B L O C K C H A I N

Cryptographic sorcery, entrepreneurial zeal, and utopian dreams have hen he moved off campus as a gripped a striking number cannily well-adapted to the challenge at junior, Dillon Chen W’18 faced a hand. And when they took a step back, situation that irks every city dwell- of Penn students and its potential seemed even more dramat- W er rankled by the price of residen- alumni this year. Why are ic. Rubin soon saw it as a way to revolu- tial internet access. His laptop registered people so excited? tionize financial transparency in the 15 wireless signals—representing more murky world of philanthropy. Haque bandwidth than he’d ever need—but every By Trey Popp envisioned taming the fraud-ridden one was locked. Wouldn’t it be great, he chaos of local educational credentialing thought, if there were a secure way to systems and merging them seamlessly incentivize people to share their signals with global labor markets, leveling a with strangers? Then he thought some citizens and refugees. Meanwhile, back playing field long tilted against develop- more, and landed on a new tool that on campus, a molecular biologist named ing-world strivers. Espinosa glimpsed a seemed purpose-made to pull off that trick. Harvey Rubin Gr’74 was wrestling with chance for exploited subjects of social Around the same time, Diego Espinosa a predicament of his own. He had piloted media empires to reclaim sovereignty WG’91, a longtime equities analyst and a program to supply remote areas of over their own data—without having to investor who has also taught finance at Zimbabwe with vaccines, which require wait for government intervention. the University of San Diego School of continuous cold storage, by using cell- Blockchains are a novel type of data- Business, had an epiphany about how to phone towers to power refrigerators. It base. They are most closely associated turn diabetes prevention into a business had helped inoculate 250,000 people. That with Bitcoin, whose unknown creator venture. Betting on the same technology had sparked interest in expanding to other invented the format as a foundation for that interested Dillon Chen, he hit the countries, but it remained very difficult to a virtual currency. Bitcoin’s tenfold price off-ramp from traditional capital markets guarantee the authenticity and storage appreciation in 2017—along with the and bee-lined toward a sector people conditions of the complex supply chain. downright stupefying gains of other vir- were beginning to call the Next Internet. Now Rubin had his own eureka moment: tual coins, like Ethereum, whose value Halfway around the world, Mir Haque This was a job for blockchain. multiplied by a factor of 70—made the WG’08 soon found himself pitching the Four very different problems, and four global cryptocurrency craze the story of same tech platform to government offi- people convinced that the same tool held the year. But that bubble may be the least cials in his native Bangladesh—as a way the solution. Not just a feasible solution, important—and least interesting—thing to extend financial services to unbanked either, but one that seemed almost un- about the technology underlying it.

34 THE PENNSYLVANIA GAZETTE Jul|Aug 2018 ILLUSTRATION BY CHRIS GASH Jul|Aug 2018 THE PENNSYLVANIA GAZETTE 35 Beneath a familiar surface, blockchain absurd ways to think about a glorified fever roiled Penn’s campus this year with ledger book? a mixture of entrepreneurial zeal, utopian In a search for answers—and a better fantasy, greed, confusion, naysaying, and sense of the right questions to ask—I intellectual electricity this reporter has audited a Wharton MBA class that fo- only witnessed once before: in the San cused partly on blockchain, taught this Francisco Bay Area during the original winter by visiting professor Shimon dot-com boom. Here was a group of stu- Kogan, who is based at Israel’s Interdis- dents trying to put insurance on a block- ciplinary Center Herzliya. I owe many chain. There was one developing a block- insights to him. It is early days for block- chain to enable gastroenterology prac- chain, and academic offerings are scarce. tices to document endoscopies. Joshua Tom Baker, the William Maul Measey Talbot WG’18 was working on a blockchain Some enthusiasts envision blockchain Professor of Law and Health Sciences, that home-healthcare agencies could use transforming capitalism itself. Others see has also addressed blockchain as part of to certify patient interactions for Medicare/ a scam of world-historical proportions. a broader seminar on tech-driven finan- Medicaid reimbursement. Xiao Ling “This is not just a bubble,” one prominent cial services, or FinTech. Next fall, Cros- EAS’11 GEng’17 was part of a team build- hedge fund advised clients in a January bie and Wharton associate professor ing a cryptocurrency they hoped would letter about cryptocurrencies. “It is not Kevin Werbach will teach Penn’s first full accomplish nothing short of incentivizing just a fraud. It is perhaps the outer limit, class on blockchain. “people to help each other more, and in the ultimate expression, of the ability of But in truth, University administrators the process communicate with each other humans to seize upon ether and hope to are playing catch-up with students. The in a more authentic manner.” ride it to the stars.” That’s a lot of scorn student-run Penn Blockchain Club, Rarely do gold rushes spark such run- to heap on one component of a tool that which has mushroomed to 400 members away idealism. “Blockchain as it helps has attracted some of the 500-pound in the space of two years, has effectively business—like, use this on our supply gorillas of global commerce: IBM, mounted a miniature shadow college to chain and it’ll make things more effi- Walmart, Maersk, Google, Goldman satisfy the hunger for insights and tech- cient, is definitely going to exist, and Sachs, and so on. Even as cryptocurrency nical know-how. Working with the probably soon, in real capacities,” I prices swooned in the first three months Wharton Advisory Board to secure class- heard from Nate Rush, a College junior of 2018, venture capitalists invested half room space, its leaders have organized held in awe among campus tech types a billion dollars in 75 blockchain projects, lectures by self-educated students—from for his coding chops. But what really according to the market-research com- code jockeys to cryptocurrency traders— drove him was a headier prospect: pany PitchBook. and brought in speakers from organiza- “blockchain as it replaces business.” David Crosbie is a lecturer in the School tions ranging from the Ethereum Foun- The Greeks had Plato’s Republic. Rev- of Engineering and Applied Science who dation to the World Bank. So students olutionary Germany begat Karl Marx. made his money creating companies that were another source of insights, along Industrial America gave rise to the Oneida “built plumbing inside the Internet.” He with a number of alumni who are devel- religious perfectionists, the Shakers, and detected a familiar pattern in the inflamed opers, investors, and aspiring thought- Robert Owen’s experimental socialist rhetoric surrounding blockchain. “First you leaders in the blockchain realm. cooperatives. Meanwhile, the great uto- dismiss it as unimportant,” he mused in It is a singularly strange place, where pian hope of our era lies in … cryptograph- February. “Then you embrace it. Then you greed and gullibility rub up against tech- ically based decentralized digital ledgers? try and kill it. And then you become it.” nical sorcery in the fervid atmosphere How has the emergence of blockchain What might become of blockchain? of a Pentecostal tent revival. Speculation ignited so many imaginations in so many Will it liberate the baby-picture-posting, naturally outruns concrete achievements different domains? Does it represent the Like-clicking, Waze-navigating masses on any new technological frontier. But final step in the digitalization of econom- from their data-snooping corporate blockchains and cryptocurrencies, per- ic life? Will it do for assets what the inter- overlords—or help 21st-century monop- haps because they take some concerted net did for information? Is it the death olists amass greater power still? Will it effort to understand, have a way of utter- knell for “lawyers, brokers, and bankers,” unleash the dormant market power of 2 ly consuming the brains of people among the other white-collar middlemen billion unbanked adults around the who’ve put in the work. “Welcome to the Harvard Business Review put on notice world—or turn the digital divide into an rabbit hole,” I heard again and again last year? apocalyptic abyss? Or are those patently from people who’d taken the plunge.

