What’s a Blockchain?

Bitcoin has now acheived the value of 10 000 dollars. when talking about bitcoin comes the blockchain, so what’s a blockchain?

Current institutional structures are drastically challenged by the rate of change of
society, technology and the environment which far outstrips their capacity to adapt.
Governments and international organizations are losing their legitimacy to competition
from entirely new structures of collective action emerging from adhocracies,
aka self-organising Information Communication Technologies (ICT)-enabled
groups and communities (Ulieru 2014). We consider four key factors fuelling
institutional change under the above mentioned disruptions. Firstly, that individuals,
ICT-enabled devices and conventional institutions are now deeply entangled.
Secondly, that is it possible to equip those devices with social intelligence to be
equal participants in society (Brynjolfsson and McAfee 2014). Thirdly, that out of
the entanglement and the intelligence, new dynamical structures emerge which are
more responsive, have greater agility and are less prone to path dependency and this
socio-technical entanglement can lead to the emergence of high quality constructive
social processes (Ulieru and Doursat 2011). And finally, that people still retain the
power to self-organise these structures and self-regulate their behaviour in the
context of these structures according to agreed rules (Chase 2015).
The book features pioneering attempts at deploying new economic models
which move the field from describing monetary flows to understanding complex
social processes that underlie the dynamics of the economy. It begins by describing

the socio-economic nature and legal challenges brought about by the emergence
and proliferation of P2P platforms. On this basis various alternatives to the centralized
approaches that rule the current financial sector—which lost its legitimacy
in 2008 by not keeping its promises to its customers—are exposed.
Pelizzon, Rieder and Tasca in the Chapter “Classification of Crowdfunding and
P2P Lending in the Financial System” give an overview of the first P2P platforms
that enabled new market structures to emerge, such as Crowdfunding. If the
emergence of P2P platforms may somehow be related to banks being under stress as
claimed by Blaseng and Koetter in the Chapter “Crowdfunding and Bank Stress”,
FinTech has continued to provide cost effective platforms as an alternative to
traditional banking. In “How Peer to Peer Lending and Crowdfunding drive the
FinTech Revolution in the UK” Chisti explains the role of P2P lending and P2P
equity markets as the drivers of the alternative finance revolution which in the UK
is experiencing some of the highest growth rates in the world. Apart from the UK,
P2P technology-enabled platforms are speedily replacing the traditional banking
services also in Asia. In particular, Barberis and Arner in the Chapter “From
Shadow Banking to P2P Lending” emphasize the regulatory challenges of P2P
lending in China: the country with the largest proliferation of P2P lending platforms
in the world. The authors argue that, due to the recently increased attention received
by the shadow banking sector and the better transparency allowed by its technological
readiness, the Chinese government now has a prime window of opportunity
to regulate non-bank finance in China without impeding economic growth, nor
risking a financial security meltdown. China would effectively transform its
last-mover advantage in the field of financial reform into a first-mover advantage.
Finally, the authors present their view of data-supported regulation, or “RegTech”.
The book continues by offering a very exciting and inquisitive incursion into the
new market dynamics brought about by the principles of decentralization and
sharing enabled by (blockchain based) P2P platforms. Although, Courtois in the
Chapter “Features or Bugs: The Seven Sins of Current Bitcoin” warns against a
number of pitfalls in the current implementation of the first and largest blockchain
application so far (i.e., Bitcoin), in the Chapter “Decentralized Banking: A Return
to Technocracy In the Digital Age”, Hayes makes the point that digital currencies
could more securely and cheaply connect the world. The invention of the Blockchain
is opening up the possibility of a different kind of monetary order run by
inviolate mathematics, not a person or committee. Further, Gavin in the Chapter
“Trustless computing—the what not the how” details how these FinTech innovations
provide more functionality than nation state monies, at a lower cost, with
safety and security achieved without armed guards and vaults and guaranteeing
stability through attractive finite issue limits, again dictated by math rather than
being subject to pressures to inflate to escape difficult political choices.
