“B” as Blockchain

Blockchain and AI

 

Satoshi Nakamoto
“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” With these words Satoshi Nakamoto, the mysterious creator of Bitcoin, defined the newly born technology of cryptonetworks and cryptocurrency in October 2008.

What is a Blockchain

Blockchain seems to be the buzzword of 2018, everybody talks these days about the Blockchain. But ask somebody about it, they will have a hard time to explain to you what Blockchain is.

I’ll try to explain what is Blockchain by giving you a simple but technical explanation of:

  • the concept
  • its applications
  • how it can interact with artificial intelligence
  • it’s limits
  • future of blockchain.

Let’s start: when somebody talks to you about Blockchain, just tell him:

Blockchain is a mathematical structure for storing data in a way that is nearly impossible to fake and that can be used for all kinds of valuable data.

Now let’s go for a more technical description that gives the name to the technology:

a blockchain is an electronic ledger, a list of transactions, which are chained together into blocks by cryptographic locks.

Bettina Warburg explains blockchain to a child, a teenager, a college student, a grad student and an expert.

How does blockchain work? The consensus protocol and the mining process

The locks are generated by a decentralized peer-to-peer network of multiple independent computers following rules dictated by a mathematical algorithm, the “consensus protocol”.

When the majority of the computers on the network achieve the consensus over the solution of the mathematical algorithm, the new block of transactions can be added to the blockchain and all the computers update their copies of the ledger simultaneously. If any of them tries to add an entry to the ledger or to change an entry retroactively without this consensus, the rest of the network automatically rejects the entry as invalid.

The process of verifying and adding transactions into the blockchain is called mining. It is a complicated mathematical process that requires high computational and electric power, therefore the miners get a reward for “mining” or validating each Block. The reward is in the form of new bitcoins, generated only at that moment, or of a transaction fee paid in other token.

How a blockchain works
How a blockchain works

What are Blockchain’s main characteristics

The most important characteristics of blockchain are:

  • peer-to-peer network: each player is a unique part of the chain, or a node in the network.
  • Decentralized network: each node is a “server”, thus there’s no need for a central server. No single entity controls the ledger and there is no need for a ‘referee’.
  • Immutability of transaction and trust: since shared record cannot be changed, no single person or authority can cheat the system. Every player trusts the system.

The immutability of transaction makes blockchain trustable and usable by any group of organizations that need a common record-keeping system. These players,  like for example a manufacturer and its suppliers, are independent of one another and perhaps don’t entirely trust one another.

Current Blockchain Applications 

We now know that a blockchain is a revolution in systems of record, let’s see some of the several successful applications of blockchain technology worldwide.

Trade

At the beginning of 2018, for the first time ever in the agricultural commodities sector, a cargo of U.S. soybeans shipped to China has been traded using blockchain (blockchain platform Easy Trading Connect, ETC). The soybean shipment transaction was completed at five times the speed of a paper-based.

The trade included a full set of digitized documents (sales contract, letter of credit, certificates) and automatic data-matching, thus avoiding task duplication and manual checks. Time spent on processing documents and data has been reduced fivefold. Other benefits include the ability to monitor the operation’s progress in real time, data verification, reduced risk of fraud, lower costs, and a shorter cash cycle.

The platform’s success demonstrates the immense potential of distributed ledger technologies to advance commodity trading and financing.

Blockchain trade
Louis Dreyfus Company (LDC), a leading merchant and processor of agricultural goods, Shandong Bohi Industry Co., the Chinese buyer, and 3 European banks (ING, Societe Generale and ABN Amro) have successfully completed the first full agricultural commodity transaction using the the blockchain platform Easy Trading Connect (ETC).

Healthcare

Blockchain technology has the potential to transform health care, placing the patient at the center of the health care ecosystem and increasing the security, privacy, and interoperability of health data. These data can be shared and used by government to improve health policies, by doctors to provide diagnosis based on a complete patient overview or by pharmaceutical companies for testing new therapy or medicine.

Blockchain technology places the patient at the center of the health care ecosystem
Blockchain technology places the patient at the center of the health care ecosystem

Bitcoin and smart contract

Blockchains technology can be used to create and exchange Bitcoin or other cryptocurrencies like Litecon, to trade digital assets or to execute smart contract. Through this new technology, the computers of a supplier and a manufacturer, for example, could automate a transfer of ownership of goods once the decentralized software sends a signal that a digital-currency payment has been made. Neither party necessarily trusts the other, but they can nonetheless carry out that automatic transfer without relying on a third party. Smart contracts will enable a much more open, global set of relationships.