36 THE PENNSYLVANIA GAZETTE Jul|Aug 2018 And there’s no shortage of blue caterpil- tain is a ledger of hashes. If they know mandate a $20 minimum for credit card lars down there, smoking hookahs atop which hash algorithm was used, they swipes.) “What is needed,” Nakamoto mushroom caps. can apply it to guessed passwords in wrote, is a system “allowing any two will- But first there’s a hall of locked doors, hopes of finding matches; that’s why ing parties to transact directly with each and opening them requires an acquain- passwords like “12345” or “admin” or other without the need for a trusted tance with a basic but far-reaching con- “password”—all hugely popular and third party.” cept from cryptography. therefore commonly guessed—are a bad Nakamoto proposed a solution that idea.) Hashes are useful in indexing, would obviate the need for trust entirely, The Hash: The Swiss Army Knife since they turn giant data packets into by replacing it with cryptographic proof. of Cryptography tiny digital fingerprints that a computer By using public-key cryptography, one A hash function is a mathematical algo- can sift through much faster. person could securely transfer a virtual rithm with a simple basic purpose: It Hashes also form the cement that coin to another. In essence, its owner converts any string of numbers into binds blockchains. would point to the specific past transac- another string of a standard length. The tion that had brought the coin into her SHA-256 hash algorithm, for instance, possession, then digitally sign a hash of converts any input into a 64-character that record to transfer the coin to some- string of numbers and letters (which one else. The digital signature is not an actually represent two-digit integers). image of some name written in cursive, Since all digital data are represented but a mathematical transformation of numerically, any digital input can be the message that proves it can only have hashed. The name “Jane Doe” produces come from the signer and not been al- a 64-character string. So does the last tered in transit. In this way, there are no selfie you posted on Instagram. So does Bitcoins, only Bitcoin transactions; un- the unabridged text of Moby-Dick—and like a bank account balance, which con- it will always produce the exact same tains the mingled sum of all your miscel- hash. But—and here’s the important laneous credits and debits, every Bitcoin thing—if even a single character of that transaction is a descendant of one or text is altered, the resulting hash will be more specific previous ones. A recipient, utterly unrecognizable from that of the Satoshi’s Bible call him Bob, uses software to generate unaltered text. In 2008, someone using the pseudonym a pair of cryptographically linked keys, Take the title of this section. Its SHA- Satoshi Nakamoto published a nine- and transforms the “public” key into a 256 hash is a string that starts out like page paper titled “Bitcoin: A Peer-to- Bitcoin address to be shared with limit- this: b03fec1465. But if we change Knife Peer Electronic Cash System.” The main less senders. Alice, having already done to knife, the hash diverges wildly, begin- problem with digital money, the author the same, points to an address she con- ning: 983a7eb155. observed, was figuring out how to pre- trols, and signs it with her associated That illuminates a key feature of hash- vent double-spending. Digital items are “private” key to transfer some of its con- es: they are one-way functions. Turning easily duplicated—hence the iconic tents to Bob’s address. a given data packet into a hash is a mat- computer-age axiom that “information So far, so good. But in the absence of a ter of trivial computation, but it’s impos- wants to be free.” But if the recipient of central authority, Nakamoto reasoned, the sible to reverse-engineer the process. If a digital coin can’t be sure its sender only way to be sure that a particular coin all you have is a hash, the only way to hasn’t already given a copy to someone hadn’t been spent already was to make the recreate the original data is by brute else, the coin can’t be trusted. time-stamped record of every historical computational force: guessing every pos- The answer, up to that point, had been transaction available to everyone. sible input until one produces a match. to trust a middleman instead: to channel Broadcasting individual transactions Hashes have many uses. Reputable every transaction through a financial over the internet was easy enough. The website operators do not store your pass- intermediary that could check it for challenge was providing participants— words, for example, but rather hashes of double-spending, mediate any disputes— who would be widely dispersed, uncoor- them. (When you enter a password, it is and claim a cut of the action as payment. dinated, and collectively carrying out hashed and compared against the stored But third parties inflate transaction costs, countless transactions simultaneously— hash; a match unlocks the door. In secu- especially for small purchases. (Think a way to agree on a single history of the rity breaches, what hackers actually ob- about all the mom-and-pop shops that order in which transactions occurred.

Jul|Aug 2018 THE PENNSYLVANIA GAZETTE 37 Nakamoto proposed a surprisingly squeak through in order to pull off a central authority, eliminated the need for democratic solution: majority vote. Every heist. So to qualify for acceptance, a block transactional middlemen, and safeguard- proposed transaction would essentially would require an additional piece of in- ed privacy while mastering inflation. be posted to a public bulletin board, formation: an integer that, when tacked Furthermore, its decentralized nature where they could be checked against the onto the block, produced a hash begin- doubled as a discouragement to hackers; existing historical ledger. Anybody could ning with a certain number of zeros. the absence of a central clearinghouse do the checking. In fact, an unlimited The only feasible approach to such a meant there would be no big “honey pot” number of parties would compete as puzzle would involve powering enough of data for them to target, just countless clerks, grouping what they judged to be computers to evaluate enough guesses isolated dribs and drabs whose contents valid transactions into blocks. When their until a solution randomly emerged. Yet were unlikely to justify efforts at plunder. block reached a certain size, they would the solution would be easy to confirm. On January 3, 2009, Nakamoto created broadcast it across the network—combin- The substantial cost of generating a the inaugural Bitcoin block, which mint- ing their batch of new transactions with block (known as “proof of work”) would ed 50 coins. Since there were no past a hash of the previous block, which would discourage cheaters. And since each transactions to reference, Nakamoto preserve the integrity of the chain. At block contained the hash of the preced- used the dated text of that morning’s that point, every other clerk could make ing one, altering a single past transac- cover headline of The Times of London: a choice: accept the new block into the tion would necessitate re-doing every “Chancellor on brink of second bailout ledger, or reject it. In practice, the block subsequent block at the same time—a for banks.” would already be attached; clerks would feat that was practically impossible. indicate acceptance by binding their Furthermore, even if a “greedy attacker” Beyond Bitcoin own next block to that one. If a block assembled enough computer power to Nine and half years later, the Bitcoin contained fishy transactions, they would overwhelm all the honest participants, blockchain has been used to exchange instead latch to the preceding one, using it to steal back his payments everything from pizza to cocaine. It has whereupon the bum block’s contents would damage his own interest. “He been courted by some government regu- would be returned to the bulletin board ought to find it more profitable to play lators and targeted by others. The cur- for further vetting. by the rules that favour him with more rency has experienced dramatic rises There would be a reward for perform- new coins than everybody else com- and drops in its market value. But it has ing this work: after a block was accepted bined,” Nakamoto wrote, “than to un- never been hacked. (Thefts have oc- onto the chain, and several more were dermine the system and the validity of curred, but only from third parties hold- connected to it in turn (indicating the his own wealth.” ing custody of Bitcoin keys.) community’s acceptance of this as the There were other wrinkles. The diffi- Considering that the price of a single One True Ledger), it would become the culty of the puzzle—the number of zeroes Bitcoin has been as high as $19,000—giv- source of a certain quantity of coins required—would be regularly and auto- ing the currency a total market value owned by its creator. Thus the clerks who matically adjusted such that a new block north of $300 billion—there is little doubt maintained the blockchain’s integrity also would be created roughly every 10 min- that many sophisticated thieves have played a role “analogous to gold miners,” utes. After the final coin is mined (some- tried to hack the chain. Their failure sug- introducing new coins into the monetary time around 2140), clerks would be in- gests that blockchains could be useful for supply at a pre-ordained and steadily centivized by transaction fees (which can securing everything from medical re- diminishing rate that, in Bitcoin’s case, currently be added to any transaction at cords, to credit histories, to digital per- would culminate in 21 million coins. the discretion of the parties involved, to sonal identity itself—data assets that have As long as honest participants out- incentivize miners to prioritize those been badly mismanaged by institutions numbered dishonest ones, that should transactions when assembling blocks). ranging from Equifax to the federal Office work. But what would stop a faction of And the use of public-key cryptography of Personnel Management, and exploited malicious clerks from validating bogus, enabled everyone to see the source and by the likes of Wells Fargo and Facebook. self-serving transactions? Nakamoto’s destination of every payment—but not Then there are blockchains like Ethe- answer: By making it prohibitively ex- the identity of the people controlling reum that enable “smart contracts”—law- pensive to cheat. those coded addresses. yer-free transactions that self-execute If anybody was permitted to batch None of the individual elements of this when certain conditions are met—open- transactions cheaply, cheaters could scheme was new, but Nakamoto’s synthe- ing up further possibilities. spam the system with hundreds of bogus sis was an elegant achievement. It en- Last June, German car manufacturer blocks, needing only one of them to abled a currency that didn’t rely on a Daimler AG floated part of a €100 million

