Why the specter of blockchain will be more important to humankind than AI

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Translation of a speech given by Wang Feng, prominent Chinese blockchain investor, at Peking University

I’m back with another translation, this time of a lecture that was given in Chinese at Peking University on May 5, 2018 by Wang Feng, founder of Huoxing24 (a Chinese blockchain news site), LineKong (a Chinese media and entertainment product company) and partner at GeekFounders (a tech investment firm).

I found his perspective about blockchain a solid and concise consolidation of the leading thoughts about the history of blockchain and what its significance is. The way he explains it illuminates both a global way of thinking about the technology, and also a Chinese perspective of what that thinking means (starting with a straight-up quote from the Communist Manisfesto...)

Having also worked on AI products myself, it was a fresh take on the significance of AI as compared to blockchain, and why people have strong feelings about the impact of these two disruptive technologies.

Note that I’m not exactly translating this in a way of a direct transcription, but rather as a narrative, so I skip all the parts addressing the audience like “hello fellow alumni” and whatnot. I’ll pepper my thoughts and comments throughout, so please do think about and debate those with me :)

Again, kudos to the originator, and you can credit me only for the translation, dramatic flourishes and contextual comments.

1848: Karl Marx wrote in his Communist Manifesto: “A specter is haunting Europe — the specter of Communism.”

On the day this speech was delivered, May 5, 2018, it is exactly 200 years since Marx was born. As a mathematician by practice, Wang often balked at having to remember all kinds of birthdays in history class in middle school; however, the few he did remember included Marx’s, because it was easy to remember as 1818.5.5. He had a certain propensity to think of famous people’s birthdays as a secret code, full of mysteries yet to be decoded; he wondered if God bestowed upon these people secret keys in the form of their birthdates, beseeching each of them to come and stir up something major in the world at various periods in time: Marx, Einstein, Jobs, and today, Nakamoto.

Bitcoin and blockchain are the technological specters of our world today, seeping steadily into reality as we know it, changing what we had previously thought were unshakeable truths and beliefs. Many dismiss and belittle it; some embrace and speculate on it; and even more sit idly, simply observing as the world changes around them.

The internet, through the communication protocol TCP/IP and standard text markup language HTML, has over the course of 30 years changed the course of human society, spurring the revolution of the most efficient and productive period in human history. Especially in China, where the government has instituted strong support for moving into the information age, and the past 30 years of reforms and trade openness, entrepreneurs have really taken to the Internet. The lives of the Chinese, from shopping, eating, entertaining, ride-sharing, paying and all kinds of day-to-day situations, have invariably been improved to the extremes of efficiency, stunning countless observers worldwide.

Comment: I concur with this sentiment. You could literally stay at home all the time and never have to want for anything — everything, from food to clothing to anything you can think of, can be delivered to you, within hours or the next day. You don’t need a wallet when you leave home. You can use your face to pay for things. You can walk around an office and it will adjust your access rights depending on your status as it recognizes you.

In the past, when Chinese went to Europe, the United States, and Japan, they often lamented how the development of Western civilization far surpassed that of their country’s. Today, Chinese people go to these places, and the biggest complaint is that the internet landscapes there are inconvenient and cannot compare to China’s. So perhaps, in China today, we can’t help but ask: Since the Internet is already so great for us, why on earth do we need something called blockchain?

The philosophy behind blockchain and the internet are two parallel universes. Some people say that the biggest proponents of blockchain are those born after 1990, or even 1995; as lifelong internet citizens, if we really want to understand blockchain, we almost have to open our “celestial eyes”.

Comment: The Chinese have a saying “开天眼”, which people believe is an extraterrestrial eye for foresight or insight. Loosely, it just means having those qualities to unveil the mysteries of the universe that seem elusive at a glance.

We also see the ills brought about by blockchain: The global, cross-border qualities of bitcoin clash against national sovereignty; bitcoin is used on the black market; because of the sheer mass of people participating in mining, POW (proof of work) now consumes over 42 trillion kWh a year — and all this, with only an early adopter population of about 10 million worldwide.

So, can this specter of blockchain technology ever be in harmony with today’s internet society?

Well, first, who were the people behind the rise of bitcoin?

