Blockchain Expert Explains One Concept in 5 Levels of Difficulty | WIRED

my name is bettina warburg i'm a researcher of transformative technologies and co-founder of animal ventures today i've been challenged to explain one concept at five levels of increasing complexity my topic is blockchain technology blockchain is a new network and it's going to help us decentralize trade allowing us to do a lot of our transactions much more peer-to-peer directly and lower our use of intermediaries like companies or banks may be i think today everyone can leave understanding something about blockchain at some level do you know what we're going to talk about today it's called blockchain what's

blockchain that's a really good question it's actually a way that we can trade do you know what trade is it's like it's when you take turns every time that's when you give a most of what you want right when you give up most of what you want well sometimes that definitely happens for sure what if i told you that there's a kind of technology that i work on that means you could trade with any kid all over the world really yeah if i could trade with any kid i would trade well i would chase something

i don't like so much that's probably a good idea maybe somebody else likes it more than you do so normally when people trade they have to go to the store or they have to know the person so that they can get what they asked for with blockchain you can make that exact same trade but you don't need the store and you don't even necessarily need to know the other person really really so ian do you know what blockchain is no have you ever traded or sold anything actually i'm selling my computer on ebay right now

that's amazing what made you decide to trade on ebay um well i mean i've heard of it and i trust it a lot because there's they have like all their guarantees so i i know that i'm gonna get money and the person's gonna get what they want so what if i told you that blockchain technology is basically a tool where you can do the exact same thing but it goes to you and i directly you wouldn't need an ebay or a brand in between that's cool and there's a lot of those kinds of middlemen in

our society today right we have a lot of banks we have a lot of companies that sort of help us make sure that our trades happen but if we could guarantee the same trade using technology as sort of like a technological trust then we wouldn't really need all those middlemen in between so how does it work it's basically a network of computers that all have the same history of transactions and so instead of sort of there being one company with one database that holds all the information the same sort of list is held by all

these different people like you could have it on your computer and then it gets validated by everyone and basically that turns into the next part of the list so it's sort of constantly updating itself so like how do you make sure that it's secure so it uses cryptography and that helps it basically encode all of the transactions so you can't really see exactly what happened but you know it happened because it's like a marker so you could kind of like i don't know say trade you trade apples but you would just see like random letters

yeah for it so you wouldn't be able to like track it i guess exactly that's cool so it's kind of this like really big ledger or accounting system for all sorts of things that get traded but instead of being owned by one company it's owned by everybody that's cool yeah we're going to talk about blockchain technology have you heard of blockchain i've heard of the words blockchain but i'm not sure i know what it is so when we were much smaller societies you and i could trade in our community pretty easily but as the distance

in our trade grew we ended up inventing institutions right if you use uber or you use airbnb or you use amazon even these are just digital marketplaces and platforms that help us facilitate an exchange of value but today we actually have a technology that allows us to trade one-to-one but at scale and it's called blockchain technology there is some kind of interface for it you could have an app or you could use your computer to do it but instead of there being a company in the middle or what's helping you make that transaction is a

bunch of software code and so it's being run by all of these different computers that have like a node so they're all running the same software and guaranteeing your transactions um as they happen i mean i would assume this technology is taking away business or activity from these middlemen in some cases yeah it is and a lot of people in the financial industry in particular are looking at it from the banking side of how do we use this technology to trade things like bitcoin or other tokens that um are easier to use instead of today's

currency you know a lot of people think about blockchain as bitcoin because it's sort of in the news a lot and it's this new cryptocurrency and it's kind of exciting but we're actually seeing a lot more use cases for blockchain that aren't around the currency side they're more around how do you take any asset and be able to trade that using the same technology is there a mechanism for verifying that person a is a legitimate seller or producer of the item so today a lot of people are working on how to create identity structures that

leverage blockchain and one of the tools for doing that is being able to cryptographically sign for a given attribute so your government could sign that you have a u.s passport or a university could sign that you are a currently enrolled student and you could then dole out that information and control it yourself and be able to show people those certifications on an as needed basis so today we're going to talk about blockchain technology okay have you ever heard of blockchain i have whenever we have a transaction and let's say i buy something from you this