38 THE PENNSYLVANIA GAZETTE Jul|Aug 2018 bond through a blockchain—automating Some entrepreneurs expect everything from origination and distribu- tion to investors to managing disbursal blockchain to unleash whole of interest payments. The company’s head of treasury cited speed, transpar- new markets based on ency, and removing the need for a bank as benefits—and predicted that block- tiny transactions. chains would allow for smaller and more numerous transactions in the future. “Hardware costs for building a mesh Facilitating small-value transactions have come down so much that someone, is a holy grail in contemporary financial or a small team, can cover a particular services. Asheesh Birla WG’10 is vice geography,” Chen says. What has been president of product at Ripple, a high- missing is a business model. A public profile blockchain upstart. When he blockchain with a native token could joined the company in 2013, he told me align the incentives: anyone wanting to in January, “you could get an email in use the network could buy tokens, which seconds, you could even beam YouTube could be earned by anyone who wished to Mars—but if you tried to send an in- to contribute to its expansion by adding ternational payment, it was so slow and hardware. That expansion would in turn so complicated.” The existing cross-bor- attract further users, in a virtuous cycle der payment system was assembled in whereby improvements in the network the 1960s, mainly to serve giant compa- would reinforce or increase the market nies that transferred thousands or mil- built to run on the Ethereum block- value of the token. No single entity lions of dollars at a time. chain, using that currency as payment. would own the system, but anyone who “The Amazons and Ubers of the world,” The team experimented with creating enhanced its value could reap a reward. he said, need to pay numerous operators their own token, but laid that idea aside That cooperative dynamic is part of small sums, and they couldn’t use the as the initial coin offering (ICO) craze what enthralls blockchain visionaries. existing financial infrastructure without seemed to be hurtling toward an unpre- The original internet, in their view, was incurring prohibitive fees and cumber- dictable collision with regulators (See a digital commons owned by no one and some waits. The same goes for migrant “Bubbling Over,” page 43). They also open to all. But its open-source protocols workers sending money from, say, Dubai came to see their reliance on incumbent lacked something critical: a way to estab- to Jordan, or the US to Honduras. Ripple internet service providers as a terminal lish a stable and secure digital identity. has built two platforms—incorporating weakness, since Comcast or Verizon The companies that arose to meet that elements of blockchain in varying degrees could easily quash signal-sharing by need—Facebook, Google, Twitter, and the (though with departures that have stoked simply adjusting their terms of usage. other giants of Web 2.0—have done so by technical arguments that lie beyond the The project’s subsequent evolution creating proprietary standards: essen- scope of this article)—in a bid to capture shows why some enthusiasts hope that tially, by controlling all the data that that sizeable market. blockchains will transform commercial define a person’s social identity. That has Other entrepreneurs see a potential activity in a deeper way. In broad empowered them to build networks that for blockchain to unleash whole new strokes, Chen’s team now envisions derive virtually all their value from user markets based on even tinier transac- building atop what’s known as a wireless contributions, but funnel the rewards tions. Dillon Chen’s wireless-sharing mesh network—a radio-connected con- overwhelmingly to shareholders. idea illustrates the general concept. “We stellation of antennas and routers that Blockchains seem to offer an alterna- built a two-sided application,” he ex- can share a single direct connection to tive path. They can establish digital iden- plained in February. “One side goes on the internet across a geographic area. tities secure enough to facilitate the your phone or laptop, and one goes in Decentralized, resilient, and unbur- exchange of not only information but your router: basically a gateway that ac- dened by some of the infrastructure assets. And they have an unusually broad cepts payments facilitated on a block- requirements of traditional ISPs, mesh philosophical appeal. chain” via smart contracts. That would networks have found use in military “For libertarians, these technologies allow someone with a wireless signal to field operations and humanitarian di- represent economic activity outside the essentially sublet it, in a controlled yet saster responses, but haven’t had com- bounds of sovereign state control,” writes frictionless way. An early iteration was mercial success. Kevin Werbach, whose book Blockchain

