Blockchain: A Capitalist Revolution for the Internet

On NewGeography.com, Dennis Avorin wrote:


 

Blockchain, i.e. digitized and decentralized public ledgers of cryptocurrency1 or digital asset transactions, might emerge as the tool to liberate the Internet from the domination of the tech oligarchy. In some senses, we can envision through historical analogy how Blockchain can change the very economic system of the Internet itself, much similar to the processes in the offline world that ended the Middle Ages and laid the foundations for the birth of Capitalism.

Viewed in isolation, the current economic system of the Internet can be described as being on a par, or at least structurally similar, with the economic system known as Feudalism. It struck me in 2013 while writing a thesis on the aspiration of states to claim sovereignty in cyberspace that the Internet is really similar to the Feudal system in terms of “land ownership”, or more accurately, the part of Feudalism known as Manorialism.

Manorialism was a system characterized by legal and economic power vested in a Lord of the Manor. These Lords owned the land of various manors and made a living out of obligatory contributions from legally subject peasants, who worked the open common lands. The peasants could pay their obligations in labor, in kind, or more rarely, in coin. This was a system based on interest rate rather than profit, therefore it was not capitalist.

Internet, since its early days, works on similar lines like Manorialism. Much like the medieval supreme powers controlling the access to nobility - the King and the Church - there is a supreme organization keeping record of Top Level Domains (TLDs), such as .com or .org.

This organization is known as the Internet Corporation for Assigned Names and Numbers (ICANN). Their motto is “One World. One Internet.” The TLDs are owned by companies and various organizations authorized by the ICANN2. The famous TLD.com for instance is operated by Verisign, one of our digital Lords of the Manors. Obviously, this is not the entire ownership structure, but it is the basis of it.

The Internet as such is owned by no one and everyone, much like the offline world prior to Capitalism. However, as users, we are never in full ownership of our own value creation online. We can use it, but we cannot really own it. The value that can be derived from our activities are all acquired by the Lords of the Internet, who are generally paid in labor, kind, or more rarely, in coin. Take Google as an example, in exchange for free web searches and free webmail, Google is acquiring our data and sells it to companies across the web. There is no way for a user to get ownership of his or her own data. This idea was first outlined by the computer scientist Jaron Lanier.3

Much like peasants under Manorialism, we are free to work on the Internet Common as long as we pay back in kind. The system of Manorialism eventually disappeared when more and more land started to become enclosed and the open-field system gradually disappeared.4

This process recalls the so-called Enclosure Movement which rose up in the early 1700’s in Great Britain. It entailed a series of events where wealthy farmers would buy land from small farmers and start fencing it off from the common land. It was the birth of private property of land, and the beginning of the Capitalism. The effects on the economic system were dramatic, as written by the economic historian James Boyle:

“Before the enclosure movement, the feudal lord would not invest in drainage systems, sheep purchases, or crop rotation that might increase yields from the common – he knew all too well that the fruits of his labour could be appropriated by others.”5

As Mark Twain allegedly said, history does not repeat itself, but it does rhyme.6 To make yet another case for this analogy, China for instance has already built the Great Fire Wall of the Internet, to suppress dissent.7 As Blockchain emulates those same factors in the online world that the Enclosure Movement brought about in the offline world.

Blockchain was first described by Stuart Haber and W. Scott Stornetta in 1991. They envisaged a cryptographically secured chain of blocks in the peer-reviewed article How To Time-Stamp a Digital Document in the Journal of Cryptology. Their initial description of the problem which a Blockchain would be able to solve, was how to certify when a document was created or last changed. Their idea was that the solution must be in time-stamping the data, not the medium. This would make it infeasible for a user to tamper with documents by either back-date or forward-date the document.

Intellectual property is one area in which time-stamping is crucial. It can be absolutely pivotal to verify when an inventor of something first wrote down the patentable idea. Since this can be tampered with in conventional documents, there is always the risk of competing claims. One conventional solution to this problem is lab notebooks, allowing scientists to write daily notations of their work one after another, while no pages can be left blank.

