Block Party

Newsweek International - - CONTENTS - BY ADAM PIORE

The “next in­ter­net” isn’t just for crypto-an­ar­chists any­more. Some main­stream com­pa­nies see Blockchain as the fu­ture for pretty much ev­ery­thing.

oe Lu­bin was Liv­ing in Ja­maica in 2014 when he had the meet­ing that would trans­form him into a crypto bil­lion­aire and a high priest in a new tech­no­log­i­cal ecosys­tem that some be­lieve may one day prove more sig­nif­i­cant than the in­ter­net.

Lu­bin, a 53-year-old Prince­ton-ed­u­cated en­gi­neer with a ré­sumé that in­cluded stints at Gold­man Sachs and sev­eral hedge funds, had long since “checked out.” Alarmed by global debt and what he was see­ing on Wall Street and in Wash­ing­ton, D.C., he had con­sid­ered hoard­ing pre­cious met­als long be­fore the 2008 fi­nan­cial cri­sis was in full swing. He’d even trekked through Peru and Ecuador with his brother, look­ing to buy South Amer­i­can farm­land that might help in­su­late them from what he saw as an in­evitable global reck­on­ing.

In­stead, once the cri­sis fi­nally hit, Lu­bin de­camped to the Rasta na­tion with a fe­male friend. They built a home record­ing stu­dio in Kingston, not far from the beach, and be­gan pro­duc­ing mu­sic and videos. For a time, Lu­bin did all he could to avert his gaze from the car­nage he’d left be­hind. “We felt like do­ing the mu­sic project in Ja­maica would be much less ex­pen­sive and more fun,” he says. “I’m a ter­ri­ble gui­tar player, so I was more of the fa­cil­i­ta­tor.”

Then, in 2011, Lu­bin read about bit­coin, the cryp­tocur­rency in­vented by a mys­te­ri­ous fig­ure known only by the pseu­do­nym Satoshi

Nakamoto. Like countless oth­ers,

Lu­bin be­came “in­fat­u­ated” with

Nakamoto’s idea of dig­i­tal money that could op­er­ate out­side global fi­nan­cial sys­tems, re­main­ing im­per­vi­ous to the ma­nip­u­la­tions of gov­ern­ments and cen­tral bankers. Lu­bin be­gan buy­ing coins and read­ing ev­ery­thing he could find about the tech­nol­ogy.

Nakamoto’s sin­gu­lar in­no­va­tion was the cre­ation of an en­crypted, par­al­lel ledger sys­tem known as the “blockchain,” along with an in­cen­tive struc­ture to get peo­ple to run it on their com­put­ers. Us­ing Nakamoto’s soft­ware, thou­sands of peo­ple could si­mul­ta­ne­ously serve as cus­to­di­ans of a con­tin­u­ously up­dat­ing body of records. The time and ori­gin of ev­ery bit­coin trans­fer and trans­ac­tion were recorded and re­vised at the same time on a mul­ti­tude of in­de­pen­dently run com­put­ers. A ma­jor­ity of these com­put­ers had to val­i­date any new “block” of trans­ac­tions to make it stick. For these rea­sons, it was vir­tu­ally im­pos­si­ble for any­one to hack it, cheat it or ma­nip­u­late it.

Still, it wasn’t un­til five years ago when Lu­bin en­coun­tered a 19-year-old math sa­vant at a meet­ing for crypto en­thu­si­asts in down­town Toronto that the Cana­dian-born en­gi­neer’s time as a record­ing im­pre­sario drew to a close. The young man was Vi­ta­lik Bu­terin, a col­lege dropout whose own in­fat­u­a­tion with cryp­tocur­rency had led him to co-found Bit­coin mag­a­zine. That evening, on Jan­uary 1, 2014, Bu­terin told Lu­bin he’d been work­ing on a wholly new blockchain ap­pli­ca­tion—sim­i­lar to but far more am­bi­tious than the dis­trib­uted ledger cre­ated by Nakamoto.

Bu­terin’s plat­form could in­deli­bly record not just bit­coin trans­ac­tions but any kind of trans­ac­tion on a dis­trib­uted ledger. It could be pro­grammed to au­to­mat­i­cally ex­e­cute com­plex agree­ments, or “smart con­tracts,” in­volv­ing the sale of a stake in a prop­erty, the adop­tion of by­laws by an or­ga­ni­za­tion or the pur­chase of 1,000 bales of cot­ton in six months at $1.50 a pound. And since it would be run in many places on many com­put­ers around the world at the same time, all of it could be done be­yond the ju­ris­dic­tion, and with­out the in­ter­fer­ence, of any gov­ern­ment or cor­po­rate en­tity. Bu­terin had al­ready given the plat­form a name: Ethereum.

