Blockchain is inherently a disruptive technology for the entire world. Its technology allows for transparency and interoperability of data systems that have previously been impossible using legacy technologies.
It’s important to start that it’s also an iterative technology. One that takes previous technologies and makes them better, namely, electronic data interchange or EDI. Starting as a means for military data systems to exchange information between themselves, EDI evolved into powering logistics and financial systems that rely on information needing to be passed between varying systems at scale and speed.
However, although EDI became standardized and companies across the world adopted it, it became too complex. Requiring intermediaries to process changes on each system in tandem meant that there existed fail points for any system to not process a change. Redundancy being that entire systems would have to recheck or re-validate each movement of data at each stage, a costly and time consuming way of checking work.
Blockchain flips this paradigm of each system fact checking itself. Instead, when data exchanges from point A to point B the entire system or chain receives the update at the same time. When paired with a proper consensus model this yields astronomical efficiency gains both from a compute perspective (energy savings) but also a time savings as the system remains always up to date — no need to wait on books to be consolidated or accounts to be calculated.
Due to the technology always being up to date, its numbers work in a pure statistical manner. Meaning that it’s ledger of accounts will always be an arithmetic derived value based on another action on the ledger. This not only ensures data integrity but it also introduces entirely new dynamics for how systems are built. Instead of business logic shifting numbers, it’s numbers shifting around other numbers for their aggregate totals, something previously too complex for older systems at scale.
Smart contracts, yes, allow business logic across some chains but they also add unneeded complexity as it removes the untethered access for raw numbers to accumulate and transact. Every piece of logic needs to be calculated from another set of data within the system.
My challenge to all in the space is to think about how the financial system and, likewise, the future economic system would work in a purely statistical digital system, one without smart contracts on base layers. One driven by the mass movement of numbers (big data) only and not begrudged by accounting standards put in place when financial numbers were impossible to calculate in real time.
Like all Digital Transformations enabled by new technologies, a shift in thinking is required. One that works in the same way of the technology, not the previous ways of a system working. By using a statistical approach of re-thinking the entire system you start to enable the technology to grab a foot hold and, most importantly, give it the chance to iterate upon itself as the technology is built. Regulations and laws then need to be enacted at each stage of iteration perfectly timed with what’s possible as not to stifle innovation but to focus it towards solving core problems.
Over the course of several articles I’ll start to guide your thinking through not only what is possible but how we must re-think current elements of our financial system to allow these technologies to both come to fruition while also yielding incredible societal benefit.