The story of the Byzantine generals
In computing there is a problem called the Byzantine Generals Problem which, describes a problem in the creation of consensus in a system where communication channels have no way of trusting each other. In other words, how can we make sure that multiple entities, separated by distance, are in an absolute agreement before taking action? Before considering different possible solutions to the problem, allow me to outline it in more detail, and explain how it relates to blockchain.
In order to comprehend the potential of blockchain technology it is important to be acquainted with the Byzantine Generals Problem. Blockchains are innately decentralised systems that consist of different actors that act upon the information available to them and their own incentives. When a transaction gets aired on the network, nodes (computers – the actors) can choose to either include the transaction in the ledger or ignore it. When a majority of the nodes makes a decision on a single state, consensus among them is achieved.
As described by Leslie Lamport, Robert Shostak and Marshall Pease in the following: A group of generals, each commanding its share of the Byzantine army, surrounds a city. The generals desire to draft a strategy for attacking the city, and have to decide whether to attack or retreat. Some generals may favour attack, while others retreat. The important thing is that they together reach consensus; for an attack by a few generals would result in defeat and the outcome would be worse than either a coordinated attack or coordinated retreat. The problem is complex because of disloyal generals who may choose to vote selectively and/or for a substandard plan. For example, if seven generals are voting, three of whom are in favour of attack and three of retreat, the seventh general may send a vote of attack to the generals who support attack and a vote of retreat to the generals who support retreat, leaving the Byzantine army with diffused signals. Furthermore, it is further complex because the generals are physically separated and have to pass their votes via messengers where a plethora of risks including failure to deliver the message and forging of false votes are present.
The Byzantine Fault Tolerance
The main objective of ’Byzantine Fault Tolerance’ is to be able to protect against failures of system components with or without symptoms that prevent other components of the system from reaching an agreement among themselves. In here, such an agreement is needed for the correct operation of the system ’Byzantine Fault Tolerance’ and it can be achieved if the loyal generals have a majority agreement on their strategy. There can be a default vote value given to missing messages. For example, missing messages can be given the value (X). Further, if the agreement is that the (X) votes are in the majority, a pre-assigned default strategy can be used (e.g., retreat or attack).
An example of a ’Byzantine Fault Tolerance’ in practise is bitcoin. The Bitcoin network operates in parallel generating a chain of data blocks with proof-of-work which allows the network to overcome Byzantine failures and reach a global consensus of the state of the system. When the story is applied to computer systems, the computers are the generals and the digital communication links between them are the messengers.
Trust and Corruption.
Matthew Harrington at Harvard Business Review concludes from the Edelman Trust Barometer that the level of trust for institutions such as business media, NGOs, and government is on average below 50%. Additionally, according to UNDP, governments from around the world are losing the trust of its citizens, civic space is shrinking, and the rule of law has become increasingly threatened. According to Social Progress Index, the Sustainable Development Goals (SDGs) will be met by 2094 instead of 2030. The fight against corruption is important in order to prevail in other areas – because annually approximately $1,000 billion is paid in bribes globally – money that is not going into development.
Despite national and international legal instruments that legitimise national governments to effectively fight corruption, there is still large scale corruption scandals all over the world and no country is immune to corruption. For example, Denmark, which in the last decades has been a role model for ’clean governance’, has recently experienced money laundering scandals involving the country’s biggest commercial bank.
Globalisation and Blockchain
The globalisation of the world has improved the conditions for the world’s poorest, made the rate and significance of our scientific discoveries more advanced and by some metrics proved global stability. However, this progress comes with inherent complications and risks. More than ever, the problems of the world share a common denominator namely, authenticity, and information security. It is clear that without modern solutions to these issues, much of the progress that we have made in the last century is at risk of being lost.
The argument for Blockchain is not just a good suggestion for businesses and one that could make many aspects of daily life much more convenient but rather indicating legitimate areas where the current systems are showing flags of stress and may fail to work as they should in the near future. The consequences of the aforementioned scenarios could be disastrous.
On a somber note, there is reason to be optimistic that the solution has been discovered at the right time. The Success of blockchain in a relatively short period of time and against so many daunting obstacles is one such proof. As this paper has outlined, it is possible that there may soon be others. The challenge ahead is: how can we make globalisation work for everyone? The answer might be Blockchain. The underlying democratising potential of the technology could be essential in an era of new globalism.
Global leaders in government, business, media, and technology made their annual trip to Davos, Switzerland, for the World Economic Forum’s event. In recent times we have seen an influx of populism span the world and transformed geopolitics. The event’s long term goal is to promote open bordes, global cooperation, and free trade. However, at present time that goal is considerably in disagreement with the isolationism expressed in Brexit and the political state of rising protectionism in USA with its newly elected president Donald Trump.
The contemporary right-wing populists have used many pseudonyms for immigrants, refugees, and what they perceive to be corrupt and ineffective international institutions. However, if we were to look past the accused, we can see a troubling reality emerge. It is not trade or immigration, but rapid technological progress, charged by globalisation, that has left a number of human beings behind. One of the truths is that the track record for the Internet is complicated at best. It has democratised access to information and transformed the way we communicate but also led to the decrease of privacy, and failed to create extensive prosperity for all.
The challenge that lies ahead is how to make globalisation (and de-facto technology) work for everyone, and not just a privileged few. A decentralised blockchain or a decentralised ledger may help us achieve the above mentioned goal. In fact, the democratising potential of this technology could be the key usher in a new era of globalism.
The blockchain’s capabilities include storing of not just information but rather anything of value. Money, votes, intellectual property and deeds can all be moved stored and managed privately and secure, as trust is established by consensus, clever code and collaboration, without intermediaries.
