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A blockchain revolution?

What will the future of blockchain be? We have just recently realized the extent of the radical changes happening in the field of new technologies, but we must already project ourselves into the future to prepare for them. Bankers, finance and insurance professionals, entrepreneurs, traders, regulators, governments, investors, citizens, we are all on kept on our toes. Ready to seize unique opportunities, frightened by the systemic risks on the monetary policies of a globalized economy, curious about the new systems of governance and value sharing, in a whirlwind of hopes and fears, the blockchain brings up unprecedented societal questions.

How can we apprehend the paradigm of using not so recent technologies such as asymmetric encryption or distributed ledger technologies but that are yet still largely misunderstood? According to several informed observers, our knowledge of blockchain today is equivalent to our knowledge of the internet in 1990, before social media, smart sensors, and digital platforms. This analogy with the Internet is enlightening by several aspects which is why I will hold on to this comparison between these two phenomena to highlight a few noticeable points and draw lessons that could help us develop an ecosystem that is as virtuous as possible.

In both cases - when we talk about blockchain or the Internet - we refer to them in an almost mystical way, we launch processes, algorithmic applications, and then pray that they work. We do not really know how they all operate, but we are thrilled that our GPS is able to show us the shortest route. The same goes regarding recommendations for the next movies or series to watch on Netflix, books to buy on Amazon or people to date on Tinder. In a way, we close our eyes and hope very much that the efficiency gains, optimized messaging and transparency we were promised will happen.

Semantics are not neutral. We always capitalize the "i" of the word “Internet”, as if to evoke a divine entity. Etymologically, Internet means interconnection of networks, "the network of networks". The Internet, by virtue of its ubiquity, is destined to become the global information and communication society. Just like an entity that we intend to deify, the capital letter provides it with a special status.

We now use the notion of smart contract to speak of computer protocols that are perhaps neither "smart" nor contracts. They interact with "oracles" that are third parties whose role is to collect information and certify it. Is it not true that in ancient Greece, the oracle was the person who would practice divination, the prophet like the Oracle of Delphi? This near-divine relationship we have with technology may just be a marketing construct, but it must make us aware of several points. Are we turning to the Internet and the blockchain as we would towards a new religion of public salvation? Let us not forget that when Nietzsche proclaimed, "God is dead", he immediately afterwards said "yet his shadow still looms". Therefore, we will have to adapt and improve our education on these subjects, to develop a relationship that is neither cynical nor blissful, but critical towards algorithms, the data they collect, protocols and chains of blocks in which this data is stored and on which applications, that could become autonomous, operate.

It Is also paramount to return to the origins and intellectual currents of thought that have influenced the deployment of these technologies. Influences from the military and the academic field shaped the Internet. Unlike the military approach, which is very secret and opaque in essence, the academic approach is extremely accessible, open and free. The later, stemming from hippie origins, fueled the rejection of the mainstream and of enslaving constraints. The values of the Internet cypherpunks which greatly influenced the first Bitcoin protagonists can be found in Tim May's Crypto-Anarchist Manifesto released in 1992.

The fundamental principle of the Internet is its "end-to-end" architecture. The "network of networks" was conceived upon the credo that the intelligence of the network should be located with the end-users. The Internet was therefore created as a common good, allowing all its users to develop new applications in a decentralized manner. From then on, innovation could happen.

This promise of an open and free Internet however, quickly came up against a very different market reality. The emergence of oligopolistic platforms, concentrating an increasing fraction of data, is far from being in line with the vision of fair and balanced sharing. Far from disintermediating relations between individuals and organizations, new intermediaries have emerged. These dominant platforms are known and used by each and everyone. Mainly referred to under the journalistic acronym GAFAM in the West (standing for Google, Apple, Facebook, Amazon, Microsoft) and BATX in the East (standing for Baidu, Alibaba, Tencent, Xiaomi). There is a multitude of other platforms like Netflix, Booking, Airbnb or Uber. Several lessons can therefore be drawn from the evolution of the Internet to better discover the imminent blockchain revolution.

The first lesson is the myth of decentralization or the illusion of disintermediation. Here is a simple example to illustrate: Airbnb did not disintermediate the relationship between a person trying to rent or sublet a property and a tenant. This is simply re-intermediation.

A second lesson is the tropism for the West, while much more impressive actors are emerging in Asia. Therefore, we need to review our digital geopolitics, so we do not underestimate the importance of these balances of power in the cyberspace. To convince yourself of that, just notice that most of the mining capacities are now located in China.

A third lesson is how to prevent new oligopolies from forming. Will the chains of blocks that will be imposed tomorrow be open blockchains or private blockchains? This relates to many debates that occurred in the past, particularly around intellectual property, when following the emergence of the Internet, proponents of free software strongly opposed those of copyright. Once again, the Internet today is much more centralized than what hippies, libertarians or defenders of cyberspace had expected. We should therefore be careful not to underestimate the emergence and domination of permissive standards, which are by nature much less transparent and decentralized.

Therefore, we must support innovation, without undermining it, while protecting the fundamental rights of users. In the short term, for example, it will be important to ensure a clear and fair information of ICO subscribers. However, these crypto-active fundraisers are only a first use case, and the blockchain has plenty more in store for us. As the author rightly reminds us, the banking and insurance sectors are often driving forces in the development and adoption of new technologies. However, let's not focus only on them. Paradigm shifts in terms of evidence by blockchain, or corporate governance could prove to be much more fundamental.

As a practitioner of digital law, passionate about the impact of technologies on society, here are some of tomorrow’s central issues that we will need to address in a multidisciplinary way together. Is disintermediation even possible? How can we reconcile blockchain and the protection of personal data? How can we clarify the validity and scope of transaction entries in a blockchain? Can trust be delegated to our traditional institutions, peer-to-peer technologies and exchanges? How to legally apprehend new forms of criminality, virtual wallet theft, data manipulation? How can we regulate these sovereign issues, i.e. sovereignty, in a decentralized manner?... In this context, France wants to be a forerunner on regulatory matters - the 2016 “ordonnances”, the 2017 decrees, the Landau report, the PACTE law - to make it an attractive place to do business. It is up to us to write the rest of the story together.

1 Comment

Muhammad Farhan Qolbuna
Muhammad Farhan Qolbuna
Jun 25

What systemic risks does blockchain pose to the monetary policies of a globalized economy?

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