Jul|Aug 2018 THE PENNSYLVANIA GAZETTE 39 and the New Architecture of Trust will be even if that proves a bridge too far— sions; a fourth to tap into a network of published by MIT Press in October. “For Aranda professed skepticism—one can geo-location beacons providing direc- progressives, they promise to undermine imagine blockchains being used to doc- tions; a fifth to purchase mileage-based entrenched private power. For others, ument the histories of physical property. collision insurance. (And why stop they are simply a huge opportunity to Jalak Jobanputra C’94 W’94 is the there? “When the Blockchain Man gets make money or solve problems.” founder and managing partner of in the car,” mused essayist Taylor Pear- Danny Aranda C’08, a managing direc- FuturePerfect Ventures, a venture capi- son in an article imagining a future of tor of business development at Ripple, tal firm that has been investing in block- self-driving cars, “he will see a sliding laid out an expansive vision during a chain projects since 2013. “A home’s data scale offering him the ability to set an January campus visit sponsored by the could also be on the blockchain,” she arrival time and calculate the cost of the Penn Blockchain Club. “There will be a mused in a 2016 blog post: “all repairs, ride. If he wants to arrive quickly, the car token for every single computational chain of ownership, history of electric- will make a flurry of micropayments to resource on the internet,” he declared. ity, etc.—providing an immutable record other cars allowing it to pass. If he’s not “What that means is that for every single of ownership so that a potential buyer in a hurry, he may choose a later arrival action that a computer, that a program, has all the information related to that time and lower fare, allowing other cars that an application needs to do, there home. The more information a seller to fly past in return.”) will be a token to access that resource.” makes available the better price she may Blockchain’s value would be in democ- As an example, he described a decentral- be able to negotiate for that transaction, ratizing participation in any of the un- ized blockchain network called Golem. [creating] value for both the seller and derlying commercial transactions, many “You can plug in your computer and give buyer and also incentiviz[ing] owners to of which could be organized more like your excess computing power to the net- take better care of assets.” cooperatives than traditional compa- work, and in return you get Golem to- Given that the physical world doesn’t nies. (Miller contends that the infra- kens. That’s the supply side. On the other line up neatly with the virtual one, there structure for exchanging all those tokens side of Golem tokens are people who are likely to be limits to such schemes. But would also need to be sufficiently decen- want computational power. Let’s say I’m the steady incorporation of computation- tralized. Otherwise, a single entity running some application and I want to al elements into material objects has fertil- could—by suddenly deciding not to pro- grab some power to run some computa- ized even more imaginative ideas. cess trades of, say, Chen’s token—strand tions or algorithms. I can buy Golem Thomas Miller G’14 spent most of the you in traffic.) tokens and now get access to that com- 2000s in trading and market making for It remains to be seen how eager people putational power distributed across that foreign-exchange and derivatives. When will be to turn every soccer carpool into computational network. And it’s all de- we spoke in February, he was working a shifting tangle of utility-optimizing centralized. There’s no middleman tak- for a Swiss-registered digital-asset ex- economic calculations. The impact of ing a fee on it. There’s no one abstracting change and crypto-wallet provider called such systems on the digital have-nots is or taxing value on it. It’s peer to peer.” Lykke (which later drew down its US an open question as well. People without Other nascent blockchain enterprises operations). He believes the structure of the means to pay for “every single com- are working on decentralized ride-shar- digital-asset exchanges and custody ser- putational resource” may feel that sur- ing, online auction marketplaces, co-op vices will play a critical role in block- rendering some sensitive personal data services for small farmers, and music- chain-based commerce. To explain why, is a better deal. And do we really want streaming platforms enabling artists to he asked me to imagine a car trip across blockchains enabling market forces to manage their own digital copyrights, town—as mediated by smart contracts. infiltrate even more realms of human which have long been controlled by dis- Say you wanted to use an electric ve- activity than they’ve already conquered? tributors. Goldman Sachs sees a multi- hicle from a car-share service. The expe- Xiao Ling was perhaps the most ear- billion-dollar market potential for block- rience would seem simple: click Rent on nest and idealistic blockchain enthusiast chains to facilitate distributed electric- your smartphone, listen to the door un- I came across. We met in a crowded cam- ity markets, integrating rooftop solar lock, and hit the road. But behind the pus coffee shop, where he explained the panels and other decentralized power curtains, blockchains would be whir- cryptocurrency venture he was develop- generation into the grid. Others go fur- ring: requiring one token for an hour of ing with three fellow alums and a re- ther, forecasting the tokenization of car time; a different one to pay some searcher at Penn’s Positive Psychology physical assets as well: fungible goods anonymous electricity supplier who Center. Their mission was to foster like commodities, or fractionally owned charged the battery; a third to access a meaningful offline, face-to-face interac- property like apartment buildings. But wireless mesh like Dillon Chen envi- tions. When I asked him why, he looked

40 THE PENNSYLVANIA GAZETTE Jul|Aug 2018 surprised, and simply nodded towards “In the shift to value-based care, one enterprises. “From the time we’re born to the next table over, where two young of the biggest challenges is creating lon- the time we die, we generate a lot of women ignored one another while gitudinal traceability across a patient’s health expression,” he said, describing scrolling through their Facebook feeds. healthcare data, and also incentives for Healthcoin’s evolution into Linnia, an Then—after surveying the room at some patients to take good care of their outgrowth of ConsenSys, a company that length—he found a pair of middle-aged health,” said Joshua Talbot WG’18, who develops software services atop the men engaged in actual conversation. worked on healthcare data analytics at Ethereum blockchain. “If we could just “Those people know how to talk,” he Deloitte. Blockchains, which create im- capture this and scale it to millions of said, “because they’re not from that gen- mutable data trails whose contents can users, we could share that data with en- eration.” Ling saw his peers as having be selectively shared by patients with terprises, with pharmaceutical compa- spent too much time escaping into social providers, could break that logjam. nies, with other stakeholders, and then media to really learn how. Moreover, the “Say you go in for a hip replacement,” we’d have analyzable data that would painstakingly curated profiles they en- he said. “And over the course of 10 years, allow us to basically have better pharma- countered online fostered feelings of in- say you have some sort of a biannual ceuticals and better prevention programs, adequacy that further discouraged them checkpoint: you have someone check better medical research. Accumulating from exposing their own unfiltered selves. your vitals and verify that the hip re- that very valuable data and allowing it to Yet Ling believed they yearned to. placement has gone well, there’s been flow to its best use would really benefit “People want help, but they’re afraid of no side effects. You set up, through a the system as a whole.” asking, because they don’t want to appear smart contract, certain … milestones, vulnerable, or they don’t know who to and the provider is reimbursed by the ask,” he said. “You want to help others, payer every time you hit that milestone. but you don’t want to appear presumptu- So, six months in, everything is great ous.” He thought the way to decrease both with the patient: you get an additional points of “friction” is to introduce a third: payment. And all the way through 10 “People like to get paid, but don’t know years down the line. how to ask for money, especially when it’s “Blockchain would enable a world a small amount … because it’s a cultural where you could do that automatically, taboo and it comes off as weird.” without a third party. That is hugely He envisioned a social network that valuable. It enables a payer to track the would connect people seeking help—even progress of a patient over time, and actu- just advice—with people offering it. A ally reimburse the provider for value— blockchain structure would help protect not procedure, but value. everyone’s privacy, and offline meetings “And it goes both ways,” Talbot added. would be memorialized via nominal ex- Another smart contract could be created If that sounds like a data overlord even changes of a native token via smart con- to release escrowed funds to a patient more powerful than Facebook, Espinosa tract—which would incentivize participa- who fulfills certain conditions: say, at- contends that the blockchain preserves tion while keeping spammers at bay. tending a certain number of physical an individual’s sovereignty over his or her While I hated to think of a future therapy sessions. information. A service provider, he ex- where my warm conversation with Ling That was the thinking behind Health- plained, “would have some access to some would be governed by digital supply and coin, which Diego Espinosa founded to types of metadata, which they could demand, in less lofty contexts giving incentivize diabetes prevention. “Origi- search through to say: Hey, here’s some- people real control over their own digital nally the idea was to use blockchain to one with these types of data, and this information and assets could generate generate proof of prevention using ac- much of it, and it came from these great huge social dividends. tual blood lab data, and making that sources.” Then the provider would make proof immutable on a blockchain so that its pitch: Grant us access to certain under- Blockchain Medicine it could support issuance of incentives— lying data, and we’ll use it to, say, broker Consider the American healthcare sys- essentially tokens—to reward people for a health-insurance policy that fits your tem, where so much hope for improving moving their blood labs in the right direc- needs better, or determine if you’re eli- outcomes and containing costs has been tion,” he told me in February. gible for a clinical trial you didn’t know placed in efforts to pay for the value Yet along the way, his sights expanded— about. A blockchain could potentially be rather than volume of medical care. a common phenomenon in blockchain structured such that the company didn’t

