is central debate
8. 5. Governance
โข Who drives core development of base layers such as
Ethereum or Bitcoin Blockchain and to what agenda?
โข How is this financed and what transparency is offered?
โข Balancing serving libertarian vs. commercial agendas
challenging
โข How is core development aligned with niche vertical
interests and trade-offs
โข Is there a role for est. trade organisations to lead dev of
industry side-chain
โข Untangling Bitcoin 1% interests and broader more
diverse ecosystem
9. 6. Stable Token of Exchange
โข 99% of Bitcoins are in the hands of 1% of people
making vulnerable to market manipulation
โข Bitcoins exchanged largely for exchange itself
rather than utility. Increasingly so by VCs and
traders
โข Price volatility exposes merchants treasuries to
too much risk to make viable means of exchange
โข Need tokens that can be pegged to currency of
business costs at point of transaction
10. 7. Usable Security
โข Basic tech is extremely secure but history is riddled with
hacks & theft
โข Why? Largely centralisation. If Bitcoin exchange stores
private keys its Bitcoin addresses in a badly secured
database server bad actor obtains access to this server,
they can steal the Bitcoin funds.
โข The weakest links are in the technologies surrounding the
blockchain and the people using them.
โข Encrypting all interactions between components and
actors, and handling the encryption keys in a secure way.
โข We expect to see more user-friendly security principles.
E.g. two-factor authentication, multisig transactions and
hardware cold storage wallets etc. will become more
mainstream.
11. 9. ECONOMICALLY VIABLE PROCESSING
โข Economics of Bitcoin mining only make sense at a centralised
industrial scale
โข Which is in direct opposition to Bitcoins algorithm which seeks
to cancel out these efficiencies
โข In other words its deliberately wasteful. Which is unsustainable
both from a financial and ecological perspective.
โข Pressure to reduce costs and increase output could result in
sweat shops.
โข Possible solutions; 21s putting mining into everyday devices,
tapping into existing latent processing networks such as
gaming or replacing with P2P distributed systems of users