The Truth Machine: The Blockchain and the Future of Everything

This book is a primer on blockchain technology written by two experienced financial journalists with a ringside seat. They previously wrote a book about Bitcoin, the first, but far from only, application of blockchain technology, also known as distributed ledger technology. It’s the basic technology behind “token economics” and is conceptually associated with peer-to-peer and decentralized processing.The authors provide a current snapshot of industry developments and a thoughtful review of the challenges, risks, and opportunities that now present themselves. One of those challenges is scalability. For reasons I won’t try to explain here, that one issue has fractured the industry into permissionless (e.g., Bitcoin, Ethereum) and permissioned segments, the former behaving more like the original ideal of the democratized digital economy and the latter being a variation of the gatekeepers model (think banks) we have today.But why should you care if you are outside the universe of tech investors, banks, entrepreneurs, and engineers? Because tech exists to serve a larger purpose. And that larger purpose, in this case, as the authors point out, extends, at a minimum, to the Internet of Things, but may ultimately impact not just our economy, but our society and our democracy. It could, as one example the authors offer, eventually lead to the commercialization of your personal reputation. (Admittedly a long way off.)This is not a book about Bitcoin, although it does come up a lot. The relevance is that Bitcoin uses blockchain technology. And whether you think Bitcoin is fool’s gold or not, the underlying technology has worked pretty well. In nine years, no one has hacked the system.The Internet and its digital revolution have one over-riding problem: digital data can be replicated. In essence that means that any digital system can be compromised. And as we’ve discovered there is no shortage of people in the world who will make every attempt to do so. It’s easy money and some people, for some perverse reason, consider it “fun.” (Or payback, perhaps.)Protecting the integrity of the digital world, as a result, has proven to be a monumental task. It’s expensive, requires a lot of people, and ultimately fails. In part, this has contributed to the reality that the Internet, once perceived to be the ultimate egalitarian state, is now the ultimate monopoly. A handful of giant companies, whose names you can easily identify, now control it. And while no one really knows what that will mean longer term, the yellow flags are starting to be hoisted, particularly following the 2016 presidential election.The easiest way to think of blockchain, perhaps, is that it goes back to the original digital ideal of the pure democracy, but incorporates security protocols that reduce the forces favoring consolidation of the gatekeepers. In short, it is the architecture that makes good on the original vision. Maybe.There are a few hurdles, however. The first is that you have to accept that the system is better, but not perfect. Before you can evaluate that decision, however, you must accept that the current system of accounting that governs our banks and corporations is far from perfect, too. Accounting is not truth. And that is the truth. Accounting is an approximation of truth and sometimes the gap, as we saw during the 2008 financial crisis, can be huge – as in big enough to cause a “healthy” bank like Lehman Brothers to disappear overnight.That, I fear, is going to be a very hard sell to the average citizen. Or, more accurately, once you let the cat out of the bag people are going to be aghast and it is unlikely they will see doubling down on technology as the best way forward. It is human nature to not want to think about what we don’t want to think about. And most people don’t want to think about the fact that Wall Street really has no idea what the companies whose stocks it trades are worth. Or that our biggest employers really don’t know if they are making or losing money. That sounds a lot like chaos and we don’t like to go there, particularly since that same Wall Street is playing its game of chance with our retirement and our savings.It’s important to accept that, however, because blockchains do not promise perfection. They might be better, but better is relative. Digital, by definition, means replicable, for good or bad. The risk can be reduced, but it can’t be eliminated.And that brings us to the second big challenge. Like any system of security and trust, blockchain systems will require that we all agree on some fundamental rules. And this, I fear, will be an even bigger hurdle than the first. And the reason is the asymmetry of power that exists today.Our economy and our society, and particularly our politics, are today ruled by minorities. It might be a numeric minority, or it might not be, but its opinion falls short of a complete consensus. There is no democracy if by democracy we mean everyone has an equal say in things. That’s not even close to being today’s reality.And as we witness day in and day out, the people who benefit from that asymmetry today want to make the balance of power even more asymmetrical – to their benefit, of course. That’s why we have lobbyists and why corporations and wealthy individuals invest so much money in the political process. If power were allocated symmetrically, it would be a lousy investment.It is that asymmetry, even more than the unanticipated security challenge, that has allowed corporate America to hijack the digital economy to the degree it has. It’s not just that the corporations did it; it is the fact that Washington let them, and in fact facilitated them. (And we, the users, of course, let the politicians let them.)I don’t yet see, frankly, how blockchain technology gets around that. The banks and the tech giants will seize the agenda and rework it to their advantage, as it appears, from the information provided in this book, they are already doing. In the end, if that continues, we will have the next big thing that looks and smells a little different but is the same old thing when it comes to asymmetric