On November 1, 2008, a self-proclaimed person (or persons), Satoshi Nakamoto, posted a white paper on a secretive crypto forum, stating his new vision for electronic money — building a peer-to-peer electronic cash system. The paper describes in detail how to create a decentralized electronic trading system, and how this system can exist on the basis of mutual trust between the parties to the transaction, without relying on a third party. Closely following this white paper, on January 3, 2009, he developed and released the first program to implement the Bitcoin algorithm, and conducted the first mining operation to obtain the first batch of 50 bitcoins. This marks the official birth of the Bitcoin financial system.

In less than a decade, the rise of Bitcoin has been spectacular, with its value increasing to a height of US$19,000. In the past two years, the value of Bitcoin has increased nearly 30 times, and the value of bitcoin in circulation has reached nearly 170 billion US dollars, which is higher than the market value of McDonald’s.

What exactly supports the rise of Bitcoin? How did it go from being not worth more than a penny, to a price that could rival gold — what are the fundamentals underpinning it? There are three factors:

First, Bitcoin has a number of staunch believers in its technology. Freedom, equality, and anti-commercialization are important attributes of Bitcoin. Bitcoin will be an open-source free software project as monumental as Linux, and more technical believers join the cause every day; the support of these people forms the firm foundation of Bitcoin. Therefore, faith is the elemental factor for the development of all great things. This is true of technical beliefs, political beliefs, and religious beliefs. The root of many evergreen foundations comes from faith, not from material or selfish interests. Second, there will only ever be 21 million bitcoins in existence. Today, already more than half have been mined, and people are just beginning to realize the increasing importance of bitcoin as a valuable investment asset. Wensheng Cai, a well-known internet investor, previously set a goal of owning 10,000 bitcoins of his own, and revealed that he had already acquired this target; Chandler Guo, also known as Bao Er Ye (宝二爷, a nickname referring to his investment persona), advised everyone to buy a single bitcoin, and give it to their child when he/she gets married. Even the Silicon Valley investment guru Tim Draper said recently that he believed bitcoin prices will reach US$250,000 by 2022. A growing tide of people are optimistic about Bitcoin’s long-term value potential. Third, Bitcoin has come to the attention of speculators, and they have taken the opportunity to speculate the shit out of it. In China, our “dancing aunties” and “Wenzhou gangs” have thundered their way into the bitcoin scene, together with the youth in Korea, all of whom are contributing to the highest levels of speculation in the world. Thanks to them, the bitcoin price has continued to climb.

Comment: Here, “dancing aunties” refer to retired housewives in China who often congregate in parade squares and mall open spaces to practise cultural dances together. “Wenzhou gangs” refers to people originating from an area in China called Wenzhou, which has the happy reputation of being sort of a scammer’s valley in China. I was told by someone: “Oh, Wenzhou — that’s where child and sex trafficking happened all the time, historically.” Um, yeah, wow.

What’s more, some countries’ governments have started to legislate in protection of Bitcoin and digital currency exchanges. Many Asian countries have started to prepare for issuing of licenses to companies engaged in cryptocurrency trading and exchanges, especially in Japan and Southeast Asia. In China, the institutions directly under the Central Government have not expressed a strong position. However, we observe that local governments in Hangzhou, Hainan and other provinces in China have begun to attach significance to the blockchain companies under their charge. For example, the famous Bitcoin investor Xiaolai Li went to Hangzhou and engaged with local governments to pave the way for the the blockchain-focused Xiong An Global Blockchain Innovation Fund. We have also just learned that Huobi Labs, an incubator under the Huobi exchange mothership, intends to develop an industrial park in Hainan.

However, while many have heard of Bitcoin, few have any knowledge of the underlying technology, blockchain.

In fact, blockchain technology is the underlying technology of Bitcoin, and Bitcoin has been operating without any centralized organization controlling or managing it since its genesis. We can think of Bitcoin as the first application of blockchain, before it gradually expanded to more and other industries besides peer-to-peer payments. We often describe Bitcoin as Blockchain 1.0, and Ethereum with its smart contract technology as Blockchain 2.0, because it has made it possible for more blockchain projects to distribute their own tokens and subsequent chains.

Today, more blockchain projects have begun to trumpet Blockchain 3.0 — promoting the maturity of applications, and applications of blockchain technology to industrial and consumer markets. EOS, founded by serial blockchain entrepreneur BM (Byte Master, aka Dan Larimer), through the concept of creating an operating system for blockchain, the release of an exciting public testnet, and the introduction of the famous 21 block producer (better known in China as super node) model, has once again set the blockchain industry in China aflame.