information gets logged and it gets verified by a third person or third party and then if like all this information verified and it all matches right the transaction goes through without any intermediary basically right and it gets stored and when we make further transactions this information is already embedded it's in the in the ledger yeah that's exactly right and you can append it you can sort of add new information that's more current but you can't actually go erase anything absolutely right the way the technology is changing nothing's gonna be like it used to be and

there's no like firm and then the buyer and the seller and it's basically we'll have to rewrite a lot of rules and economics as well for sure a lot of the assumptions won't hold true same with who are the who are the actors it's not just people anymore it's machines absolutely we're going to have to create entire new concepts of how they do trade and how they work with us too what kind of barriers or roadblocks would you imagine are going to happen in the blockchain space so at least when we we talk about bitcoin

there are some trust issues there have been some hacks and uh so there is obviously a need to to work on on trust and feeling that it's uh it's the safe technology yeah one of the problems that bitcoin has faced is bitcoins getting stolen or lost but a lot of that actually comes from people trying to recentralize bitcoin in different ways making themselves actually a pretty easy target absolutely so education will be a big part before we actually can use the technology very in in the wide sense right yeah to actually transition into the mainstream

and and make it useful for average people to use we're going to need to make sure we have a lot more education a lot more standards and probably work with a lot of enterprises to create sort of the user experience around this being a technology that is safe and usable and understandable what is the current state of blockchain in your understanding what's going to have to happen next the current state is in this the research state and it's being developed to to be applied in many many areas it might be used almost everywhere to where

like we won't even imagine how we lived without it but i'm not sure where it's going to go i mean no one really knows right well we have a lot of uh public blockchains like we have bitcoin we have the ethereum network nxt but a lot of companies and consortiums are getting together to build private blockchains so ones that are more closed off at first and then may evolve into a public network when people feel comfortable using it and some are also proof of concepts out in the real world projects in energy and in pharmaceuticals

and in retail and lots of different fields are starting experiments and we'll see in the next few years how all of those interact and what we learn about the best use cases for blockchain and what it means for trade so tell me your version of a technical definition of blockchain a technical definition of blockchain is that it is a persistent transparent public append-only ledger so it is a system that you can add data to and not change previous data within it it does this through a mechanism for creating consensus between scattered or distributed parties that

do not need to trust each other but just need to trust the mechanism by which their consensus has arrived at in the case of blockchain it relies on some form of challenge such that no one actor on the network is able to solve this challenge consistently more than everyone else on the network so it randomizes yes yeah it randomizes the process and in theory ensures that no one can force the blockchain to accept a particular entry onto the ledger that others disagree with one that relies on a mechanism for a peer-to-peer network that can maintain

updates to the ledger and then verify those updates in such a way that it is impossible to defraud and impossible to alter after the fact and do you see it as defining a new discipline of kinds or where where are we going to see blockchain emerge in the real world first i mean just so like as an example one thing that i think about a lot in terms of possible blockchain applications is electricity right the next generation of distributed smart grid technology effectively sure and people are working on that already yeah yeah exactly and it's

this very fruitful area of research and you can find yourself looking like 20 years out right where you have an enormous number like of electric cars you have all of these batteries like that's essentially um a distributed peak load power grid right like the cars are getting plugged in and unplugged at different times if you have a mechanism that is able to automatically and autonomously be distributing power based on batteries that are scattered throughout the grid that are being used for other purposes their owners don't even necessarily need to be aware you begin to have

something that looks like a much more viable society that still has a lot of electricity needs but is able to base that much more on renewables is able to make up the difference during peak load periods or during differences in weather that is able to have power much closer to where it's needed rather than having to be distributed over great distances like that's something that would be an enormously hard problem to solve and it's not that the blockchain makes it easy but it makes it possible a lot of people are seeing blockchain in the news