Smart Contract
A smart contract is a computer code running on top of a blockchain containing a set of rules under which the parties to that smart contract agree to interact with each other. If and when the pre-defined rules are met, the agreement is automatically enforced.

Blockchain and Art

The art market is dependent on the provenance and authenticity of artworks. While blockchain cannot authenticate a painting to determine whether it is an original or forgery, it can be used to prove the piece’s previous owners. In addition, blockchain can be used to “trade” art, like soya beans. Two art collectors can trade a work of art anywhere in the world, without the need to physically transfer it from secure storage.

Blockchain and art
Forbes and New Art Academy developed together “Basel ArtTech+Blockchain Connect”

Blockchain and Artificial Intelligence

Blockchain and Artificial Intelligence are two of the biggest technology trends of our time.  They could both enhance the capabilities of the other, but in many ways they express opposite concepts, like nicely expressed by Peter Thiel and Reid Hoffman in a recent conversation at Stanford University concerning the relationship between technology and politics. Thiel declared that “Crypto is libertarian, AI is communist,” pointing to two extremes of the technological and political ideological ends. While Hoffman agreed with Thiel, he also provided another metaphor, stating that cryptocurrencies are “anarchy” and artificial intelligence is “the rule of law.”

AI and blockchain
Peter Thiel and Reid Hoffman at Stanford University discuss on decentralized and centralized technologies like cryptocurrencies and artificial intelligence.

AI: a centralized world system

AI is worldwide very much centralized within very few companies which includes the American “GAFA” (Google, Apple, Facebook and Amazon) and the Chinese “BAT”  (Baidu, Alibaba and Tencent).  These companies have access to a massive amount of data concerning user behavior, search and images, that have been collected over the years and can be used by the to train their AI algorithms. On top of that they can attract the top AI talent around the word, by paying with 6 zeros checks. The results are huge competitive advantages which basically kill competition and rises quite a few ethic problems for our society.

Can blockchain create a decentralize more democratic AI?

All of us (individuals, institutions) would be more comfortable sharing our sensitive personal and professional data anonymously, rather than have it harvested by a for-profit organization. But that would only work if we knew it would be kept completely secure and private through decentralization and secure system, which is what the blockchain could guarantee. Over time, this “marketplace” would accumulate a lot more data, and higher quality data, than what GAFA and BAT have access to. This data would be available for all machine learning experts for developing and training new AI models, not influenced by the goals of the current internet oligarchy and with a much wider perspective.

Blockchain technology can help building a fully decentralized AI marketplace where people provide their data, developers compete to provide the best machine learning models, and the whole system works as a self-reinforcing network that attracts more and more participants and creates increasingly better AI.

Blockchain limit

From a mere concept just a few years ago, blockchain technology is nowadays being used by companies in large-scale industrial implementations. But although the technology itself is revolutionary, there are certain blockchain limitations that have raised questions about its efficiency and reliability.

Being distributed in nature, blockchain technology will always be slower than centralized databases. Whenever a new block gets added to the blockchain, it must carry out all the mathematical processes that takes time and affect its performance. Furthermore, the consensus mechanism makes it mandatory for every participating node to verify a transaction. This limits the number of transactions that can be made in a given time.

New Blockchain

To improve blockchain performance we need a new concept of a “world computer” that is simultaneously decentralized and scalable.

DFINITY  a Palo Alto, and Zurich based project, is building a next-generation, decentralized world computer that can scale to billions of users. On top of the scalability issue DFINITY is developing a technology that can solve the performance of the mining system keeping the truth of the transactions and the independency from third parties.

New blockchain
DFINITY is building a new kind of public decentralized cloud computing resource. This rests upon a new blockchain computer with vastly improved performance and unlimited capacity.

Future of Blockchain

We discovered what a blockchain is and how we can use it to improve trade, health, art and even artificial intelligence algorithms.  But can blockchain really disrupt our society in a moment when centralized authorities and governments are facing a critical moment and bring better human collaboration?

In my opinion these decentralized computation networks are an important starting point toward a new kind of relationship between citizens, companies and government. Blockchain technology, based on a peer-to-peer, open, trustless and inclusive philosophy, has the potential to organize human collaboration at an unprecedented scale and create a more democratic balance of power, less dependent on large capital investments.

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