When I wrote about trust relationships in business the super-smart Gerrie Smits left a comment on the post about the potential impact that Blockchain might have on this relationship. Rather intrigued by this idea I got in touch with Gerrie (who’s writing a book on it) and asked if he’d be willing to answer a few questions on the subject. I’m far from being an expert on Blockchain but, as Gerrie’s answers demonstrate, there are some fascinating and not insignificant implications for many of the themes that we talk about in the agile business book. Over to Gerrie:
NP: Blockchain has become something of a hot topic over the past couple of years – how would you define it?
GS: It’s a digital ledger, a decentralised database that creates and stores the common truth about the history of transactions in a certain network. Apart from the technical uniqueness and smart code and cryptography, there’s a few conceptual aspects that make it different.
One, it’s decentralised, which makes it more robust as a network and makes the history immutable. Plus, there’s less or no central authority, deciding the rules.
Two, the newer blockchains like Ethereum are programmable, so you can run decentralised applications and create conditions through what they call ‘Smart Contracts’. It’s like ‘If This Then (Absolutely) That.’. The app will run exactly as programmed, without any chance of fraud, downtime, 3rd party interference,…
Three, there’s an aspect of common incentive. You see that in the way that the consensus algorithms are set up. Plugging a computer onto the network to help creating a blockchain costs energy, so these miners get rewarded with bitcoin or ether or the cryptocurrency of that specific blockchain. Result: people running the software have the motivation to keep running it. If they’d try to break the system, the value of their coins would go down. There’s a carrot-system baked in.
More so, on Ethereum, you can create your own crypto-token, your own value system. So if you’d run a Dapp (decentralised app), and people can pay for services with this token, the whole mini-economy benefits from a quality service. The more the token gets used, the more valuable it will become and be traded on exchanges. Again, common incentive.
So blockchain has the potential to allow transactions or exchanges of value, of any kind, between humans, software, hardware without the need for 3rd party verified trust. That’s why some people also call it ‘The Trust Machine’.
NP: We talk a lot about the importance of transparency and autonomy in the book. What’s the role that Blockchain can play in enabling these key attributes of organisational agility?
Transparency (in different degrees) is a part of the blockchain tech. Blockchains equal compliance upfront. Things don’t need to get double-checked, audited, etc. That could free up time and capacity within an organisation.
Also, a client of mine, the CEO of an SME, is creating an open organisation, sharing his financial accounts, salaries etc with clients. He’s now looking at blockchain that make sure those conditions are set in stone, so the company will never take a U-turn on that. That could possibly lead to transparency being a real USP towards clients, partners,…
Tokens can also represent voting power. Say, you earn 100 reputation tokens from your colleagues. At the end of the year, that could give you a relative say in certain decisions. Whatever that is: from where your next team day is going be to something more substantial like spending of profit.
Autonomy is a different beast. If you look at the ‘true’ decentralised organisations, they’re not even organisations any more. They’re a cause, they’re a vision.
A really interesting project in that respect is Swarm City
. In short, their aim is to make P2P-transactions like Uber effectively P2P, without a central middle-man being in control. They don’t run a company, they’re creating an app which will enable a bunch of people to create a P2P economy. Rather than organisational structure, they use Swarmwise methodologies from the book by Pirate Party founder Rick Falkvinge, to design autonomous behaviour. And that’s again supported by this common incentive model of a niche-token. This drives people to autonomously make decisions for the individual as well as the greater good.
NP: Do you think that Blockchain can enable different approaches to organisational structures (for example greater decentralisation)?
That’s exactly what people are experimenting with right now. People are looking at different governance models. You’ve got the bottom-up approach of SwarmCity. You’ve got projects like Colony, who want to change the way people collaborate. It’s like a project management tool on blockchain for the gig-economy. You combine reputation with tasks, immediate payments systems and a way to align incentives so people get paid for the value that they add. They call it Direct Meritocracy.
You’ve also got a really intriguing start-up called Aragon
, where you can set up and create a blockchain-based organisation, with the rules written into immutable smart contracts. Their ambition is to become a digital jurisdiction.
It’s obviously early days and this whole community is trying things out. But basically, companies that are embedded in blockchain can be whatever they want. And whatever they decide to be is open, transparent and it’s part of the vision. And then it’s up to clients to use their services/products and up to people to work for these ‘companies’.
NP: Can Blockchain support greater trust within the organisation? Are there any other ways in which it can support greater agility?
Blockchain takes away the need for trust, or at least in 3rd parties. I can trust that a certain app or a certain contract will always behave in the way it set out to do. It’s not susceptible to censorship, fraud, shareholder interests,… So in theory it should support greater trust.
If you take the graph of Charles Green you referred to in your post. Elements that increase business-trust are reliability, credibility, intimacy. Reliability and credibility are out of that equation in blockchain-land. Credibility or reputation is the sum of previous transactions. And reliability is baked into the immutability of smart contracts.
The one element that decreases trust is the perception of ‘What’s in it for you’? The element of common incentive in a decentralised organisation could potentially alter that.
But then again, there’s human nature. One of the aspects that I’m curious about is how people will react and start behaving when you take out the need for trust, which is a crucial glue for communities. And also, if everything becomes a ‘transaction’, then how will we deal we that?
My thanks to Gerrie
for such insightful answers on this fascinating subject.