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Social Innovation and the Blockchain

April 21 2017

Francisco Santos is a politologist coming from Leiria, Portugal. Until June, he is doing an internship at DRIFT, more precisely within the TRANSIT project. Currently finishing his Masters on Technology Governance from Tallinn`s University of Technology, he is writing his dissertation on Blockchain, more specifically, The DAO project.

In this blog, Francisco relates Blockchain to the perspective of social innovation, and describes how its disruptive potential is a great match for the transformative ambitions of social innovators.  

Is it “the new internet” or just “the new google”? The Blockchain is a digital technology which holds immense potential for social innovation. The first blockchain brought into existence is the Bitcoin. It`s cryptographic security features allowed for the attribution of value to pieces of data. This made a single bitcoin worth practically nothing when it was created, while now it is worth up to a 1000$

What is Blockchain?

Bitcoin can be understood as an internet-based electronic payment system. It`s users transact in bitcoins. These bitcoins are basically, numbers in a database. Only the person with his or hers respective key, associated to an entry in the database, can effectuate transactions with it. In this first application of the blockchain (bitcoin), every user is pseudonymous. Whilst the transactions can be observed in the mentioned database, they can only be identified with the users instead of the individual behind it.

Each set of transactions between the different users is compiled into a block. These blocks get time-stamps, much like it happens when you send or receive an email. These blocks registering time stamped transactions, are stored in several computers across the world, therefore being distributed.

Considering that these blocks are stored in different computers, they are maintained as a common database. Such well managed infrastructures are very difficult, nearly impossible, to corrupt.

Whilst you can “steal a movie” by making a digital copy of it, you can copy bitcoins all you like, but it`s validity is still dependent on its use within the network. Therefore, the trust is distributed amongst all the nodes. You do not necessarily “own bitcoins”. However, since you are the only one able to transact the set corresponding to your key, you are trusting the nodes who, due to the economic cost associated to their work, do not have sufficient economic incentive to alter the chain.

What is socially innovative about Blockchain?

As Vinay Gupta explains, blockchain features “relational software”, in the sense that ownerless software enables new trust mechanisms capable of transforming our social relations. This allows for the development of trust architectures whose transformative potential is not necessarily captured, but is to be progressively adopted instead.

Social innovations can be defined as new social relations, involving new ways of doing, thinking and organising. The same way we trade currencies locally trough a number of intermediaries, we can now pay to someone across the world without any transnational fees. As we have laws made to enforce contracts, we will soon see software replacing legal procedures, or institutional models altogether. Discussing cryptoeconomics and blockchain designs will increasingly be comparable to discussing political systems.

If we can assign currency value to a digital token, that means that we can assign any other kind of value to tokens alike. Whether it is pegged to gold, company shares, or property rights, their value will be connected to the physical world and have more and more implications outside of cyberspace, allowing for innovation to take place. This presents a chance to re-create and re-arrange our society according to the values embedded into blockchain, (as represented in the case of bitcoin). 

Transformative Potential of Blockchain

Remembering that Rousseau`s Discourse on The Origins of Social Inequality preludes from a first claim of ownership, admittedly we have the transposal of social inequality to the cyberspace trough the establishment of what is, effectively, digital property. Pseudonymous Satoshi Nakamoto`s technological contribution came in the form of a white paper back in 2008, proposing the first cryptocurrency to enter the market.

Bitcoin seemingly flawless design presents political consequences. Kostakis and Giotitsas note that there is a bitcoin aristocracy within the network. By design, the number of bitcoins to be created is limited, causing an inflationary pressure on the currency. Decentralised governance can also become centralised: around 70% of the nodes are present in China, where both hardware and electricity are cheaper. Bitcoin`s proof-of-work system consumes a shockingly high amount of energy, though there are other ways to replace this protocol.

I would like to equiparate technology with transformative social innovation through Kranzerg`s first law of technology: it is “(…) neither good, nor bad; nor is it neutral”. It both empowers and disempowers different actors. It can and has been put to use in accordance with different visions of a better future.

In this particular case, bitcoin does nothing more than to displace central banking institutions whose role in guaranteeing trust is decentralised trough new governance mechanisms. Whilst it is set to disrupt other organisations of similar nature, it is notorious that the space is being overtaken by the financial industry and private investors. Banks have even taken the lead in filing patents on blockchain related technologies.

A Call to Social Innovators

I call upon social innovators to engage more with blockchain so that they are capable of setting its technological trajectory. If the buzzword becomes more synonymous with private and permissioned shared databases controlled by centralised institutions, then, the distributed consensus potential exemplified by the model that bitcoin introduced, will be used primarily by the institutions that it sought to replace.

Social innovation is part of a market-oriented society and therefore has to, in one way or another, compete for adoption. First-mover advantage will grant social innovators an opportunity to be ahead of the curve. I argue that existing networks of social innovators, alike the ones studied by TRANSIT, could highly benefit from entering into the space since they are capable of using their connections to drive adoption and use a network effect to their benefit. This provides them with an equal feet against organisations established in the market with their set of users and clients. Such existing organisations are likely to face an innovator`s dilemma, preventing them from taking action and adapting to new organisational models with disruptiveon potential.

For instance, Transition Towns, working towards local resilience, could co-create sustainable energy and govern it through an energy based and commons oriented cryptocurrency. The Slow Food network could trace and map food supply chains, enabling them to engage and push for sustainable practices. Credit Unions like the ones part of FEBEA, could align with the cryptocurrency FairCoin and drive its adoption, meant for a more ecological and resilient economy.

Backfeed is attempting to create such a social operating system; their aim is to develop a blockchain to enable massive open-source collaboration without central coordination trough a meritocratic governance system of consensus on contribution value. It seeks to enable the alignment of like-minded individuals.

These are some of the experiments being made for a socially innovative architecture of trust, waiting to be enabled.

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