The Chapters authored by Porter and Rousse (“Reinventing Money and Lending
for the Digital Age”) on crypto currencies and Biggs (“The Opportunity for
Non-Banks in Financial Inclusion and Remittance”) on mobile money present a
number of narratives about why those FinTech innovations may be empowering for
people, especially in historically poor and financially underserved communities, as
well as in less developed countries:

• as a means to facilitate low-cost remittances for those seeking to transfer small
amounts of money internationally
• as a means for an otherwise excluded individual to have a decentralized global
bank account, accessible simply by downloading an open source wallet from the
internet, rather than having to set up with a formal financial institution
• subsequently providing the basis for a richer set of financial services, cooperative
structures and even micro-insurance systems (Scott 2016).
The Blockchain ledger is not simply for accounting monetary transactions. At its
core, it is a platform that allows people to come to agreement on virtually anything
without intermediaries. It provides a foundation to make social contracts based on the
principle of consensus. Its universality enables it to be an asset registry, inventory,
tracking, and exchange infrastructure, a universal registry, listing, and management
system for any of the world’s assets, smart property, and itemizable quanta. It is an
infrastructure which provides society’s public records repository, a representative
and participatory legal and governance system. Thus the Blockchain is poised to
become a social technology for whole new institutional forms of economies sporting
new market dynamics. Brought about by the principles of decentralization and
sharing enabled by (blockchain based) P2P platforms, a deeper societal transformation
is catalyzed, resulting in the basis of economic life being mutual cooperation
and solidarity, rather than individual competition for narrow economic success. The
idea is that in removing the need to trust central authorities (as Gavin clarifies in the
Chapter on Trustless Computing), blockchains could be platforms upon which one
can build new forms of non-hierarchal cooperation between strangers.
While formal market systems may be a source of economic growth and individual
enhancement, they are simultaneously the source of social inequality, individual
alienation and community disintegration. In essence, the cryptographic
apolitical purity of a blockchain system appears not just as a way to stop abusive
people who control central institutions, but as a way to once-and-for-all resolve the
problem of how to establish contractual relationships between untrustworthy human
beings who seek out their self-interest (Scott 2016). Aste, Caccioli and Livan
(“Scalability and Egalitarianism in peer-to-peer networks”) further prove using
network theory that there is a trade-off egalitarianism vs efficiency for Blockchain
based communities. Further, Barberis and Arner (From Shadow Banking to P2P
Lending) and Chishti (How Peer to Peer Lending and Crowdfunding drive the
FinTech Revolution in the UK) show how in deploying such decentralized platforms
cryptocurrency is interesting because it has features that potentially allow for
non-hierarchal self-organization and peer-to-peer collaboration within a communitarian
network structure.
With advances in Blockchain technology now removed from the constraints of
Bitcoin, it is possible to encode smart contracts as algorithms that will act as a
trusted enforcer of agreements. Sclavonius et al. (“Are Transaction Costs Drivers of
Financial Institutions? Contracts Made in Heaven, Hell, and The Cloud in
Between”) offer a review of how technological innovation is changing transaction
costs and therefore the economic and financial system. They explain the
socio-economic impacts of “smart contracts”: modules of computer code that run
on blockchains and can be programmed to transfer tokens of value, enable access to
resources or otherwise automate functions based on conditions. This opens the
perspective of increased access to critical financial services for all, creating more
transparent democracies, and developing services that dramatically reduce barriers
for global commerce. Panay (“Understanding Modern Banking Ledgers through
Blockchain Technologies: Future of Transaction Processing and Smart Contracts
on the Internet of Money”) deepens this understanding by illustrating how smart
contracts can ensure financial stability. E.g. if the economy is growing too rapidly,
the rate of money formation should be reduced over the next time period. In such
instance, smart contracts working on behalf of a virtual organization could engage
in purchases of foreign currencies in FOREX markets, as well as stabilize prices by
purchasing bonds and equity in exchange for its stock of digital currency. Further,
in order to quickly reduce the money supply outstanding, smart contracts could
feasibly buy up existing digital currency and even destroy some of that currency by
sending it to an unusable wallet address. This would have a similar effect to raising
interest rates in that it would make money more scarce on the margin, that is, more
expensive. Such intelligent virtual organizations running via smart contracts and
acting as monetary authority can truly be removed from government, central
authorities, or the influence from policymakers and corporate lobbying, thus
opening the perspective of a more fair society with fair exchanges (Ulieru 2014).