and maybe seeing a lot of sort of initial coin offerings this sort of monetization opportunity around blockchain and are getting very excited about it and some of that excitement is is real and should be you know encouraged but some of it is also hype how do you feel about the hype cycle around blockchain today i'm glad you mentioned initial coin offerings um because for me those really exemplify the sort of the the problem that we're having at this exact moment they are a an idea with enormous potential significance down the road however the promise of

the initial coin offering has been kind of hijacked into this string of like basically pump and dump scams or sort of desperate gold rush schemes the faster that we can we can shift from this this fantasy that it is going to make you rich in a sort of you know 1920s tulip bubble kind of way um is is that is the sooner that we can get into people honestly and i mean this like with all the hope in the world people being disappointed in blockchains like oh i didn't get rich it's just being used now

to make it easier to transact goods and services safely across borders this isn't exciting at all and then we'll see that like become part of the everyday infrastructure of the world in a way that i think will be very significant but i think it is now almost every aspect of it that's connected with the concept of money is wildly overhyped um and it also creates a problem which is people get a lot of excitement around it and then they're waiting for [Music] the world to change yeah right where where is this technology why haven't i

seen anything changing yes yes because we've had a lot of pr a lot of proof of concept but yeah truthfully this is more like a science right it will develop it will take five years it will take 10 years that kind of time is necessary one of the areas that brought me to supply chain research is the fact that we're we're not just going to see blockchain emerge we're going to see artificial intelligence continue to evolve we're gonna see connected devices and this sort of growing internet of things machinery that can do a lot more

and have a wallet and transact on their own and so i actually think a lot of where blockchain and other technologies are headed is this interesting synergy that will help us elevate the kinds of institutions we've used in the past and cobbled together to create that identifiable verifiable trust yes and one of the most interesting ideas to me that came out of the currency side of the blockchain project was the notion around like coloring coins right assign properties to a particular coin and in particular to assign those properties in ways that would allow you to

do things like bring in the graph of previous transactions you know there's sort of an obvious application for this which is something that would look a little bit like an extreme version of like a boycott divestment and sanctions kind of approach right a model where it's sort of like i will not touch money my wallet will automatically not touch money that has been exchanged with the following as a sort of very extreme way of cutting those things out but there's also ways in which i think that could be applied to to clearing out the entire

logistics process of many kinds of bad actors but trying to make a supply chain better in some ways relies a lot on whose version of better that is and exactly kind of what gets qualified but also how that is quantified within say some kind of like smart contract system there's multiple ways that i could see this backfiring and one is the ways in which that is implemented for example leaving certain kinds of bad behavior untouched or unanalyzed or one that feels even more dire to me in some ways is creating an extremely inflexible con like

because human contracts legal contracts are actually very flexible like there's a lot of kind of room to move and renegotiate yeah but we we already have real world versions of some of these nightmare scenarios right where like your kid has a medical emergency and you can't unlock your car because you're two days behind on payments for it and so the car system will no longer respond to the app mechanism that you're supposed to be able to use to drive it barrier being sort of a rigidity in structures that maybe don't accommodate real life scenarios very

well as you and i have been talking one of the things that keeps coming up is that we tend to hold novel technologies to an unrealistically high standard in terms of what they are supposed to deliver rather than comparing them to actually existing systems where we can begin to see the possibility that even like a slight incremental improvement would still be an enormous gain the system we have today is also broken right it's it's hard to compare it to some perfect future just like we compare um you know autonomous vehicles to this very high standard

because machines are doing it should be perfect right there should be zero car deaths and when you say well there's hundreds of thousands millions of you know car deaths on the road due to human error today i think we're in a similar place we're going to see problems with this technology and we are going to need to develop multiple kinds of standards that also have some flexibility but it's it's going to also be a version a system that allows us to fix some of the things that are broken today blockchain may sound complicated but at

its core it's just another tool for humans and eventually robots and other kinds of identities to trade at scale and make that trade more decentralized and it's part of our future so it's important that people have these kinds of conversations and start to learn about it