Shermin Voshmgir, blockchain consultant, founder of the coworking space and think tank Blockchainhub.net, believes that decentralized database technology will usher in a new era of the internet. Blockchain, she believes, is a game-changer.
iRights.Media: What is so special about blockchain?
Shermin Voshmgir: Blockchain can be a major step in computer and internet development. With blockchain, we are building a decentralized global computer. The worldwide network of participating computers is in a way the hardware, and the blockchain protocol is the operating system.
What does that mean exactly?
The world wide web has revolutionized information exchange. Web 2.0 made the web programmable, bringing social media and the sharing economy with it. Blockchain can be seen as a building block of Web 3.0, which will revolutionize value exchange through peer to peer transactions without central clearing. This transaction protocol can be used to build up smart contracts, and so-called dApps—decentralized Apps.
How would you explain the fundamentals of this technology?
Blockchain is like a huge compartmentalized account book—a table in which all transactions from point 0 are shown: who has sent what to whom. No single person can manipulate entries in this table, and all participants in the network can verify transactions. That’s why in the future there will be no need to guarantee the reliability of transactions. Instead, it is the blockchain network majority who decides whether a transaction or a process is valid under the protocol.
And what are smart contracts?
Smart contracts are automatically executable programs that build on the blockchain, depicting pre-defined transaction rules in programming code. A transaction effected via smart contract is automatically executed when all parties fulfil pre-defined conditions. This removes the need for a middleman, and reduces transaction costs.
What might it look like in practice?
An example: German company Slock.it develops smart locks that are joined to the blockchain. I can use these to loan out my lawnmower, for example. If my neighbour wants to rent it, he can activate it via smart lock. This is saved as a transaction in the blockchain network: identity X activated the lawnmower at such-and-such a time, and deactivated it two hours later. Afterwards, the smart contract ensures that the money is actually paid. As per conditions set out in the contract, the network calculates the sum required. The money is then transferred directly and automatically from my blockchain account.
In what parts of society and in what branches of industry do you see this being used?
Banks and financial services, certainly. At present, financial data is saved centrally and goes through various clearing stages. So, when I want to send money via a normal bank, it sometimes takes a few days. That’s absurd. With blockchain you can send money from A to B in a few seconds and at a fraction of the cost. Another function is in terms of transparency. Blockchain permits operating and production chains to be shown in their entirety. For example, in future I can look at an instant meal and say: where does this pork come from? Is it organic? I also expect to see an accounting revolution. If I can display all my financial transactions using blockchain, I won’t need neither an accountant nor an auditor, and my taxes can be deducted automatically.
Do you believe that smart contracts could present problems for lawyers?
It is only a matter of time until legal tech startups are able to shape smart contracts so that they automatically achieve legal validity. That will then replace certain areas of legal practice. Certainly, that will not be the case where disputes or complex procedures are concerned. However, in more straightforward matters, where lawyers use copy-and-paste contracts, we will see it happen a lot. I would not advise anyone to become a notary. As soon as the land registry can be shown on the blockchain, for example, we will need far fewer notaries.
In the public discussion of blockchain, superlatives predominate. How disruptive do you think this technology is?
Blockchain will alter every sector of industry. It is a further development of the internet, itself largely made up of central institutions. Thanks to blockchain, the future of the internet will be considerably more decentralized. It’s early days, though. We are still working on core problems and the first applications.
Where do we stand on the line between overblown hype and justified expectations?
I do not believe that the blockchain technology is over-hyped. If by hype you mean: does the technology have substance? I want to be very clear: yes, it has substance. It will be a game-changer. The question is merely when and by how much it will change the game. The problem is unrealistic expectations—that the revolution is going to happen the day after tomorrow.
And when do you expect to see the first effects?
Within the next two years, we’ll probably see the first user-friendly alternative applications in the financial service sector. That will involve more work on projects that have thus far been user-unfriendly. And I firmly believe that, in the next two to five years, we will experience a real killer application for blockchain.
Interview by Stefan Mey.
Latest posts by Shermin Voshmgir (see all)
- We’re about to experience a real killer app for blockchain - 11. July 2017