If There Was No Blockchain, It Would Have to Be Invented
This article was written by philosophist and member of Russia’s Futurology Association Alexander Boldachev exclusively for ForkLog.
There have been lots of words as to bitcoin and blockchain capable of dramatically changing the organization of financial relationship. My purpose here is to show that blockchain isn’t a mere new technology or a new algorithm, but a fundamentally new ideology of social relations that will up-end our lives.
Money Is a Document
Fundamentally, the money’s purpose is similar to that of any other document, like passes, certificates, licenses, contracts, diplomas, etc. They are required to confirm that some earlier event entitles one to perform an action here and now.
If I have money, it means I’ve sold something of my own â€“ my time, skills, or work of my art â€“ and now can buy someone else’s work time, skills, or works of arts. Money are documents to certify a person’s right to perform a certain action, which is an act of buying and selling.
Because the event of obtaining a right and the event of using it are separated in time and space, there is a need for documents confirming that right. Such events like graduation, beginning of work at a closed facility, or marriage give grounds to make some events in the future. In order to confirm that one has indeed graduated from a university, works at a secret institution, or may inherit something, he or she has to have papers â€“ in this case, a diploma, a pass, or a marriage certificate.
The acts of production and consumption are also separated in time and space, so we need an intermediary document to exchange the products of our labor for, and, in its turn, exchange the document for what we intend to consume. Money is the document confirming our right for the event of purchasing consumer values.
Document Circulation Is Our Life
Creation, verification, and administration of documents are procedures coming from the need of record and link social events. In fact, the function of document circulation is one of the biggest obligations of governments or institutions. In order to merge lots of separate events into working social systems, we need papers, thousands of them, millions of them, and millions of people making, verifying, sending and checking them.
However, has anything changed once computers and the internet emerged? Essentially, logically and mechanically, it’s all the same; it’s just the speed of documents has increased, as it became easier to create, store and search them. A contract, instead of being carbon-copied three times, is now editable as a file. One may keep their money on a bank account as a record instead of putting cash in a safe. Instead of handing banknotes to a seller, you may transfer them from your account to the store’s account just by putting a plastic card in a slot.
Yes, it’s faster and easier, but the principle remains the same: any event has to be recorded (in an electronic document), data on the event is stored in the form of documents (a database in this case), and exercising a right to perform a new even requires a document. It’s electronic, but it’s still a document. It means that, just like as before, it is documents that are recorded and exchanged, not the events originating them.
Financial Relations Overturned
But then bitcoin creator Satoshi Nakamoto and his original blockchain protocol showed up. The protocol has a completely different approach towards the exchange: the question of ‘how much you got’ becomes secondary, while the primary purpose is to record and protect the event of sending/receiving coins from falsifying.
Satoshi, probably without fully understanding it, has proposed a completely different principle of relationship between the elements of our society: you don’t have to keep documents certifying some events; you should operate the events themselves. In fact, blockchain is a mechanism of storing events. It is a distributed time-event database.
Let’s compare two approaches towards financial relations: the traditional (document-oriented) and the event-oriented, which underlies bitcoin. In the first instance, we deal with lots of bank databases, and transferring money from one party to another is implemented by decreasing the value in one database and simultaneous increase of the value in another. In fact, it’s just automation of replacing a bank note to a different pocket. The responsibility for the money’s continuity is completely born by the bank.
In the second instance, we have a single database, which stores not accounts or amounts, but the events of exchange. A party has only an identification number and a password which he or she is responsible for storing, but the correctness of recording and continuity of their immutability are maintained by the technology’s algorithm. You need no documents: any event of exchange between the system’s members is confirmed by events in the system.
It’s a widespread opinion that blockchain is applicable for document circulation. Indeed, I may scan my diploma and pack it in a blockchain. But what’s the sense? Confirming I had the paper at the moment of adding the block? Does it guarantee I really graduated and therefore had some qualification? Not at all. I might have forged the diploma, or even bought it without attending a single lecture.
The essence of blockchain is not in safe storage of a document, but in the fact that it is an event-oriented database, and therefore has to store events, not documents.
Let’s use the situation of confirming my higher education while entering a job as an example. Today, the event of graduation is recorded in a specific document called ‘diploma’, which is a paper copy of a record from the university’s database. If I have this paper, I am entitled to participate in a multitude of events generally known as ‘competition for a job’. If they hire me, the organization’s database includes a record on my higher education. Now we have to ask ourselves: why do we need a diploma if we’ve got blockchain, a system designed to safely store data?
It’s either a paper, as a unique and unfalsifiable record of an event, which may, in its turn, be included in other events as a mandatory condition. While entering a work, I have to show my identifier, and the organization, while generating the ‘hiring record’ has to reference the existing event of ‘graduation’.
The event of ‘graduation’ has to be recorded once there are all electronic signatures of the commission’s members as provided at the moment of graduation. Sure, the signatures of that event have to comply with an earlier event, which is ‘assignment of the commission’s members’.
Those who know the concept of smart contracts already see that this example describes the basics of that technology. We have an event that might occur only in the presence of other events, and that later becomes a condition for forthcoming events. If all those events are recorded onto the blockchain, we may just forget about documents like diplomas.
The same is true for any contract, i.e. a document certifying some sort of event (like ‘purchasing property’), which puts on obligations and entitles to perform some events in the future (in this case, ‘paying taxes’ and ‘selling the property’). If we use blockchain to record the events listed on the contract, and introduce events of conditional relations with other events, therefore any contract, as a paper to confirm something, becomes totally meaningless. The transition from document-oriented approach to event-oriented makes the very term of ‘document circulation’ completely futile.
How and when something occurred, and what may happen to it next, is now important, while having something is not. The diploma, i.e. a piece of paper with signatures and stamps, doesn’t matter; the event of graduation (the event, not a paper prone to forging) is what actually matters and entitles the person to participate in competitions for a job. Similarly, it’s not the paper contract on a house’s selling that matters, but the event of ownership transfer, which entitles the new owner of initiating a new event of selling and regularly perform the event of tax paying. The fact of having $20 in a pocket or $1m on a bank account is not important; the events of legal obtainment of such amounts is what really matters, as it entitles the money owner to participate in forthcoming events of their exchange for goods or services.
It is quite clear that the future will see not some automatic document circulation, but systems of recording and conditionally linking events. The main ideological value of bitcoin and blockchain technology is not in decentralization or removal of intermediaries, not in data privacy or their immutability, but in the idea of abandoning documents and operating events.
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