Will blockchain really break the internet’s ‘feudal model’, or is it just a glorified spreadsheet?

“The current Internet is based on a feudal economic model,” Dennis Avorin, a Malta-based tech policy expert says, explaining how the ownership of the internet is in the hands of a few large companies. “We kind of pay them by giving away our data for free, and in return we get free searches, free email, and so on.”

It serves as a good introduction to Avorin’s argument on why the world wide web’s ‘feudal model’ will be broken by Blockchain, perhaps 2018’s word of the year to go by the Maltese government’s unabashed worship at the altar of  the digital rapture.

Techno-evangelists and crypto-princes have flocked to Malta from all over the world this year to convene at the Delta Summit in October, and at the Malta Blockchain Summit in the week that the Maltese government published a set of laws to regulate distributed ledger technologies (DLT) like Blockchain itself. With the Labour administration now billing Malta itself as ‘the Blockchain island’, beyond the PR there is the real-life consequence of the Blockchain revolution and why DLTs matter so much.

So why is the Internet today spoken of as a ‘feudal’ system, and DLT its liberator?

Dennis Avorin thinks DLTs will break the Internet’s feudal model

Think of it this way: imagine one government server containing all your identity data – if you want to pass on that data to say, your doctor, then you have to ask the government to release that data to the doctor. That’s a centralised way of organising the data.

But a distributed ledger is a database that is not held by a central administrator, and which cannot be edited by any one user without there being agreement among all the other users. It is a new way of organising the discovery, valuation and transfer of data, or units of value.

Advocates say this is what is meant by a decentralised Internet. And Dennis Avorin thinks this is no hyperbole, but indeed, it should be interpreted quite literally.

“The way the Internet has evolved is similar to how humans went from being able to live off the land for free, to seeing most of it become private property, along with anything it was able to produce,” Avorin says.

He cites as an example the way pro-Catalan nationalist websites were ruled to be illegal by Spain’s constitutional court to allow authorities to block them.

The way to block them was to block their data transmission on the web, which are those letters at the start of all web addresses that represent the rules governing data transmissions: HTTP – or hypertext transfer protocol.

“The DLT alternative to HTTP is called interplanetary file system, or IPFS. It is different to HTTP because it is a peer-to-peer method to store and share hypermedia (ie. the stuff on internet). So unless we shut down the very infrastructure the internet operates on by cutting the wires… IPFS is outside centralised control and cannot be shut down by big service providers,” Avorin says.

And that’s how Catalan websites skirted the Spanish blockade during the Catalan independence referendum. The sites were mirrored on IPFS by the Catalan Pirate Party, allowing them to continue being accessible.

“This is one of various ways in which DLT could change the internet,” Avorin says.

Take Google as an example. Avorin says that in exchange for free web searches and free webmail, Google acquires our data to sell it to companies across the web. So just like the feudal model, or manorialism, we are free to work on the land of the Internet ‘common’ as long as we pay back the lord back in kind.

So what happens when the Internet becomes decentralised? “Manorialism in Europe gradually disappeared when the process known as the enclosure movement started to enclose and privatise the formerly open field system. The enclosure movement was the main force behind the birth of private property of land, and the beginning of capitalism,” Avorin says.

In this same vein, Avorin says individual users become the owners of their own data on the web, now enclosed in DLT systems, where private property is guaranteed by the very code. “Users will be able to monetise everything from their cat videos to their very consumer data in ways that are impossible today,” Avorin says.

So when any, say transaction, is recorded on blockchain, that transaction is made known throughout the chain connecting users’ to each other. And it is not possible to tamper with a blockchain, which is why trust is built into the system rather than guaranteed by a ‘central owner’ of the data.

Nouriel Roubini: “Whenever ‘blockchain’ has been piloted it was turned into a private permissioned database that is nothing more than an Excel spreadsheet or a database with a misleading name”

Decentralised everything

You will find supporters and critics alike of blockchain. Perhaps the most authorative critic is Clinton-era advisor Prof. Nouriel Rabini, of NYU’s Stern School of Business, who called blockchain as “nothing more than a glorified spreadsheet”.

Pretty much like Avorin’s feudalist allegory, blockchain has become what Rabini says is “the byword for a libertarian ideology that treats all governments, central banks, traditional financial institutions, and real-world currencies as evil concentrations of power that must be destroyed.”

With permissionless ledgers and without the need of a credible institution such as a bank as an intermediary, the importance of trust in the social contract that people have with government seems to be nowhere to be seen in the blockchain society.

Indeed, Rabini says there is no corporation under the sun that would relinquish any proprietary and highly valuable information to a decentralised peer-to-peer ledger such as DLT. Why would it? “No serious institution would ever allow its transactions to be verified by an anonymous cartel… it is no surprise that whenever ‘blockchain’ has been piloted in a traditional setting, it has either been thrown in the trash bin or turned into a private permissioned database that is nothing more than an Excel spreadsheet or a database with a misleading name.”

But beyond reinventing the internet, Avorin is confident that blockchain technology has the potential to revolutionise other aspects of modern-day life, especially when combined with other technologies like cloud computing – which allows users to store their data in ‘cloud’ servers rather than on-site IT servers – and Artificial Intelligence.

“From the streamlining of supply chains and the use of smart contracts, to better administration of public records or even automated traffic systems and self-driving cars, almost all sectors stand to gain from the widespread use of DLT.

“It will also allow individuals to regain control of their own data, such as medical health or education records, and use it in ways that would not have been possible in the past… DLT will improve the tracking of intellectual property rights, as well as strengthen the concept of ownership in the digital sphere. Media companies in particular have much to gain from the DLT revolution,” Avorin says.

Indeed, with the largest cryptocurrency exchanges having already opened offices in Malta, Avorin said it is hard to call the laws’ introduction “anything else but a success”.

“The move is important because it has given entrepreneurs and investors the necessary peace of mind to continue contributing to the sector’s growth. As many of the disruptive projects in the DLT space require years of development and substantial investments before they can be applied in real business cases, I believe we have only seen the start of Blockchain Island so far.”

The Maltese government has however said the most significant challenge standing in the way of Malta becoming a digital innovation hub was developing a workforce with the right skills, which is why a scholarship fund has been set up for postgraduate degrees, as well as an emerging technologies lab to encourage the exploration of emerging technologies.

“Keep in mind that this space is currently unregulated anywhere in the world and it is exactly this lack of regulation that has contributed to abuse,” parliamentary secretary Silvio Schembri told MaltaToday. “Malta is even going beyond the fifth anti-money laundering directive, a testament to how serious we take our role as a jurisdiction.”