When you send a message or check your news feed on your Facebook app, almost everything is routed through centralized servers. Your Instagram photos. Your email. Even your Snapchat messages (they say they're deleted... but are you really sure?) While most of us don't understand how all of this works, it's hard to miss the fact that centralized systems have major flaws, despite (or even because of) their growing complexity. The NSA can intercept your private user data from Google by tapping into their centralized network. Hackers can reveal millions of people's identities and online choices by hacking in through Ashley Madison's VPN. Apple iMessage goes down when Apple's servers go down. And 56 million credit cards can be stolen from one national retailer's servers, because, well...they were on a server.
The technology behind cryptocurrencies like Bitcoin is, at its core, all about decentralization (see A Beginner's Guide to Bitcoin and the Blockchain). Satoshi Nakamoto's invention of Bitcoin's blockchain introduced a robust, practical way to both securely send transactions and let the public verify them, allowing us for the first time to have a truly decentralized currency. But the power of the blockchain led many in the community to believe there was more we could do. People started wondering why, if it was possible to get a network to validate Bitcoin transactions, we couldn't get the network to reliably run more complex "smart contracts" and even bigger software?
Two years ago, as a 20-year-old Bitcoin developer, Vitalik Buterin dreamed up a new platform called Ethereum. Working with a quickly-growing team, Ethereum raised over $14 million dollars in a Bitcoin crowdfunding campaign, and kicked off with huge goals to disrupt the way we build apps, social networks, financial systems, and even businesses. As a software platform, Ethereum is like Bitcoin in that it is built on a blockchain and everything that happens is powered and verified by computers across the network. It also has a built-in currency unit called "Ether," which operates much like Bitcoin. But the primary innovation of Ethereum is that it also includes a full programming language (computer scientists call this a "Turing-complete" language). This is something that Bitcoin does not have, and which allows developers to dream up much bigger applications that will be executed and confirmed by the network. The platform enables developers to build "Decentralized Apps" (or "DApps") which are, to the user, almost identical to a standard web app, but whose primary database and server is the blockchain.
While not all apps can be directly translated into a decentralized architecture, Ethereum makes the most sense in places where transparency and honesty are valued or needed. For example, in recent years many companies are introducing heightened levels of transparency and openness into the way that decisions are made. Zappos reorganized their company around a innovative model of democratic governance called Holacracy. Many companies have introduced transparent pay policies. Forward-thinking companies will soon have the option of having all of their most important governance managed on the blockchain, powered by apps like Boardroom which are being built on Ethereum. Imagine if all of the decisions of your company – including pay policies, investments, and project approval – were handled through a voting system that couldn't be rigged and which was processed and verified according to rules set in code.
Another high-profile Ethereum-based startup is Augur, which is building a predictive intelligence platform and has already raised the equivalent of $4 million dollars in cryptocurrency. The community around Ethereum is growing fast, and many other startups are preparing to launch products as the network gets off the ground. Big companies are also investing lots of time and money into the space, trying to figure out how Ethereum and related technologies may disrupt existing institutions, especially in financial industries.
The case for decentralization is also strong when you think about the enormous leverage held by some of the largest social networks and online marketplaces. Just this week, TechCrunch picked up the story of an AirBNB superhost who was terminated with zero notice for unclear reasons. Uber has been criticized for their lack of transparency around driver deactivation. And anyone who has used Facebook for any amount of time knows the struggle against constantly-changing privacy settings. Imagine the next generation of marketplaces and social network apps, where the rules are set and voted on by the users, and where policies can't be changed on the fly by a small group.
Many of these ideas will take time, because they require society to embrace a shifting conception of what a company is expected to be or do. However, at a minimum, Ethereum promises to challenge the way we think about building products for the web in the near future, and has the long-term potential to completely revolutionize the way that we interact and transact online.
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For further reading, I recommend:
- The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order (Book) by Paul Vigna and Michael J. Casey
- **"Ethereum Explained... to my Mom" **(Infographic) by Angelo Milan