Blockchain and Sustainable Growth

We are at a unique moment in history: our society is in transition from an industrial economy to one defined by a new set of technologies, ranging from digitalization to nanotechnology. Among the latest waves of digitalization is blockchain—a technology that many say promises to redefine trust, transparency and inclusion across the world. Blockchain, however, is a relatively immature technology and can create as many problems as it solves. What it has offered so far is a series of key insights into emerging technologies and how we can approach them in a rapidly changing world.

Digital Transformation

Digital technologies have been transforming our economy and society in several waves since the 1960s, beginning with the digitization of many business processes, followed by the capturing and sharing of large amounts of data, and finally driving a mobile phone revolution that has placed computational power into the hands of just over 60 per cent of the world’s people.

Previous Waves of Digitalization

We are now in a liminal period for digital technologies. Nearly all the benefits of having access to computing power were previously kept inside corporations. Information technology was primarily about following the same business processes in place since the 1950s but doing so faster, more efficiently and more securely. With the broadscale distribution of computing power across the globe, however, something shifted. Many of the technologies driven by the distribution of computational capacity are about radically redefining how those business processes, our economy and our society are defined in the first place. In effect, placing the power of digital into so many hands is having a significant impact on all aspects of human existence.

Decentralization and Blockchain

Blockchain is one of the technologies enabled by the worldwide distribution of computing capacity. Put simply, blockchain is a digital ledger in which transactions, e.g., for Bitcoin and cryptocurrency, are timestamped and recorded chronologically and publicly. It is the public aspect of this exchange that is the most interesting. Basically, any person in the world is now able to download the code and start ‘mining’ Bitcoin or participating in new network ideas built on the Ethereum platform. The idea is that through radical transparency, blockchain—created through huge portions of the public being able to participate in the network—creates ‘trust’ by making it close to impossible to record nefarious entries or to change transactions that have already been processed. Now, having moved far beyond its original application within cryptocurrency, the underlying technology of Bitcoin is being applied in a variety of situations, from incentivizing the inclusion of renewables in energy networks, thus reducing emissions in the global shipping industry, to enabling banks to perform remittances faster and at a lower cost.

There is a significant amount of hype about blockchain, as well as misconception, driven in part by the fact that it is extremely new and in part by greed, as people have realized that they are able to make money from blockchain as a new form of asset class. People often talk about cryptocurrencies as being ‘free from government control’ or outside of the existing market and political system. Blockchain, however, does not exist in a vacuum and it indeed functions within a political economy, like every other technology. Moreover, the idea that a currency can exist without Governments getting involved is a fallacy; there is nothing more political than money. What can blockchain give us, then?

Blockchain’s 1,000 Thought Experiments

Blockchain is still new and will evolve many times before it can be fully integrated into society. We have seen similar trajectories before in the technology industry; examples include the Internet of things, mobile telephony and even the Internet itself. Every one of those technologies went through various iterations before it was fully integrated and used within society. Many technical, social and political obstacles had to be slowly but surely overcome.

It is often useful, therefore, to approach emerging technologies with some depth of thought—not by expecting them to act immediately as a fully functional solution but rather as a lens on the possible. Such an approach allows for a broader discussion, one in which we can challenge our preconceived notions. Blockchain has already illustrated the power of individuals connected via the Internet with sufficient computing power at their disposal. Far from merely tweeting, or taking and sharing photos or videos, such people can also create an entirely new economic structure.

The power of blockchain thus lies not in the technology itself but rather in how it has reframed many discussions across various parts of our society and economy. Blockchain shows us that there are options, that we can organize society differently. It has launched 1,000 different thought experiments but the resulting solutions, which will be delivered a decade or two from now, may or may not be based on blockchain or cryptocurrencies. The discussions that started from this point, however, will have been important contributions to the progress that society makes around digital technologies and what they can mean for humankind. For these reasons, it is important that everyone, including the United Nations, engage with these technologies to understand and learn from them.

At its most basic level, blockchain speaks to a deep, human need, one of being able to trust other people, organizations and companies in a world where most of our interactions are mediated and stored digitally. It is arguable how well it captures that notion of trust, or whether any technology can ever actually replicate what a human being thinks, feels and acts like when they trust and are trusted. These concepts are deeply human, as are the power structures within which digital solutions are built. Blockchain is often discussed as removing intermediaries or creating democratic solutions to problems, but it may merely replace existing analogue power structures with digital ones, and cause decision-making within such contexts to become more brutally binary. ‘Truth’ on the blockchain does not leave room for interpretation, as today’s systems do.

Context is critical for the development of any technology, as is the political economy within which it exists. Those who have tried to use blockchain, however, have quickly realized something: it forces a new level of cooperation. It requires partnerships and deep discussions of what transparency and inclusion truly look like.

Blockchain’s Call to Multilateralism

In the same way that the technology of the Industrial Revolution was a response to the changes in society during that period, so too is blockchain a response to ongoing changes in our own era. 

Perhaps one of the reasons that blockchain has received so much attention is because it speaks to something that many people across the world are feeling instinctively: that we can only create new solutions to some of the world’s oldest problems by working together and including everyone in the discussion. Blockchain appeals to many people as a viable solution precisely because it is about applying a counter-intuitive approach to problems; despite the often technology-deterministic manner in which it is discussed, it is important to listen to the underlying message. The call to inclusion, trust and multilateralism that blockchain attempts to address from a technical perspective is one that will continue for many decades to come and one to which we must find new ways to respond via Governments, civil society, academia, non-governmental organizations and international organizations such as the United Nations.

A key issue that needs to be approached multilaterally is the regulation of digital technologies. Although several initiatives have been developed worldwide to establish such regulation, we must broaden the understanding of those efforts as well as the principles of human rights across the digital industry. Blockchain, for example, is truly cross-border; it knows no national boundaries as either a currency or a technology and it demands a unified, multilateral approach to regulation. It also requires that those working in the civil services across the world be more than just technically aware; they need to understand how their regulations may be interpreted in code. Smart contracts and their ilk require diversity of thought and thus inclusion. We cannot leave the codification of social norms into smart contracts to be handled solely by start-ups or by young men, since the manner in which they are implemented has an impact on a large number of people and therefore needs to be managed across society. More importantly, code written in one country under a certain set of laws may have an impact on the citizens of another country. How these situations will be handled has yet to be defined.

Education is critical, not just for civil service or government leaders but for everyone. In the same way that we learn the rules of the road before driving, we need to be taught how to manage the data highways upon which our society is now being built. Research has shown that only about one third of the population can understand the data and statistics that form the outputs of the open data movement. Blockchain goes much further, requiring that citizens accept a completely new approach to data management, and have some understanding of cryptography and key management principles, or face losing their money or government services. To transition to a fully digital economy without updating our education systems is a sure recipe for disaster. 

It is by creating appropriate multilateral solutions that we can address our current emerging technologies and have reasonable frames of reference for ones that have not even been thought of yet. That is why it is crucial to engage with new technologies and why the Secretary-General’s Strategy on New Technologies is so important. Rather than accepting or rejecting such technologies outright, we must give them careful consideration and work together to assess and address their impact.

It is likely that the key legacy of blockchain will be that when computing power is handed to a large part of the population—rather than solely housed in corporations—completely new solutions to old problems will emerge. In the case of blockchain, it began with a desire to see a new form of banking system, one that was truly native to the digital world we are all starting to inhabit. It may or may not overcome its technical and environmental challenges, but the concept of citizen-led and citizen-owned solutions to global problems has been unleashed. The established international system ignores that message at its peril.