Jul|Aug 2018 THE PENNSYLVANIA GAZETTE 41 even know who it was proposing to ana- some not so good.” All that fundamentally Business School professor Shoshana lyze; some types of ensuing transactions changed, Espinosa declared, in 2006— Zuboff’s contention that we’ve entered the could conceivably be carried out in ano- with the collision of the smartphone and age of “surveillance capitalism.” nymity—just as a Bitcoin user need only Web 2.0. Now “it was a few big firms that China offers a glimpse of that future. In reveal a coded address when sending or were capturing billions of data points 2014, its government began building a receiving payment. about us, potentially over our lifetime, system that will combine digital, biomet- There’s a host of challenges, Talbot and using that to get us to cooperate in ric, commercial, and other data to assign says, to creating those sorts of metadata a way that was really nontransparent. a “social credit” score measuring the in a way that truly anonymizes the pa- “Right now it may seem innocuous,” integrity of every citizen. Private compa- tient. Some years ago a Carnegie Mellon he continued. “They give us these ser- nies have already implemented precursor researcher found that 87 percent of vices, and we enjoy free social media, systems that score consumers’ creditwor- Americans could be uniquely identified and those kinds of things. But the issue thiness on the basis of not only their bill- based only on their birth date, gender, is that, increasingly, the analysis of that payment history but their educational and ZIP code. “So it will be quite an art data is going to be used to feed artificial attainment and the scores of their social- to be able to create this second level of intelligence, and AI is going to be a media friends. The government aims to a blockchain in a way that gives control much stronger influence on our lives … extend that model into a “credit system to the patient to push data to where it’s and it’s not difficult to see how that that covers the whole society,” enabling helpful, but also allows folks like the might not head in a good direction.” it to reward compliant citizens—with NIH or different research organizations, As I reported this story, I started using building permits and eased travel restric- or pharma companies, to essentially a web browser called Brave, which allows tions, say, or access to certain medical eliminate the CRO [contract research you to see and selectively block entities services—and punish rebellious ones. organization] industry entirely, which that track your movement through the “Those data have enormous value,” is a multibillion dollar industry that’s web. (It also gives you the option of auto- Espinosa said, referring to the American essentially just acting as a middleman.” matically sending micropayments to context. And with blockchains, “our abil- websites where you spend the most time, ity to capture that data and use it with Data Servility and through a smart-contract-capable block- our own agency [will] influence how we Data Sovereignty chain that anonymizes those transactions live for a long time to come.” The people I spoke with about blockchain to protect your privacy.) In one month, it tended to fall into one of two camps. I intercepted more than 4,500 trackers. Identity Power came to think of them as the utopians and Whether I was visiting the Washington Mir Haque is a utopian of another stripe. the pragmatists. Some people swung from Post or National Review, the National His views are shaped by his youth in one camp to another, but Espinosa articu- Rifle Association or the nonprofit Bangladesh and a restless adulthood lated the utopian outlook with particular UsAgainstAlzheimer’s clinical-trials that’s taken him from driving a New York passion. He concurred with Talbot’s warn- page, there was Facebook, trying to log taxi, to earning a Wharton MBA, to jobs ing about the challenge of striking the my activity—never mind that I don’t in fields as varied as cloud computing, right balance of privacy and transparency have a Facebook account. Eluding corporate mergers and acquisitions, and in blockchain applications, but framed it Google was like trying to outrun my immigration legal services. Like many in even more dramatic terms. shadow. It was a constant stowaway on people I spoke with, he thinks the poten- “If you think about it,” he told me, “when web trips to health insurers, the Susan tial for blockchains will be felt most pro- we lived as hunter-gatherers we kept G. Komen breast cancer page, Fox Chase foundly in the developing world. data in a decentralized way: 150 indi- Cancer Center—even when Yahoo The main thing keeping his countrymen viduals that we knew from relationships searches led the way. (“Facebook knows from basic financial services, he said, is a pretty much knew all about us: our loca- a ton about your health. Now they want lack of economic identity. To a Western tion, who our social contacts were, where to make money off it,” went the headline consumer seeking a car loan, or a student we were born, our health history. All this of an April Washington Post editorial, loan, or an apartment to rent, the biggest data was, in a sense, stored in a decen- about a company initiative to obtain potential impediment is a low FICO score. tralized way, by that network.” Over time, patient data from hospitals. Google, But Bangladeshis face a bigger obstacle: organizational hierarchies took over that Amazon, and Apple are also charging having no FICO score (or its equivalent) function, and began exercising their into the “digital health” marketplace.) at all. That’s the norm throughout much power over our information “to get us to Whatever ordinary people may get out of the developing world, stunting the do certain things—some really good, this bargain, it’s hard to argue with Harvard development of entire markets.