Beyond the financial applications though, the Blockchain 2.0 movement is
characterized by emergent attempts to build digital currencies with a focus on
understanding the value created by online peer-production communities, and how
such value can be used as a means to support and encourage the process of
commons-based peer-production envisioned as a means of exchange for explicitly
cooperative and collaborative enterprises that exist outside the logic of normal
market processes.
Open question for those inspired by such Blockchain 2.0 platforms is whether
blockchain systems can be a basis upon which people can easily interact with
distant strangers for collaboration at scale. In this vision, the objective is to replace
hierarchal centralized institutions with decentralized ones, but the point of doing
this is (as we mentioned above) not to once-and-for-all perfect a means for naturally
self-interested individual humans to contract with each other. Rather it is to allow
naturally social beings to flourish and collaborate with each other in a spirit of
cooperation, not individualistic competition. (Ulieru 2014). There are already creative
initiatives to strengthen political accountability through the use of this technology.
For example London mayoral candidate George Galloway is calling for the
city to adopt Blockchain-based accounting in order to provide full transparency for
the public of the city’s financial activities. The Mayor’s Chain Project aims to put
the city’s annual budget on a Blockchain to foster collective auditing by citizens.
The Blockchain thus, creates incentive for participants to work honestly where
rules are applied to all equally. The Blockchain fosters a true consent of the governed
through voluntary participation and enables self-regulation taken up by each
choosing to abide by the rule of consensus. Foremost, the Blockchain enables a
larger function of accounting; performing checks and balance on the self interests
300 M. Ulieru
and the corruptible tendencies that exist in society. Unlike traditional representative
models of governance, where systems of checks and balance are exercised through
third parties, under bitcoin’s consensus model, accountability is distributed directly
and exercised by all in the network. With the blockchain’s transparency, those who
prefer profit without work will have no place to run and no place to hide. What
emerges in this innovation is a new form of social accountability (Scott 2016). On
this foundation we can envision a city network of informal street vendors running a
collective mutual insurance pool between themselves using only their smartphones
to interact with a distributed ledger system, with no central financial institution
involved. Or a regional mutual credit system—effectively a ledger of credits and
debits—implemented in a decentralized blockchain form (Scott 2016).
To this extent the blockchain becomes a technology for building new economies,
as MacDonald, Allen, and Potts expose in the Chapter “Blockchains and the
Boundaries of Self-Organized Economies: Predictions for the Future of Banking”.
As “the secure, verifiable, trustless (i.e. cryptographically secure) mechanism to
record the actions upon the rules” the Blockchain becomes a social technology for
whole new institutional forms of economies. More precisely the Blockchain enables
the deployment of emergent temporary catallaxies, aka economies rooted in the
very “adhocracies” featured in the title, and which we introduced in the beginning
of this concluding Chapter. As “a foundation for social order, built on mathematical
truth as verified, rather than political force as threatened”, the Blockchain becomes
“a source of welfare” acquired from releasing “the vast captured resources we have
hitherto devoted to artificially manufacturing trust” into adhocracies that embody a
“pure task economy where you find your people, you make your rules, and you do
your thing”.
Pioneering examples of such decentralized collaborative platforms enabling the
deployment of adhocracies include: Backfeed (http://backfeed.cc/)—a
Blockchain-enabled reputation based platform aiming to eliminate intermediaries
from peer-to-peer exchanges; Sensorica (http://www.sensorica.co/)—a maker platform
for collaborative design of specialized high end technical products, which runs
an original “Value Accounting System” on a “Network Resource Planning” background
to guarantee that participants are rewarded fairly according to their respective
contributions (Turgeon et al. 2014); and Hylo (https://www.hylo.com/)—a
co-creation platform catalysing communities around common intentions to bring the
right skill set and resources to the right project timely.
Future studies are needed to reveal the respective legal frameworks in which these
and other platforms operate (Dawson and Bynghall 2011), as well as the viability of
alternative governance models—combining regulation by code, smart contracts and
social norms—implemented by these platforms on top of the legal framework, either
as a complement or a supplement to the former. Hypotheses such as those posed by
Bollier et al. (Bollier et al. 2015) regarding the deployment of collaborative entities
that issue blockchain-based shares—or crypto-equity tokens—that give the holders
ownership or membership rights in a type of decentralized cooperative, need to be
tested. How such organizations might end up looking in the real world remains to be
Blockchain 2.0 and Beyond: Adhocracies 301
seen, but they may be an interesting new form to explore in the quest to build social
and solidarity-based finance (Scott 2016).
