A bitcoin (lowercase b), as a currency, has several flaws that will continue to limit its ability to replace money as we know it. There are millions of words published on the subject, so I’ll leave it to the reader to assess arguments on both sides. However, Bitcoin (upper case B) as a “protocol” for the transfer of value is an extremely important innovation that engineers must not ignore.
The opportunities for the profession are sweeping and vast, but only if they take action and build this ecosystem their selves – it is so powerful, that others will gladly do it for them. I will try to explain this opportunity in this short 1125 word article, but please feel free to contact me with in-depth questions.
The Block Chain Protocol
The Bitcoin protocol is a brilliant innovation that cannot be un-invented – it is here to stay and it will appear in many forms long after it sheds the “bitcoin” moniker. Formally called the Block Chain protocol, Bitcoin was designed to solve an age old problem of double spending a currency, specifically, a virtual currency. A currency created on a computer can be easily copied by a computer and thus negates the real productivity that a currency is supposed to represent. The same is still true for money – paper currency is becoming increasingly complex so that it cannot be easily copied, etc.
Today, there are vast institutions from banks, corporations, a legal system, prison system, and unfathomable volumes of legislation (all imposing respective brokerage fees) acting on the behalf of sanctifying the dollar. However, volatility in these very institutions is what threatens the value of the dollar and all currencies upon which the World depends for very basic needs. How well is this working, really?
So, What’s the big deal?
The stakes are high. To invent a new secure and resilient means to rapidly transmit value can in one fell swoop eliminate the friction of the massive institutions on our economy, while also decreasing the volatility and economic friction imposed on society. This is the reason behind the media hype, congressional hearings, declarations of nations, billionaire press conferences, etc. They are all scared to death of the disruptive potential of this little beast. Unfortunately, bitcoin has fallen victim to many of the same deficiencies that it proposes to correct. But these will likely be corrected in the next iterations.
The Train Leaves The Station
The backbone of the Bitcoin protocol is called the Block Chain. There are now hundreds if not thousands of Block Chains in existence independent of Bitcoin. Consider the Block Chain like going down to the train station. At some predetermined time, a train arrives and the doors open. Everyone piles into the train and after a predetermined amount of time, the doors close. The corollary is that the doors cannot be opened for a predetermined amount of time and no changes, copies, or corruption can take place within that time stamp, no matter what. Only when the train reaches the next location, the doors will open. Once the doors close for a second time, they never open again and a new block is formed. Also, there is no way to retract this process, except by repeating it forward in a reverse transaction.
The protocol has a few more features that I’ll leave to the reader to research including a public ledger where all transactions are open for everyone to see; and the train gets infinitely long with each new opening. The transactions are opened and sealed cryptograpically and incentives are in place that compensates exchanges (the station masters) and well as those who solve a cryptographic puzzle that creates and maintains the integrity of the public ledger (miners).
Everyone knows that money and contracts are intimately related. In fact, money is a contract. A contract is defined as a meeting of the minds. As such, where the Block Chain protocol can efficiently transmit “currency”, so too can it transmit contracts. In fact, it is so effective for articulating contracts that it’s potential to do so far eclipses its ability to replace the existing fiat currencies. But again, money and contracts are so closely related that even this becomes a grey area – both can exist within the Block Chain. This is hugely significant.
So what’s in it for the Engineering profession?
There is a special type of contract that engineering societies such as the NSPE, ASME, IEEE, etc., should have a laser focus. These are called Oracle Contracts; also known as adjudicated contracts, (except subject to scientific judgement rather than necessarily a judgement of law). For example, a client would retain a contractor to build a structure or machinery. They would deposit funds into an escrow account managed by “smart contract” in a block chain. This means that the computer will flip the switches instead of an accountant, banker, or attorney. At certain points in contract and “oracle” – a third party vetting mechanism – will verify that the conditions or performance of the agreement have been met, then they would flip a switch that releases the funds to the contractor or back to the client (or through a predetermined decision tree), depending on objective observation.
It’s All About Efficiency
This is efficient for the contractor because they don’t have to worry about getting paid as long as they meet the conditions of the contract. The client does not need to worry about getting ripped off because they are assured that the conditions of their agreement will be met. The system is efficient because high integrity is rewarded and there is little incentive to cheat which minimizes lawyers, accountants, social dysfunction, and all manners of corruption in a public ledger that provides extraordinary analytics available for societal learning in the public domain.
For the vast majority of projects, products, or policies in the United States and the world, a licensed professional engineer and related scientific bodies are the ONLY qualified Oracles that can be deployed to vet an astonishing variety of Smart Contracts.
Smart Contracts can be written for almost any transaction, but it is inherently an intangible transaction since a “meeting of the minds” is the true nature of the value that they articulate. The implications of an abundant intangible economy vs. a scarce tangible economy are vast. Silicon Valley is pumping millions of dollars into virtual currency start-ups like Ripple Labs while companies such as Ethereum promise to make smart contracts on public ledger block chains as easy to build as dragging and dropping puzzle pieces into a web page. This is here today – it is not a theory.
Banks, insurance companies, and attorneys will be the first to adopt smart contracts because they stand the most to lose by not doing so. Meanwhile, engineers in the US and indeed the World are relegated to the contractor sweatshops or smothered under the weight of towering hierarchies. Tragedies such as the Oso landslide and global warming remind us of the absence of engineering oracles advocating for society and our planet. It is imperative, now, that engineers embrace Block Chain Protocol Technologies and the deployment of Smart Contracts to elevate the profession to the top of the proverbial food chain before there someone else does it for them.