42 THE PENNSYLVANIA GAZETTE Jul|Aug 2018 Bubbling Over but at times it has invested directly in tokens. Yet the bubble has majorly mud- David Crosbie knows what it feels like for died the view of companies’ performance a bubble to pop. Long before he became a and prospects. lecturer at Penn Engineering, he was on the “Token holders have gained value just from cusp of an IPO for a company he built during all the speculation that’s happened, and the the first dot-com boom. When the tech mar- promise of what the technology may be able ket collapsed, his firm went “spectacularly to do in the future,” she said. “But we’re still bust.” He took a philosophical view. not seeing real-world implementations of “I used to have a bumper sticker,” he utility going back out to the token holders. told me, “that said: PLEASE GOD, JUST “I expect a few will get there in the next “Eighty percent of people [in Bangla- ONE MORE BUBBLE.” year,” she added. desh] have no access to bank accounts— “Why waste a good bubble?” he said. But only if oversight agencies manage to because you don’t have any identity,” “They bring money and people and inter- catch up—and not overreact, Werbach Haque told me. “Now, with a 10-dollar ests into a space.” And as the saying goes, contends. Android phone, you can leapfrog all these tomorrow’s industries rise from the suds of “Regulation of the internet was actually obstructions. You don’t need a bank … yesterday’s bubble. an important step in its widespread adop- you can take a selfie, and the blockchain Bubbles also bring headaches. tion,” he writes, noting that he was involved creates a unique hash out of that image, “Token sales could offer a new means of in that process 20 years ago. But it’s tricky. and that hash leads to a digital identity funding innovative technologies that circum- “If regulators jump in before a market is that enables you to receive payments and vents the limitations of the traditional ven- mature, they run the risk of preventing it remittances,” and over time build a secure ture capital model,” writes Wharton’s Kevin from ever getting off the ground—and writ- record you can use to obtain other finan- Werbach. “They also offer an almost perfect ing the rules with the old incumbent tech- cial services. way to cheat people out of their money.” nologies too much in mind,” he told me. “Eventually you can do lending,” he A regulatory vacuum is partly to blame. So- On the other hand, if regulators wait too added, calling it a huge potential market called “initial coin offerings,” or ICOs, smack long, and the market grows and matures that hasn’t been addressed by traditional of NASDAQ listings, but they have more in on the assumption that there are no rules, financial institutions, whose limited common with Kickstarter campaigns. then when there need to be rules, the col- product offerings have carried high fees Lena Šutanovac GL’18 laments that what lateral damage can be substantial. to offset the risks inherent in a low-infor- most of them offer shouldn’t be called “Over $5 billion was raised last year in mation environment. “With a blockchain- “coins” at all. “A coin is a currency,” she initial coin offerings,” he noted. “So this is based identity and a smart contract,” he told me, “whereas tokens are essentially not a tiny nascent market anymore.” said, “peer-to-peer group lending could smart contracts.” Most commonly, they And it is a maddeningly uneven one. happen at a very low cost”—replicating a offer—or purport to offer, given the tidal “There’s a lot of crap out there,” Asheesh business model that companies like wave of fraud out there—some sort of util- Birla WG’10 said. “A lot of these ICOs don’t Lending Club have used succesfully in ity, like access to decentralized cloud-com- have a use case. I think a lot of them are mature markets. “So it’s lower-cost for puting power. But some tokens are indeed companies that raised venture equity in the borrower, but the lender would get structured more like securities, only without rounds A, B, and C, and this is a Hail Mary. better returns than in a checking account. a watchdog like the SEC providing over- “I think the SEC will come in with strong So there’s a winner on both sides.” sight. So, buyer beware. regulation—but I don’t think that’s the end Ripple’s Asheesh Birla also thinks the The uncertainty puts blockchain develop- of it,” he added. “Crypto winter may be com- developing world has the most to gain ers in a bind as well. ing for ICOs, but I do think it’s going to be a from blockchains—and wonders if that “It’s kind of the Wild West out there,” fundamentally new way to raise money and accounts for some of the naysaying among said Dillon Chen W’18. “We’ve played it on digitize and tokenize assets that weren’t influential figures of Western finance. the safe side, in terms of not doing a token very liquid in the past. … But the right regu- “So much of this technology is about in- offering. There needs to be oversight— latory framework needs to be applied.” clusive access to the financial ecosystem.” there definitely needs to be a guiding Some of Werbach’s prescriptions appear But Silicon Valley venture capitalists “have hand. We need to trust someone.” in a 2018 paper in Berkeley Technology VenMo, PayPal, six credit cards—they’re Venture capitalist Jalak Jobanputra C’94 Law Journal, “Trust, But Verify: Why the overbanked. They think, ‘Well, I can send W’94 told me her firm has mostly taken Blockchain Needs the Law,” which can be money instantly, what’s the big issue?’ But equity positions in blockchain companies, found online. —TP

Jul|Aug 2018 THE PENNSYLVANIA GAZETTE 43 the more I travel to places like Africa, the as an informal ally in his blockchain- (crypto) cash reward to anyone who aced Middle East, and other emerging markets, related advocacy, thinks financial access it. Even the equivalent of $100 would be I realize that [these are the places] where could be just the beginning. Blockchains “a huge incentive in a developing country. you’ll see adoption of blockchain and could amplify the power of education, for And now the employer would have a digital assets—because they’re the ones instance, by helping to expose fraudulent verifiable talent pool, identity authenti- on the fringes of the financial system.” credentials and validate authentic ones. cated—no Nigerian scam—and as a result, Lena Šutanovac GL’18, a law student He envisions “a permanent ledger of your could contract them out for real work and from Slovenia, thinks blockchains could course completion and certification that reduce its costs.” be powerful weapons against government can be authenticated from anywhere in corruption. Blockchain-verified voting the world”—so that a certificate in, say, Not So Fast could invigorate democratic decision- PHP programming might actually carry Even apart from the cryptocurrency making. And creating transparent block- weight with an American employer even bubble, there’s no shortage of hype about chains for land, business, and trademark if it was issued in French by the Univer- blockchains. If some analogies point to registries could eliminate bribe-heavy sity of Science and Technology of Togo. the internet as the last comparably mo- bureaucratic choke points that are “keep- Going a step further, he imagines edu- mentous advance, others reach all the ing developing democracies in a crunch cational institutions administering tests way back to the emergence of double- and prohibiting them from developing.” and courses in the form of smart con- entry bookkeeping in medieval Venice, And a blockchain solution to, say, con- tracts on a blockchain. “You could take which has been credited with the birth sumer credit ratings may eventually prove an exam, and get a certificate automati- of modern commerce. Here’s the prob- attractive to Americans burned by the cally assigned, time-stamped, on the smart lem. Blockchains, at least at present, are Equifax breach—just as Wells Fargo’s contract,” he speculated. Employers could really, really slow. This is particularly the abuse of its customers’ identities sparked take advantage of the same thing. “The case with the truly open ones—like Bit- an appetite for alternatives. Indeed, some cost of employee acquisition for a good coin and Ethereum—that have gener- blockchain entrepreneurs have sloganized tech developer is $25,000 to $30,000,” he ated the most excitement. their mission as “unbanking the banked.” asserted. “That’s a lot of money. One thing Speed, of course, is a relative concept. Haque, who has managed to cultivate a company could do is give a test on a A blockchain that collapses the sale former Mexican president Vincente Fox smart contract,” and offer an immediate agreement, clearance, and settlement of

Blockchain Berkeley Technology Law Journal, “re-us[ing] standard clauses, which they adapt and negotiate for the particular transaction.” and the Law And smart contracts have already conquered some realms, like derivatives trading. Insofar as blockchains could expand the scope “In the past, people hired lawyers to review complicated con- of such instruments, lawyers may need to master new skills. tracts,” opined digital-security expert Rob Graham in a 2016 con- Regulatory compliance issues won’t disappear, and organiza- sideration of blockchain’s implications for legal practice. “In the tions that value a high level of legal customization will continue to future, they’ll need to hire hackers.” pay for it. But the playing field may change, creating new niches. It is a fashionable view. If distributed digital ledgers portend a “We’re going to see a need for a new kind of legal engineer who’s “smart contract economy” in which anything from a real-estate trans- able to advise companies on how to implement agreements and fer to streaming Beyoncé on your car stereo could trigger a cascade applications in the best possible way,” Werbach said. of computer codes shifting money this way and that, are traditional Lena Šutanovac GL’18 envisions a library of legal provisions business lawyers going to go the way of switchboard operators? formatted as code, from which such lawyers might pick and “If all lawyers do is basically add transaction costs to processes, then choose when structuring smart contracts. “I don’t think it will ever it’s true that they can be replaced when more efficient approaches reach the fl exibility you have with paper,” she told me. “But maybe come into being,” said Kevin Werbach, an associate professor of legal we will get more legal certainty.” studies and business ethics at Wharton. And “there are reasons why Yet certainty can be a two-edge sword, she pointed out. Consider a distributed ledgers would be a good platform” to automate many func- smart contract governing a multi-company supply chain involving a tions that have long been governed by paper contracts. farm, a processing plant, a freight airline, a distribution warehouse, a For one thing, business contracts have a lot in common with short-haul truck, and a retailer. There’s a lot to recommend a tool that code as it is. “Most business contracts are essentially modules would automate the immediate exchange of money upon each change that lawyers string together and customize,” he wrote in the of custody, conditional on timely receipt of goods at each phase. But