Haber & Stornetta write that the claim noted in a lab notebook can be even further enhanced by having a notary public signing off on the validity of the notebook on a frequent basis. This provides a strong case for the origin of a particular idea if it becomes challenged in the future. Another method is to mail a letter to oneself and leave it unopened, as the postal service will time-stamp it.

As the two authors noted, these procedures are completely out of question for digital documents, which now can be changed without leaving any mark or sign. Hence the need for a solution which fulfils the properties of being able to time-stamp the data itself in disregard of the medium. In this system, it must be impossible to change the time or data. From this problem, Haber & Stornetta worked out a solution that was computationally practical as well as mathematically sound: the blockchain.

This idea was then implemented by the anonymous person (or group) known as Satoshi Nakamoto in 2008 and developed into the digital currency bitcoin, which in essence is a public ledger of transactions based on Blockchain technology. The revolutionizing feature of Blockchain creates the possibility of having immutable property rights written into the very code of online environments, given that they are “enclosed”.

Blockchain can therefore be envisioned like an Enclosure Movement of the Internet, where business-minded users will eventually close off areas of the online world on enclosed Blockchain systems, where private property is guaranteed by the very code. This technological disruption might potentially catapult the online world into a capitalist state which is hard to even imagine in our current paradigm. Users will be able to monetize everything from their cat videos to their very consumer data in ways that are impossible today. It will effectively reinstate the scarcity principle in the online world and make it impossible to infinitely copy various kinds of immaterial assets.

Many people will probably protest to this development, as it will perceived that their Internet Commons, are being illegitimately cut off by pay-walls and enclosed systems. However, in the long run, it is absolutely necessary in order for common users to profit from a digital economy increasingly dominated by a handful of players. The fiercest critics of this revolution will be a paradoxical duo much like the ones who protested the bourgeois revolution in the offline world. The aristocrats and the non-commercial peasant. This time, it will be the Internet Lords, such as Google, and the global Left, who seek public, government control of the net.

As in the case of the first capitalist revolution, the stakes are high, but well worth fighting over.

Dennis Avorin is a Malta-based business analyst passionate about the digital economy. He is a master of Interdisciplinary Research and publishes frequently for the Swedish think tank Timbro.


References

Boyle, James (2007). “The second enclosure movement”. In Renewal: A Journal of Labour Politics, 15:4, 17-24.

Haber, Stuart & Stornetta, W. Scott (1991). ”How to Time-Stamp a Digital Document”. In Journal of Cryptology, 3:2, 99-111.

Investopedia (2017). Blockchain. Retrieved 2017-11-08:https://www.investopedia.com/terms/b/blockchain.asp

Jones, Andrew (1972). “The Rise and Fall of the Manorial System: A Critical Comment”. In The Journal of Economic History, 32:4, 938-944.

Kolbert, Elizabeth (2017). Who owns the internet? The New Yorker, August 28 2017. Retrieved 2017-11-07: https://www.newyorker.com/magazine/2017/08/28/who-owns-the-internet

Kshetri, Nir (2017). “Will blockchain emerge as a tool to break the poverty chain in the Global South?” In Third World Quarterly, 38:8, 1710-1732.

Nye, Joseph (2016). Who owns the internet? And who should control it? World Economic Forum, August 11 2016. Retrieved 2017-11-07: https://www.weforum.org/agenda/2016/08/who-owns-the-internet-and-who-should-control-it

Scott, Laurence (2013). Who Owns the Future? by Jaron Lanier-review. The Guardian, February 27 2013. Retrieved 2017-11-08: https://www.theguardian.com/books/2013/feb/27/who-owns-future-lanier-review

Wikipedia (2017). ICANN. Retrieved 2017-11-07: https://en.wikipedia.org/wiki/ICANN

Wikipedia (2017). Manorialism. Retrieved 2017-11-07: https://en.wikipedia.org/wiki/Manorialism

1. Investopedia 2017.

2. Wikipedia 2017.

3. See Scott 2013.

4. Jones 1972.

5. Boyle 2007. Page 18-19.

6. Kolbert 2017.

7. Nye 2016.