Other than Bitcoin, some are of the opinion that the greatest value in blockchain is the “meeting of the minds” that is happening because of the technology. This is an interesting perspective; Bitcoin is the original “bible” that sparked this revolution, but the door out of the blockchain church has been cracked open but only a tiny sliver. What happens next — well, it’s still too early to tell. However, let’s not be careless; this is not the world as we knew it before.

In the current state of the overly-centralized internet, the birth of blockchain can be interpreted as “right time, right place, right people”

Comment: Original text was 区块链的诞生可谓符合“天时地利人和”, a reference to the Art of War by Sun Tzu, stating that you need the right factors to fall into place, namely: timely opportunities bestowed by heaven, situational advantages afforded by land, and unity powered by the accord of man.

In 1989, Tim Berners-Lee proposed the establishment of a global hypertext project, the World Wide Web (WWW), whose original intention was to make it easy for everyone to obtain and share information online. However, the Internet has been monopolized by the giants today. Centralization has led to the unfortunate outcome that the internet is no longer being open. Facebook is a closed system, and WeChat is a closed system. These closed systems have created isolated islands of information, drifting apart, severely hindering the free flow of information on the internet, betraying the original hope of its creators.

In the real world, economic fundamentals determine what infrastructure is built; In the virtual world of the internet, technological fundamentals determine what infrastructure is built.

The blockchain technology model consists of a 6-layer structure consisting of a bottom-up data layer, a network layer, a consensus layer, an incentive /economic layer, a contract layer, and an application layer. Many tech entrepreneurs glance at this model, and dismiss that there is nothing new about this technology–that this is only old P2P (peer-to-peer) technology wrapped in shiny new garb, and good ol’ Napster, NetAnts, and even the Chinese video player QVOD, were built upon a model like this. However, if you study more deeply and carefully, you will realize that this is a new model. The significance of this new model is the discovery of “open source consensus incentives” in its structural design, a multi-level architecture comprising system design, integrated data, calculation, and governance; and with it, has constructed a new technological civilization and social civilization system. The blockchain will give us a freer, more transparent and fairer world.

In the last 30 years, the internet civilization has achieved runaway success, almost like a horse that has bucked its reins. In these past 30 to 40 years–let’s forget about the boring trend of mobile internet surpassing traditional internet–we have had Internet+ and Industry 4.0, both of which were the starting points for the next wave of important developments: smart watches, smart bands, smart glasses, assistive/humanoid robots, driverless cars, smart medicine, natural language generation, machine translation… It is inevitably clear that our artificial intelligence research has delivered results.

If you look at things from a long historical time scale, everything developed from an accidental turn to the inevitable. Nobody can predict the accidental, but we certainly can push through to create the inevitable. The internet, big data, cloud computing, IOT, and artificial intelligence were progressive improvements, inevitable developments from the accidental and randomness in the world. Artificial intelligence simply follows the trend of increasing productivity and growth in human history.

Artificial intelligence includes robots, speech recognition, computer vision, natural language processing, expert systems and more, and what it augments is productivity–let machines do the work, and let humans do less work, or even no work at all.

If you don’t have to be a producer in the future, because you no longer have the productive power to rival that of a machine equipped with data and processing power, you can forget all about being a rightful consumer in this world. Engels said that labor makes a man, that productivity is the essence of being human–but if you can never work again, what does that mean about your continued existence?

If we reach the extremes of information processing and technological prowess, but lose our ability to be productive and are completely replaced by machines, and are controlled by a few monopolists who own the AI systems, what do we do then? Should we simply accept our current view that human prosperity always comes from continuous productivity growth, or should we consider a technological revolution in our relationship with productivity growth?

What blockchain will bring is this revolution in our productive relationships; in the future, it will release humanity from the clutches of robot dominion and labor impotence, and bring about a new prosperity in productivity growth. For example: in business today, for the most part the channel is king. If you sell FMCGs (fast-moving consumer goods) your margins are razor thin, but before you even make a couple of pennies, you are already working for the mall and the supermarket. If you own a mall or supermarket, before you even make a couple of dollars, you have already paid most of it to rent. The internet has destroyed traditional businesses and channels, but its own entryway is the strongest, most centralized channel. If you are a small e-commerce seller, you pay away your profits to the e-commerce platform; if you create games, your users and traffic are at the mercy of the internet channel you are on.

