The Wall Street Journal: Blockchain Marks the Next Step in Internet Evolution

Original Title: "Blockchain Marks the Next Step in the Internet’s Evolution"

Original Source: Irving Wladawsky-Berger,The Wall Street Journal

Translation: 0×33

Jai Arun, Jerry Cuomo, and Nitin Gaur recently published a book titled "Blockchain for Business," in which they write: "The reason blockchain is significant is that no enterprise is an island. By enabling business processes that leverage the collective knowledge of a team, the cost efficiency of the process can be increased by orders of magnitude."

Since blockchain first emerged over a decade ago as the public distributed ledger for the Bitcoin cryptocurrency, people have struggled to understand what blockchain is and its benefits. This is not uncommon for a potentially revolutionary technology in its early stages. The key question is whether blockchain has the potential to become a truly transformative technology over time. Almost everyone agrees that the answer is yes. According to Gartner, by 2025, the business value added by blockchain will exceed $176 billion, and by 2030, it will surpass $31 trillion.

Today and even back then, there were two very different blockchain camps: one primarily focused on blockchain as the underlying platform for cryptocurrency, and the other primarily focused on blockchain's use in the business realm.

The most Bitcoin-like cryptocurrency camp is mainly based on public, permissionless blockchains that operate anonymously and require some form of PoW or PoS system. The second camp, characterized by Hyperledger, is primarily interested in business applications, based on using private or public permissioned blockchain networks to facilitate interactions among mutually known institutions. "Blockchain Revolution" defines blockchain as "a shared, decentralized, cryptographically secure, immutable digital ledger," then adds several key attributes critical to enterprise blockchains:

Accountability. "Network participants are known and identified by cryptographic member keys with access rights assigned by business role."

Privacy. "While the network knows the members, only those who need to know can share transactions."

Scalability. "Supporting high transaction throughput is crucial for enterprise scenarios." Permissioned enterprise blockchains are not constrained by PoW or PoS requirements.

Security. "Enterprise blockchain is fault-tolerant. With the support of a fault-tolerant consensus algorithm, the network continues to operate."

In the 1990s, the internet was supposed to usher in a more open, more decentralized economy. However, as we know, it did not succeed as expected. Instead, it led to the rise of a platform economy driven by powerful network effects. Several companies have become category kings, dominating their competitors in their specific markets. How was this achieved given the open protocols of the internet and its highly distributed architecture? Science writer Steven Johnson provides a good explanation in a recent article.

Think of the internet as consisting of two distinct layers: InternetOne and InternetTwo. InternetOne was designed as a relatively simple, highly flexible, general-purpose data network that supports various applications in the InternetTwo layer. The various open protocols used today—such as TCP/IP, HTML, and URL—are associated with InternetOne. Generality was a fundamental design choice that allowed the internet to grow continuously and cater to a wide range of applications.

However, to maintain the simplicity and flexibility of InternetOne, almost everything else, including identity and security management, became the responsibility of InternetTwo applications, with InternetTwo having few general open standards. The lack of identity and security standards was a major reason for the rise of superstar companies that, based on their massive data, established de facto standards within their proprietary platforms. Thus, while the open, decentralized internet thrived and operated well at the InternetOne layer, InternetTwo became highly centralized, controlled by a few large companies.

Blockchain technology has the potential to address these serious internet issues, allowing for the secure, decentralized exchange of key identity verification data without the need for a central platform or other intermediaries. Over time, blockchain-based applications can be used to coordinate self-organized activities of a large number of individuals and institutions in a secure and decentralized manner, much like the early goals of the internet. "Blockchain for Business" believes that this is why blockchain has become one of the most disruptive technologies of the 21st century and a key next step in internet development.

Blockchain technology is driving this transformation opportunity in three key areas:

Distributed Organizational Structure. "The distributed nature of blockchain technology with consensus and smart contracts provides an autonomous business network with greater self-governance, flattening traditional corporate structures into a distributed, shared one."

Trusted Business Models. "Blockchain offers many opportunities... by disrupting traditional business models through the use of trustful peer-to-peer exchanges, digitalization and automated execution of business contracts, and protocols with smart contracts. Intermediaries between third parties are handled through distributed ledgers and transparency, and transaction integrity is achieved through security and cryptography."

Decentralized Ecosystem. With blockchain, the ecosystem is the business. Value is collaboratively created among organizations and systems.

The book concludes: "This is not a matter of mastering blockchain technology; instead, it is about rethinking your current market role, value flows, and existing business ecosystem, and seeking opportunities for transformation."

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