44 THE PENNSYLVANIA GAZETTE Jul|Aug 2018 match. But the real issue lies in the time make sense in many cases. Documenting and energy required by the proof-of- the cold-storage chain of vaccines sitting work consensus algorithms that permit in some fridge in remote Zimbabwe untrusting strangers to confidently doesn’t require universal participation. transact with one another. As the Bitcoin Companies will have competitive reasons network has grown, for instance, so has to conceal many sorts of internal data on the difficulty of the hash puzzle at its private blockchains. The law comes into core—which now requires so much com- play as well. “In healthcare, in finance, and putational juice to crack that, late last potentially in shipping, where for example year, it was estimated that a single you’re not allowed to ship to certain coun- Bitcoin transfer consumed enough elec- tries,” observed David Crosbie, “you may tricity to power the average American need to have a club in order to follow home for a week. regulatory practice.” a securities trade—which currently Some companies are experimenting “In a truly decentralized network,” takes about two days and multiple in- with “permissioned blockchains,” which, Werbach writes, “there is no way to im- termediaries—into a single instanta- by limiting participation to parties pose limits on money transfers to known neous transaction represents a quan- deemed trustworthy, eliminate the need terrorists, transactions selling children tum leap in efficiency. for intensive cryptographic proofs. into modern slavery, or laundering of But other measures paint a dismal pic- Walmart and IBM, for instance, are pi- funds known to be stolen.” ture. The Bitcoin blockchain can current- loting one to track the provenance of Yet permissioned blockchains sacrifice ly process a maximum of 7 transactions grocery products—which would enable the most transformative element of the per second. Ethereum can manage about the retailer, for instance, to trace and technology: the ability for unknown parties 13. Visa’s payment network, by contrast, contain food contamination events far to confidently transact with one another. claims the ability to handle 24,000. more efficiently. “One of the problems with the IBM Centralized databases enjoy economies Permissioned blockchains preserve the example,” Crosbie said, “is it’s actually of scale that decentralized ones, by dint ability to create an immutable, decentral- very hard to join their club. It’s expen- of their massive redundancy, can never ized data trail. And restricted access could sive, and you have to be vetted to get in.

such an instrument has, in a manner of speaking, a “mind of its own.” it. So abiding by smart contracts might be less of a conceptual leap. It could be too rigid for the air freight company to pick up the phone and In his law review article, Werbach explores the possible evolution say, “Sorry, but a tropical storm has grounded our fleet, let’s work out of arbitration clauses to deal with disagreements arising from smart an alternative,” or for a retailer to say, “We can’t pay you because our contracts. “Consider a simple smart contract in which each of the liquidity is at a zero, can we pay you next month?” parties has a private key, and a third key is given to an expert arbi- “The contract doesn’t care,” Šutanovac said. “It just starts doing trator. The smart contract requires two of three keys in order to exe- the steps.” And as Werbach noted, there is no good way to repre- cute. If the parties agree the contract has been fully performed, sent terms like “reasonable” or “best efforts” in software code. they each provide their key and the smart contract executes. If Šutanovac, a Slovenian with an undergraduate law degree from there is a dispute, they turn to the arbitrator. She either provides the University of Ljubljana, suggested that European businesses her key along with that of the party seeking to enforce the contract, may be more willing than their US counterparts to embrace that or refuses it and therefore prevents completion of the transaction. level of stringency. American companies, she noted, more rou- The system has just mimicked a legal arbitration process.” tinely practice “efficient breach,” in which a contractual party sim- The legal system has managed to adapt to every technology ply stops abiding by an agreement upon determining that fulfilling from the printing press to the internet, he observed. So while it would be costlier than violating it and paying damages. blockchains may bring disruption to the legal realm, it could cre- In Europe, “we have a concept called pacta sunt servanda, which ate as many opportunities as it destroys. means ‘contracts are binding,’” she said. “So even if it would be “Smart contracts are good at setting forth anticipated condi- efficient to breach a contact, we don’t do it—because we consider tions and consequences ex ante, and then ensuring the conse- the contract was an agreement, and respecting the agreement is quences occur upon fulfillment of the conditions,” he writes. more important than the potential outcome.” Efficient breach hap- “Legal contracts are good at cleaning up the mess when, as inevi- pens occasionally in the European context, she allowed, “but it’s tably occurs, things do not go according to plan. There is no rea- really frowned upon, and you would go to extreme lengths” to avoid son, however, that the two mechanisms cannot coexist.” —TP