power. Maybe a few new products, like crypotcurrencies or blockchain-enabled supply chains, but the same old players pulling the same old strings to their advantage.My ultimate takeaway from the book: It’s ultimately a battle between an ideology of individualism and an ideology built on the common good. Liberal democracy, as we know it today, and have known it since the founding of the country, is built on a foundation of individualism (e.g, individual rights, freedoms, and opportunities). And it has worked remarkably well.The Achilles Heel of individualism, however, is the asymmetric allocation of power. It is a weakness, moreover, that has been great exaggerated and accelerated by technology. Technology, to date, has done nothing quite so dramatically as it has enhanced the asymmetric allocation of power in our economy, our society, and our politics.The ultimate promise of blockchain technology, therefore, as I think the authors see it, is the opportunity to double down on individualism. The blockchain, might, if the predictions hold, provide the means to overcome the inherent inequities of modern capitalism fueled by the creation of digital monopolies.They might be right. But, as Yogi Berra noted, “In theory, there is no difference between theory and practice, but in practice there is.” And I’m with Yogi on this one. I don’t see the 1%, however you define it, just walking away and letting the other 99% of us back into the fight.Perhaps more importantly, Washington shows no resolve to do anything to impede the asymmetric accumulation of power by corporations and wealthy individuals. According to the authors, while the central banks of England, Japan, and Canada are all actively exploring blockchain technologies, our own government seems content to leave it in the hands of private initiatives like the corporate consortium, Hyperledger, dominated by companies like IBM and Intel.I may be wrong. I dearly hope I am. At any rate, it’s a very good book and you will do yourself an injustice if you don’t read it.

Bottom line: book is a decent primer on blockchain technology. Just beware of the progressive/liberal bias that is rampant throughout (and a smattering of TDS).I wanted to give this book a 4 out of 5 star rating. I really did. The authors did an adequate job of explaining how blockchain technology works and how it can be applied to many areas of life. But their over-the-top political comments, and their erroneous and/or incomplete information whenever they touched areas outside of blockchain, made me want to give the book no stars. So I settled on 2 stars.They start off by showing how blockchain technology could be used to ensure equitable distribution of resources in a refugee camp. Which is a pretty good example (until they start ascribing causes to the creation of refugees, including the ‘failure of western policies to contain it.’ on page 4. No explanation is given for why Western policies are the scapegoat, or if Western policies actually have the power to do what the authors suggest).From there they go into a deeper understanding of how blockchain technology works, the different major types of systems, and some challenges with systems that are designed to be autonomous, yet may require significant changes to address future unforeseen issues.The authors also make what is, I think, an incredibly insightful comment on page 13. “In fact, it (blockchain technology) may never be scalable to the size needed to make a difference.“ To me, this means that it’s a bit too early to buy into the hype that blockchain technology will change everything. It might, but the technology is not there yet.From there they venture into examples of where blockchain technology could solve some of the world’s most challenging, and perplexing, problems.So far so good, except they now venture into areas where they have no expertise. They offer thin and specious hypothesis for the causes of some problems that blockchain might be/might have been able to help solve. The only problem is that their hypothesis don’t stand up to the facts of history. A couple of examples….- They attempt to make a case that transparency - or a lack of it - was the cause for the collapse of Lehman Brothers. Kinda. Except the root cause that kicked it off was federal banking regulations dating back to the Carter administration.- My favorite example: “Anger festered and turned into the Tea Party and Occupy Wall Street.” Page 21. I practically laugh out loud every time I read that little piece of wildly off-track prose. Two completely different entities with absolutely nothing in common except approximate starting dates.- They also attempt to smear Christianity, claiming it ‘had a real axe to grind against the business of lending.” Page 25. Sorry, but wrong again. They were against usury, not lending. Big difference, and one that y’all could have researched in about an hour to get your facts straight.At least they got it right when they stated that trust is lacking in Venezuela (page 22).In conclusion, I would like to see them address a few potential Achilles heels for blockchain technology.Two that I can think of - and I am new to blockchain so I’m sure there are more1) Many of the problems their examples are aimed at solving are for people in undeveloped/underdeveloped countries. In many instances the leaders of these tyrannical / socialist countries aren’t interested in private ownership of anything. So I’m not sure the Utopia the authors envision will survive in the political reality of those countries.2) Can the blockchain technology be gamed? For example, if an errant transaction (a lie) is put in front of the distributed ledger computers often enough, will they eventually deem that it is the truth? Would one computer include it on the first pass, but it be rejected - then three accept it on the second pass, and so on, until eventually all approved it and it became a part of the immutable record?At the end of the day, it’s a decent primer on how blockchain technology works and where it has some real potential to solve problems. Just be aware that they go way off track when they venture into other fields… and they have more than a touch of TDS.