The ultimate quest concerns the emergence of adhocracies in a catallaxy and
their societal transformative potential, with focus on how the Blockchain technologies
enable implicit trusted exchanges in an open environment. In other words:
How to enable large scale, free and systematic cooperation in a self-organizing
manner that will produce constructive social and economic dynamics? (Ulieru
2014). How can social interactions be aligned with macro-level goals and how
policies steering action towards goal achievement can emerge from such interactions?
(Pitt et al. 2012). The answer we hope will contribute to the creation of more
tools that facilitate the governance of online communities, and increase the innovative
potential and productivity of commons-based peer-production platforms.
As an infrastructure which provides society’s public records repository, a representative
and participatory legal and governance system, Blockchain technology
has the potential to benefit people with privacy, security and freedom of conveyance
of data—which clearly ranks up there with life, liberty and the pursuit of
happiness (Roszak 2016).
Bollier, D., de Filippi, P., Dietz, J., Shadab, H., van Valkenberg, P., Xethalis, G.: Distributed
collaborative organisations: distributed networks & regulatory frameworks. Coin Center Working
Paper. http://bollier.org/sites/default/files/misc-fileupload/files/DistributedNetworksandtheLaw%
20report,%20SwarmCoin%20Center-Berkman.pdf (2015). Accessed 17 Aug 2015
Brynjolfsson, E., McAfee, A.: The Second Machine Age: Work, Progress, and Prosperity in a
Time of Brilliant Technologies. W. W. Norton, New York (2014)
Chase, R.: Peers Inc: How People and Platforms are Inventing the Collaborative Economy and
Reinventing Capitalism. Public Affairs, NY (2015)
Dawson, R., Bynghall, S.: Getting Results from Crowds: the Definitive Guide to Using
Crowdsourcing to Grow Your Business. Advanced Human Technologies, San Francisco
Pitt, J., Schaumeier, J., Artikis, A.: Axiomatization of socio-economic principles for
self-organizing institutions: concepts, experiments and challenges. Trans. Auton. Adapt. Sys.
7(4), 1–39 (2012)
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20160316/104677/HHRG-114-IF17-Wstate-RoszakM-20160316.pdf (2016). Accessed 16 Mar
Scott, B.: How can Cryptocurrency and Blockchain technology play a role in building social and
solidarity finance? UNRISD Report, Feb 2016. (http://www.unrisd.org/80256B3C005BCCF9/
Turgeon, N., Thai, M., Epuran, G.: ODH start-ups’ business development challenges: the case of
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Ulieru, M.: Organic governance through the logic of holonic systems. In: Clippinger, J., Bollier, D.
(eds.) From Bitcoin to Burning Man and Beyond, ID3 2014, pp. 113–129 (2014)
302 M. Ulieru
Author Biography
Mihaela Ulieru works with many governments and organizations
seeking to make ICT an integral component policy making
for a healthier, safer, more sustainable and innovation-driven
world. She founded two research labs leading several international
large-scale projects, among which: Organic Governance,
Adaptive Risk Management, Self-organizing Security, Living
Technologies and Emulating the Mind. Coaching young people
to value relationships and making powerful introductions to
assist them, has contributed to their ongoing success. One
example is Garrett Camp, founder of StumbleUpon and Uber,
whom she guided for his MSc degree one decade ago. For her
results which have positively impacted citizens in emerging and
advanced economies including Asia Pac, North America and
Europe she was awarded, among many others, the “Industrial
Research Chair in Intelligent Systems” and the “Canada
Research Chair in e-Society” and was appointed to numerous boards among which the Science
Councils of Singapore, Canada and European Commission and to the Global Agenda Council of
the World Economic Forum. She is a Research Professor at Carleton University, Global Leader
with the Aspen Institute and Chief Innovation Officer of Affectio, the first Blockchain-enabled
human data analytics platform fueling personal empowerment.

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