I am delighted to publish a 15-video series dedicated to my book, “Blockchain + Antitrust: The Decentralization formula”. You can access all the chapters over here, and all the transcripts over here.
In this video, I’d like to put blockchain in the context of evolutionary theory.
The term evolution is often associated with Darwin. I will discuss his work in just a minute. But before, let me mention that the transposition of Darwin’s work to modern economies does not explain how new technologies appear. The answer to this enigma can be found in the work of W. Brian Arthur, who explained that new technologies result from unexpected combinations. Blockchain is very much a combinatorial technology. It integrates encryption technics with specific governance systems, which I explored in the second video of this series.
That being said, Darwin’s findings do explain how living organisms (e.g., technologies) evolve and survive. So, welcome to Darwin 101. In the Origin of Species, Darwin explains that survival is more ferocious between different varieties of the same species than between different species. They indeed consume the same food and are exposed to the same dangers. As a result, those who can utilize their characteristics the best will survive and thrive. The other varieties disappear. In the long run, the process of natural selection causes mutations because only surviving species reproduce. After they have multiplied, they expand their territory and encounter new species which they will compete for survival. A new form of competition appears, this time around, between species.
Transposed to blockchain, one must distinguish between two evolutionary periods. The first period is one of natural selection between blockchain varieties. According to Darwin, “no man can predict” which varieties will thrive because, I quote, “we are much too ignorant in regard to the whole economy of any one organic being to say what slight modifications would be of importance or not”. Predicting survival with accuracy would require computing all the characteristics of a variety, even the slightest, to compute all the characteristics of other varieties to anticipate their relationship and compute all the characteristics of their environment to simulate which varieties are best suited. We cannot do that. So, we wait for natural selection to operate.
The second period of blockchain evolution is one of maturity. The most efficient blockchain varieties will logically thrive, and, as a result, they will gradually enter the territory of centralized applications, such as the one provided by big tech. Certain characteristics of blockchain will prove central to its survival. If several of these characteristics have been eliminated without undergoing natural selection, let us say, by way of regulation, blockchain’s chance of survival will be significantly affected. For example, altering blockchain immutability could be deadly as users may want to use blockchain services and not centralized services for that precise characteristic. To put it differently, manufacturing evolution is a perilous game.
Ok, let me be more specific and classify blockchain varieties. There are indeed monocentric blockchains and platform blockchains.
I call monocentric blockchains the ones that permit only one application. The Bitcoin blockchain is a good example to this day, even if several initiatives have been announced to make it more versatile. It is almost exclusively used for the Bitcoin cryptocurrency, and it gets its entire value from the application for which it was created.
Platform blockchains allow an unlimited number of applications to be added on top of what is called the “layer 1”. Ethereum is a great example of a platform blockchain, as anyone can upload a program there and leave it to self-execute. Here, the blockchain code can be described as a “fat protocol,” “since the success of the application layer drives further speculation at the protocol layer.”
This application layer can regroup three big types of applications. The first (blockchain 1.0) is cryptocurrency, where blockchain tokens are used as coins (utilities or securities). The second (blockchain 2.0) is smart contracts, said differently, automated transactions between users. The third (blockchain 3.0) covers all other blockchain uses, including peer-to-peer ridesharing, social media, online research, and more. In fact, blockchain 3.0 includes alternatives to the products and services that are generally described as the “sharing economy”, or web 3.0.
Now, the entire ecosystem is highly dynamic. These varieties of blockchain compete fiercely. They are being adopted by big corporations, a majority of the world’s governments, and civilians. I give some contract examples and numbers in the book. Just one, for now: 1 billion transactions were recorded on public blockchains in 2019 alone. So, what’s next? Blockchain varieties will surely compete in years to come before several emerge. And we see already the premises of blockchain competing with big tech, something I will cover in the last video of this series.
Bain has predicted in a study that, by 2026, distributed ledger technology and blockchain will increase the volume of global trade by $1.1 trillion from $16 trillion today – which represents a 6.9 percent increase. PwC’s estimates are slightly higher: it attributes a $1.76 trillion impact to blockchain, representing 1.4 percent of the world’s total GDP. Lastly, Gartner prophesizes that blockchain will create $3.1 trillion worth of business value by 2030.
Let me stop here and say that prediction growth often amounts to reading tea leaves. What matters here is not the exact numbers but the idea that blockchain could enable new transactions on top of transforming existing ones. This is good news generally speaking, but it also means, almost mechanically, more antitrust infringements, unless blockchain architecture prevents most of them? You’ll find an answer in forthcoming videos. For now, let us remember Darwin’s teaching: one does not manufacture natural selection. I will also come back to this idea.
That is all for today. Thank you very much for listening. Take care of yourself, and, if you can, someone else too. Cheers.