The decentralised blockchain has the power to entrust individuals and local communities, constitute opportunities for and enable connection across borders without requiring users to sacrifice its/their individual autonomy or privacy. Individuals can be owners of their own personal data as well as identities, they can perform transactions, and create and exchange value peer-to-peer.
If blockchain were to become more widely used, a lot of diminished people will stand a better chance at entering the global economy through financial inclusion and the intensification of property rights. Wealth for the world’s poorest will no longer be tied down by limits of cash in the grey economy, as more people will have the chance to store value, means to make payments, and access credit globally. Rather than trying to solve the problem of expanding social inequality through redistribution alone, we can transform the way wealth and opportunity is distributed at first. For example, farmers can connect to global supply chains without intermediaries, and musicians can make their creations available themselves and in that way get fairly compensated for it. It is possible to build a true sharing economy where creators of value share the wealth that is created on the new platforms.
In this regard, the promise of blockchain technology is encouraging. It includes significantly lowered transaction costs, wider financial access for individuals and companies, stronger financial and social stability through greater economic participation, stronger economic activity, and the strengthening of suitable transparency, security, and privacy. Among other things, these transformations has the possibility to usher in a peaceful age of entrepreneurship, as SME’s without equivalent liabilities, such as diminished bureaucracy.
At the same time, blockchain is not the solution to all of the world’s problems, and of course the irony in positing that this new technology could help us address the world’s social and economic issues, when previous technologies have not quite made it, is clear.
Blockchain technology is not only about the money, it is simply one of the applications. It is essentially a way of establishing consensus in a distributed system, it is a sophisticated yet revolutionary way to reach trust between parties and it is all governed by awe-inspiring code and clever algorithms.
The Economist recently referred to Google, Facebook and Amazon as ‘BAADD’ — big, anti-competitive, addictive, and destructive to democracy. The conclusion is that the impact of network effects, the value of data and the dominance of platform-based business models, are currently being challenged. Hence, a decentralised approach to either replace or amplify a central, proprietary data store is important for us to regain control over our data to ensure it is being used to benefit our community and our lives.
Two key aspects are required to ensure that blockchain technology meets its positive promise – leadership and stewardship. This calls for consistent commitment to global cooperation, rather than disengagement. Now, more than ever, global institutions and organisations like the world economic forum are required to work together to ensure this promise of a better future.
Collectively, organisations are made up of volunteers from contrasting backgrounds, unified by the collective goal of guiding this significant global resource in the right direction. One can argue that in order for blockchain technology to affect the world in a constructive way, the communities of the world must take positive action, and it must be done with a stress of importance. In past times, goals like financial inclusion or enabling individuals to have greater agency over personal data, have been treated sloppy rather than as a must.
Without coordinated effort, there is a risk of the technology to fail to deliver on its promise. Leaders and governments may try to disrupt it. Perhaps even the greatest risk is that the technology will never make it to the masses as competing forces inside the blockchain community progress their own self-interest rather than the ecosystem as a whole. Neither of this is a reson to dissuade from pursuing the technology, it is, rather, highlighting the obstacles that the technology need overcome – through meritocratic, inclusive, bottom-up and multi-stakeholder governance.
There is no magical solution for preventing corruption. Every country has its own set of legal, cultural and political context – the measures that may be effective in country A may not work in country B. But there is hope. A lot of successful anti-corruption initiatives and projects around the globe have made it possible to save billions of dollars as well as improving the quality of citizens lives.
Additional important aspects that are required to ensure blockchain technology meets its positive promise are;
Transparency and citizen-engagement.
When a government is working transparently, it contributes not only the civil society and the wider public to hold its government accountable, but is also encourages public officials to act ’clean’ and perform their work more efficiently. Therefore, it is important for governments to go digital in order to achieve transparency. For example, A project in Brazil now publishes government’s financial transactions, hence complicating the process of wrongdoings. Another example are portals such as ChileCompra (Chile) and ProZorro (Ukraine) that are enabling a competitive and transparent bidding process, saving significant dollars in the process.
Strengthened political will.
In order to create political will, it is important to have fair and free elections where the citizens elect political party and leader after commitment to make a positive change, however the citizens shall have the tools to control the fulfilment of pre-election promises also in the post-election period. Therefore, citizens needs to have the effective tools to monitor activities of the governments, and therefore, be able to hold them accountable when the official capacity of the public official is abused. An example of a recent effort is UNDP, who are co-designing anti-corruption action plans with civil society and municipality actors in various countries around the world.
In an era that some may refer to as the fourth industrial revolution, with technologies such as supercomputers, artificial intelligence, machine learning and blockchain technology. Tools like these can be used to restore massively (un)regulated processes, make bureaucratic procedures easier and less perplexed. For example, an initiative in Georgia has lead to the government using blockchain technology to make it impossible to temper with their land registration system. Furthermore, in South Korea, a project called ”e-People”, an initiative where South Koreans can file a petition with the Korean Administrative Agencies, allowing citizens to report or submit any claim of corruption electronically to the government.
It is however, important to understand that the success of such initiatives greatly depends on internet penetration rates. Without national and international actors working to increase internet access in rural areas, the impact of such reforms will not reach the people who one could argue might need it the most.
Technology is rapidly changing the world around us as well as transforming the way governments work and act in order to deliver on its service and promises to their citizens. The governments that decide to invest in digital transformation and data capabilities are much more likely to deliver successful transformation through the fourth industrial revolution than those who do not. Admittedly, new technology can decrease corruption in a longer time and the need for political commitment for such reforms are increasingly growing. Technological transformation is important, but not important enough, it has to develop with a people-centred approach.
DISCLAIMER: This is NOT financial advice. This is just opinions. Fronesis Analytica is not responsible for any investment decisions that you choose to make.