Some people have gone as far as to say the internet is now the giants’ “user slaughterhouse”, and no individual or corporation is exempt from the fate of being a cow or a sheep on their playing field, biding their time before they are skinned and slaughtered.

With blockchain, for the first time, producers can promote their products and content directly, judged only by the consensus of the crowd. If the content is good, everyone will be willing to share it, because they too can get rewarded for it. They are not beholden to traditional channels, and not held captive by internet channels or user entry points to the internet. Good products and content will naturally spread and its prices will rise. This way, producers and users are finally in the same boat, in a boat sailing along on the winds of a distributed and fair technological foundation.

Therefore, with blockchain’s significance being to increase human prosperity through changing the way that value is distributed throughout the world, its meaning to us far surpasses what artificial intelligence can bring in the way of greater productivity.

On October 31, 2015, The Economist’s cover was “The Trust Machine”, with an interpretation far deeper than just the impact of cryptocurrencies. It enables consensus among those who may not have trust to begin with, without an intermediary, and in this way builds true trust instead.

If the steam engine set human productivity free, and electricity fulfilled the basic needs of daily life, the internet fundamentally changed the way information is transmitted, then blockchain as the trust machine will completely change how value is exchanged among humans. Hence, blockchain technology is seen as the successor of the steam engine, electricity and the internet, as the next disruptive technology.

The core of this technology is built upon trust, no matter whether it’s a narrower application like Bitcoin’s peer-to-peer payment ledger, or a larger application like blockchain consensus mechanisms. This consensus mechanism is blockchain’s unique ability to establish trust among distributed nodes, an algorithm that powers the exchange of rights and interests. Blockchain’s foundational support system is a pure logic, and is more ambitious and vital than computers and mobile internet devices running on physical systems and infrastructure. The blockchain can exist on both PCs and phones, run on mainframe servers, and even on quantum computing platforms in the future.

The extreme centralization in our internet model today will eventually lead to more negative social effects and externalities. In March, due to poor management, Facebook caused more than 50 million users’ private information to be disclosed, and more seriously, the data was used to intervene in political elections. In April, following Facebook, Twitter was also exposed to have been involved in selling data collection to the same Aleksandr Kogan, a Cambridge Analytica researcher. These highly-efficient centralized platforms have been generated such a crisis of confidence that has only become increasingly serious.

The emergence of blockchain, with its distributed and decentralized solutions, have arrived in a timely manner to address the internet’s pain points.

There is a well-known “impossible trilemma” theory positing that the current blockchain technology cannot solve for efficiency, decentralization and security all at the same time.

However, even though there may be such an impossible conundrum limiting us now, the blockchain industry must still forge forward and improve. After all, for our human society, security and multi-node, decentralized participation are more important than efficiency.

Finally, many of us in the industry think that there need not be such a strong distinction between what is a blockchain company and what is an internet company. In the next three years, perhaps every internet company will integrate blockchain technology into their products; and similarly, every good blockchain company will no doubt combine the existing internet technology and user base so they can truly expand at a large scale.

If we zoom out from our current existence, and look at this from a macro perspective, the birth of the Internet and blockchain occupies only a short time span of a few decades in human history. If the blockchain and Internet overlap, it will fundamentally solve the twin challenges of information ownership and value transmission at the same time.

So is blockchain a revolution and subversion of the Internet? It may be hard to justify describing it in that way. In previous eras, if you refused to give me what I wanted, I can only start a revolution and take away your wealth and life, and I can build the world order in the way that I want after that. However, people later realized in this dog-eat-dog model, more chaos ensued instead — and in many cases, it is not really a question of interest but a question of perception instead.

Human civilization has developed rapidly. The use of new technologies has increased the level of cognitive ability and consensus in the community. So when someone asks if blockchain can revolutionize today’s internet, perhaps the better response is that blockchain and the internet, today living in two parallel worlds, will gradually converge in the future. Hopefully, many of us will pay more attention to the blockchain, ascribe more importance to its value, and understand the difficulties and opportunities it will inevitably encounter in its development.

(￣^￣)ゞ ☆ END .*:ʕ•ᴥ•ʔ:*.

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