Jul|Aug 2018 THE PENNSYLVANIA GAZETTE 45 And therefore it limits the number of in- like when Apple automatically updates tally anti-social. Trusting other people novations that will happen in that space.” your iPhone’s software. So any proposed may be risky, but so is withholding trust. Jitin Jain WG’18, a co-founder of the change to a blockchain’s inner workings The whole reason we enter civilization Penn Blockchain Club, drew a broad requires either universal agreement, or is to escape the stark perils of absolute comparison to the commercial adoption a “fork” event whereby one blockchain self-reliance. of the internet. “Big companies and or- is split in two: one of which abides by “By solving this really hard, really im- ganizations were quite apprehensive the old framework, and one of which portant problem of trusting the integrity about putting their data in the public adopts the new. That happened to Ethe- of the ledger itself, blockchain hasn’t domain [at first], so they started moving reum in the wake of a 2016 disagreement solved all the other kinds of trust prob- to intranets—and then to the internet. It about the validity of a certain controver- lems that will come up,” said Werbach. happened with cloud computing as sial transaction; the majority of Ethe- “Those who are going to use it to accom- well—incremental steps from private to reum miners agreed to reverse it, while plish things need to have a more granular public cloud computing,” he said. a minority refused, effectively becoming understanding of what their goals are, “I think organizations will have a tough a spinoff chain that now goes by the what kinds of risks they’re taking on, and time moving onto blockchains like Bit- name Ethereum Classic. what kind of trust they need to engage in coin and Ethereum, but at the same time Jobanputra, the venture capitalist, sees this kind of environment,” he elaborated. consumers will start moving onto them other avenues for achieving scale. “There will be, as always, segmentation for their non-critical applications,” he “Maybe because I started my venture in the market. Actors who are very so- speculated. “And by the time public block- career in tele-capital, and so have some phisticated and able to protect them- chains have more scale and security, or- exposure to hardware and chips, I think selves from risks will be able to do that. ganizations will become more comfort- we’re going to see lots of innovation on And those who are less sophisticated will able moving onto them” in search of the hardware as well as the software and have environments available to them that customers. “That’s the true potential.” middleware,” she told me. “I’m talking are more constrained, that address some “Scalability is a big concern,” says Col- to entrepreneurs who are working on of those trust concerns.” lege junior Nate Rush. “I wish everyone different ASICs [application-specific The need for trust cannot be elimi- could just hang out until we got the per- integrated circuits]. Also, if you start nated, only displaced—and not entirely fect system, but obviously that’s unrea- looking at AI and machine-learning, and to software algorithms. “Lawyers have a sonable. So I think there are going to be adding that to some of the [new consen- role to play,” said Werbach (see “Block- intermediate-term solutions, and then sus proof methods emerging], you can chain and the Law,” p. 44). “Insurance the real long-term solutions.” speed up a lot of this.” entities have a role to play. Established Rush, who projects a genuine modesty Another challenge is developing tools companies that have brands and reputa- I did not necessarily expect after hearing and user interfaces that can demystify tions that promote trust have roles to others call him “Penn’s deity of block- the underlying blockchains enough for play even in a blockchain environment. chain,” took a leave of absence last semes- ordinary people to feel comfortable Governance has a role to play. The real ter to wade neck-deep in the river of cod- using them. Bitcoin’s most celebrated open question is how these different ing. Over the last two years, he has made features—the elimination of middlemen blockchain platforms and communities more than 1,000 contributions on GitHub, and irreversibility of transactions—can will develop a set of frameworks and a repository of open-source code where a be nerve-wracking. experience to be trustworthy. And a lot lot of the technical action in blockchain For starters, humans can’t memorize of those things are about people. development takes place. He is an advo- lengthy strings of hexadecimal code. “For example, the Ethereum commu- cate of “proof-of-stake” consensus algo- Figuring out how to store cryptograph- nity is very different from the Bitcoin rithms, an alternative to proof-of-work. ic keys can be daunting. (That’s one community,” he continued. “They’re both Instead of solving arduous hashing puz- thing that has discouraged institutional using the same basic software approach, zles, blockchain miners would instead investors from buying in, Shimon Kogan but the humans are still the things that vouch for blocks by posting cryptocur- observed in his class; any single em- make the difference. And I see an op- rency as collateral, which they’d forfeit if ployee with access to a private key could portunity space for those institutions an invalid transaction was found within. purloin its contents and disappear, leav- and actors who are good at promoting But even a good solution could prove ing his employer with no recourse to trust to figure out how to do that in this difficult to enact. By definition, decen- recover them.) On a deeper level, one new environment. And that’s a role for tralized networks lack authority figures could argue that a system requiring such regulators too, because regulation is a who can impose even minor changes, extreme self-sufficiency is fundamen- way to promote trust.”

46 THE PENNSYLVANIA GAZETTE Jul|Aug 2018 “There’s blockchain as it helps The fevered activity on these and other fronts is part of what has sparked the business. Then there’s the other, enthusiasm of so many students, who see a rare chance to shape a virgin in- more radical thing: blockchain as it dustry. “We’re currently in the plumbing stage of blockchain,” Crosbie quipped. replaces business.” “At the moment you can see all the guts spewed out all across the floor.” Pessi- lowed the Silk Road to operate and have mists see an insoluble mess. Optimists trust along it.” (The flow of goods and see opportunities. Crosbie professes to ideas along that route reached its apex be “remarkably unfussed” by the techni- under the religiously pluralistic Mongol cal challenges. Empire, which explicitly protected mer- “We used to have Gopher and FTP and chants and traders without regard to a dozen pieces of software you put to- faith.) “Why was the British Empire suc- gether before you could ever connect [to cessful?” he continued. “It effectively the internet]. And fairly quickly, what forced a system of legal structure around people did was hide all that. That’s what the world which still exists today,” fa- Mosaic did with the Netscape browser.” cilitating mercantile and intellectual Sooner or later, he said, the same will exchange. Blockchains offer opportuni- happen with blockchains. ties to expand trust even more radically. “I think blockchain will truly take Dillon Chen, who has traveled deep root,” Joshua Talbot summed up that just as the internet did. Some of the wild and wide in the blockchain realm since widespread view, “when the users of a ideas that are thrown out there are going that initial prick of irritation about over- blockchain solution don’t realize that to be interesting experiments that sim- paying a local monopolist for internet blockchain is being used.” ply aren’t going to get to scale, or are access, is as good a place to end as any. going to take much longer than people “The most impactful inventions in On the Varieties of Utopia think to get to scale. human history,” he mused in the forum “There’s blockchain as it helps busi- “But saying that it’s just a new way to do of Huntsman Hall one afternoon this ness,” Nate Rush mused when we spoke databases is not actually derogatory,” he winter, “have been writing, money, and by Skype in February. “Then there’s the added. “Databases are the foundation of then contracts and programming, if you other, more radical thing,” he added, the world economy! And if you can change want to lump those in. Each of those “and somehow that’s more exciting, and the way they work in a small but real way, have reduced transaction costs. also maybe more unlikely, and also re- it has all kinds of knock-on effects.” “Blockchains kind of roll all that to- ally fun: … that in the long term we’ll see Crosbie struck a similar tone. “You need gether,” he continued. “And if you think blockchain as it replaces business.” the big vision,” he said, referring to some of Ethereum [and its smart contracts] It’s a strange sort of radicalism that of the wilder ideas some of his students specifically, it kind of covers many of the holds transactions to be the fundamen- bring him. “But I think the reality is going use cases of a government. It’s a govern- tal unit of human intercourse, and con- to be far closer to a bill of lading being put ment-in-a-box, so to speak. We pay 15 to tents itself with tinkering at the intersec- on a blockchain, and making internation- 30 percent taxes to the government. And tion of supply and demand. But maybe al commerce more effective. But you if we potentially can have the same level the history of utopian schemes, spotted shouldn’t underestimate the impact on of financial stability, contract negotiation with failure and tombstones, argues that society of reducing the cost of shipping software, and money all rolled into one, societies flourish most readily in the stuff around the world—given how much with a transaction fee paid every time wake of more prosaic developments. we ship around the world. The reality is that adds up to, like, 1.5 percent, it’s a “To me,” Werbach reflected, “block- going to be a good deal less sexy, but the huge step-reduction in transaction costs. chain is a foundational technical innova- impact is probably going to be greater. “And when costs come down by a fac- tion that will have tremendous impacts “When you look at human civilization,” tor of 10, a lot of interesting things hap- on just about every company in the he added, “what has generally driven pen,” he said. “There’s just a whole host world. But that’s going to unfold over a growth has been the expansion of trust. of things that could be built that I can’t very extended period of time—and it’s Think of the Silk Road. That was largely even think of.” going to lose its purity in that process, driven by the Islamic faith, which al-

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