Rent-seeking behaviour dies hard

During the early 90’s, sending messages over the Internet was much cheaper than placing international phone calls, so much so that geeks were often tasked to relay a message across the Atlantic on behalf of loved ones. Everyone knew they were part of something special when they pressed ‘send’. Many wondered what the world would be like once the terminals would be in every home of every country, and how it would change humanity for the better.

Others contemplated the value of this ‘SMTP’ thing. Billions? Trillions? Somehow it had to be harnessed. Surely people shouldn’t be allowed to just send as many messages as they wanted! What if we charged 1¢ a message? Or per email address? Should the price be the same as a fax? What if we made email private, so that it’s free to send to an address on our network, but cost to send to other domains? Wait, we control the server, so we could charge whatever we want!

Outrageous? No, mundane, because rent seeking models have been attempted on every single open technology. Email, the Web, Bittorrent, the whole of the Internet, and now ‘the blockchain’.

If you’re not familiar with rent-seeking behaviour, the classical example by Robert Shiller is that of “a feudal lord installing a chain across a river flowing through his land, and then hiring a collector to charge passing boats a fee to lower the chain. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is helping nobody in any way, directly or indirectly, except himself. All he is doing is finding a way to make money from something that used to be free”.

Thanks to the technological breakthrough of Ethereum and its turing complete blockchain going live, I often read that things are “like the Internet in the early 90s”. To a certain extent, this is true. But unfortunately it’s also attracted a crowd that is seemingly in an awful rush to “embrace, extends and extinguish” the technology before it disrupts them, permanently. My apologies to the wannabe Zuckerberg, but blockchains aren’t here to build Facebook 2.0, blockchain edition.

What this technology could excel at however, is improving the efficiency of society as a whole, by making available to the world an always-on ‘world computer’ we all share.

Think of Ethereum as cloud hosting, except no single entity or person owns it, all of its applications are open state and its end users cover the cost of operation per an ultra-granular ‘pay as you use’ model.

But who’s going to write the code, if no one can gain an unfair advantage by staying proprietary? Well apparently, quite a lot of people, including the company I co-founded, Slock.it. Open source rules the world: an estimated 80 to 90 percent of the world’s software uses open-source libraries. Auditability, stability, absence of vendor lock-in — the advantages of open source are now well understood and leveraged regularly by businesses worldwide.

And the blockchain is the perfect environment for both individuals and corporations to run this code — leveraging it as an on-demand, always on, always correct, trustless computing cloud.

Ethereum applications are also expected to be modular — one program could run a delivery tracking system, another a reputation system, a third a stock management component and a fourth an auction house. Together, they will form one of the many inevitable decentralized eBays of the future, owned by no one, their source code in plain text for all to verify and audit. Added bonus: no more reputation silos, so the good you do on the decentralized Airbnb will count towards your reputation on the decentralized uber.

When I look at the Mist alpha preview, I think of it as the decentralization equivalent to the 1968 Douglas Engelbart’s “Mother of All Demos”. I believe there’s a good chance the concepts the Ethereum team put forward today will be eerily similar to the ‘new normal’ of the future, but I also don’t fool myself that it will be the only technology we’ll all use in 30 years time. There is still much to research, and there certainly won’t be a single ecosystem — interconnectivity is, and always will be key.

The purpose of the Ethereum project is to reach across into the future, defining what the ideal network technology will look like, and build it with today’s tools.

Which logo or acronym will power the Internet of tomorrow is ultimately irrelevant, but under no circumstance should it be proprietary, or exhibit any property of a proprietary system.

So, amidst all this hope of a decentralized future, it’s rather disconcerting to see that for so many, the first question asked is how to keep data hostage on this new platform. I have a not so subtle hint for them: attempting to re-create rent-seeking models and platform capitalism on a system designed to end these very things simply is not going to work.

In the next post, I’ll cover why blockchain-based projects will find success through openness, just like the bitcoin blockchain maintains the security of USD 6.5 billions with open source and free software.

About the Author

Stephan Tual is the Founder and COO of Slock.it.

Previously CCO for the Ethereum project, Stephan has three startups under his belt and brings 20 years of enterprise IT experience to the Slock.it project. Before discovering the Blockchain, Stephan held CTO positions at leading data analytics companies in London with clients including VISA Europe and BP.

His current focus is on the intersection of blockchain technology and embedded hardware, where autonomous agents can transact as part of an optimal Internet of Things economy.

Twitter: @stephantual
Contact: https://www.linkedin.com/in/stephantual/
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