To most peo­ple—par­tic­u­larly those who haven’t spent time con­tem­plat­ing how much we are at the mercy of cor­po­ra­tions

I RE­AL­IZED IT WAS GO­ING TO CHANGE THE WORLD. I CAUGHT BLOCKCHAIN FEVER. EV­ERY­THING SUD­DENLY MADE SENSE.

and gov­ern­ments that con­trol the in­ter­net’s servers and data cen­ters—bu­terin’s pitch might have elicited a blank stare. But when Lu­bin read Bu­terin’s pro­posal, or white pa­per, he re­al­ized it was the so­lu­tion he had been wait­ing for: a tan­gi­ble way to fi­nally put into mo­tion the pos­si­ble global trans­for­ma­tion he’d en­vi­sioned with the in­tro­duc­tion of bit­coin.

All of those cen­tral­ized servers could be re­placed by a hive mind com­posed of in­de­pen­dent, in­di­vid­ual ac­tors—one con­trolled by ev­ery­body and no­body at the same time. The toll keep­ers and mid­dle men would be cut out, en­abling new kinds of in­sti­tu­tional, com­mer­cial and gov­ern­men­tal struc­tures, and a dif­fer­ent sort of World Wide Web—a truly demo­cratic “vir­tual ma­chine.” We could take back our data from the Face­books, Googles and Ama­zons of the world. Even the dis­rupters would be dis­rupted.

“This tech­nol­ogy has the po­ten­tial to shat­ter the si­los of power and re-bal­ance the in­for­ma­tion asym­me­tries that dis­ad­van­tage so many,” Lu­bin would later write.

Al­most five years later, that vi­sion has grown into a global move­ment.

As many as 250,000 de­vel­op­ers are now build­ing on the Ethereum plat­form, launched in July 2015 by Bu­terin, Lu­bin and a small core of other pi­o­neers. It has spawned scores of im­i­ta­tors, spin-offs and would-be usurpers, and made Lu­bin and his young friend unimag­in­ably rich. How much Bu­terin’s pi­o­neer­ing re-en­gi­neer­ing of blockchain will ac­tu­ally change the world re­mains to be seen. But we may soon find out.

A Vir­tual Avalanche

in re­cent months, the first of what many ex­pect will be a vir­tual avalanche of blockchain-based projects—on Ethereum and on the many dis­trib­uted ledger plat­forms that now com­pete with it—have be­gun to move from their pi­lot phases to full im­ple­men­ta­tion. The group of peo­ple push­ing these new tech­nolo­gies is no longer lim­ited to a small band of crypto-an­ar­chists, dis­il­lu­sioned Wall Street cast-offs and geeky com­puter pro­gram­mers. It now in­cludes cor­po­rate and gov­ern­ment lead­ers at the cen­ter of the power struc­tures many of blockchain’s early con­verts once hoped to dis­rupt.

Although the uses these lead­ers have in mind for the tech­nol­ogy are pro­saic—sup­ply-chain cus­tody track­ing, back-of­fice bank­ing set­tle­ments, the re-en­gi­neer­ing of food safety sys­tems—they talk about blockchain with an al­most re­li­gious fer­vor. That has cre­ated a manic hype around a tech­nol­ogy many peo­ple are too em­bar­rassed to ad­mit they don’t re­ally un­der­stand.

“Ev­ery con­sult­ing com­pany is ob­ses­sively en­gaged with this stuff now,” notes Sheila Warren, who heads a blockchain project at the World Eco­nomic Fo­rum fo­cused on en­cour­ag­ing the de­vel­op­ment of com­mon tech­ni­cal pro­to­cols and com­mon stan­dards. “There are a lot of blockchain labs in big com­pa­nies—ibm, Mi­crosoft, Face­book, Google, SAP. All these com­pa­nies are pay­ing at­ten­tion.” Some of blockchain’s more rad­i­cal early in­no­va­tors look askance at the ef­forts of Big Busi­ness to co-opt their ide­al­is­tic vi­sions for a uni­ver­sal “truth ma­chine” and mod­ify its ar­chi­tec­ture to bet­ter suit more mer­ce­nary uses. But oth­ers, like Lu­bin, see this de­vel­op­ment as a use­ful step to­ward a larger vi­sion of a new World Wide Web for trans­ac­tions of all kinds. Cor­po­rate spend­ing on blockchain tech­nolo­gies is ex­pected to rise from

BU­TERIN’S WHITE PA­PER HAD BEEN WIDELY READ, AND AN­TIC­I­PA­TION OF THE ETHER COIN LAUNCH HAD BEEN BUILD­ING FOR MONTHS.

BRAIN MAN Col­lege dropout Bu­terin chan­neled his early in­fat­u­a­tion with cryp­tocur­ren­cies into a far more am­bi­tious ap­pli­ca­tion of blockchain tech­nol­ogy: one that could ex­e­cute “smart con­tracts.”

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