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Take over from GAFAM with Blockchains?

When innovation is not created directly by the GAFAM, thanks to their considerable talent pool, it is either captured (Facebook with Instagram and WhatsApp, Microsoft with LinkedIn, Google with YouTube, etc.), copied or prevented (the recommendation service Yelp has been accusing Google for a number of years of biasing its search results to the benefit of its own service).

In these conditions, how can we ensure the emergence of digital giants that are neither under the thumb of the GAFAM nor doomed to ultra-specialization? The solution may lie in changing the way we look at things: no longer trying to beat the leaders on their own turf, but instead investing in the terrain of tomorrow. Contrary to what is widely believed, nothing says that the current digital economy – with its own business models (data capture, etc.), its specific rules (network effect, etc.) and its established players (enjoying the Winner takes it all phenomenon) – will remain dominant in the future.

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If there is a changeover, it will be through talent

When the current model of the digital economy loses its monopoly on the hearts of the brightest developers and entrepreneurs, the game will be turned on its head. These talents will be able to join, as thousands are already doing, the pioneers of a new digital economy under construction.
The goal is clear: the advent of a new Web that gives users back control over their data and digital identity, and prevents platforms from unilaterally deciding to censor content or suddenly change their algorithms and terms of use. A Web that counters today’s imbalances and paves the way for a return of the pendulum after years of GAFAM takeover.
Behind this seemingly naive wish lies a movement already worth tens of billions of dollars, based on several pillars. First, a key concept: decentralization. In essence, this is opposed to the current logic of the Web and constitutes a return to the original spirit of the Internet. Secondly, a set of technologies that are still poorly understood: blockchains.

Introducing Blockchain

Without going into the technical complexity, it is sufficient here to outline how this new tool works. A transaction on the Internet today requires certification by a trusted third party – a bank, a public body, a notary, an insurer, etc. To prevent fraud attempts, this intermediary alone keeps the record of transactions. The blockchain carries out this exchange on a peer-to-peer network, thus without intermediaries. The transaction between two Internet users is recorded in a ledger that keeps track of all the operations carried out.

This ledger is not held in a centralized location but is “distributed” among the computers of all participants, called “nodes”. With each transaction, network members query the history to ensure that the individual has the assets they wish to trade. The transactions are then grouped and validated in blocks – which form a “blockchain”. Each new block of transactions is added to the chain, linked to the previous one by a cryptographic process.

Blockchain: a technology with a bright future

One can imagine the magnitude of the changes that such an innovation promises. Technically, it could offer a solution to the weaknesses of centralized systems. Economically, it should make it possible to increase productivity by limiting intermediaries and automating transactions. Institutionally, it is a response to the mistrust of political and economic institutions, with the result that economic and social relations will become more fluid.

Blockchain is therefore a technology with a bright future. In the wide variety of uses envisaged, two main categories emerge:

  • Notary-type applications linked to the keeping of a register that is intended to be shared. Blockchain could change the way transactions are controlled, the way goods are transferred and exchanged between people, and beyond that the certification of industrial or financial processes. It is expected to be used in particular for the traceability of medicines or food products; it could also give rise to secure online voting systems or digital identification of individuals.
  • Applications coupling the transactional dimension to the physical world, the so-called “Internet of value”. A transaction can be triggered by a direct intervention or by the execution of a computer program that can include specific conditions or verifications, for example on the date or based on information from the physical world. With such “smart contracts”, blockchains open the era of programmable transactions, without the intervention of a trusted third party. These applications aim to create trust where it is lacking or to replace centralized trust mechanisms. By eliminating intermediaries and decentralizing validation processes, they should lead to substantial productivity gains.

An economy that could be transformed

The speculation and “scams” around crypto-currencies should not obscure the main point. What explains the success of these crypto-assets is the promise of one or more automatic transaction networks and notarization.

Many are betting on the future of blockchain as they did yesterday on Google and Facebook. Once the development phase is over, this technology is likely to revolutionize the economy. Exchanges that have become totally digitized could be certified. The operations surrounding the exchanges – tenders, partial validations by third parties, conditional settlements, etc. – could be managed automatically and in confidence thanks to smart contracts.

The economy would become partly programmable. In France, a dynamic ecosystem is gradually developing, with startups, consulting firms and the involvement of large companies that are studying the subject and dedicating resources to it.

Proof of Stake: a lower carbon footprint

The real innovation lies more in the validation method. The blockchain promises to reach a consensus on the validity of transactions. Security and decentralization come not from the chaining of blocks but from the distributed consensus protocol. This mechanism works by the “proof of work”. This is how the blockchain succeeds in reconciling openness to the general public with maximum security.
This “proof of work” or mining can be very costly, both in terms of time and power consumption. The verification, validation and cryptographic operations related to the Bitcoin blockchain The verification, validation and cryptographic operations related to the Bitcoin blockchain consume a lot of electricity. A wide diffusion of this technology could technology could result in a highly negative environmental externality.

Hence the idea of using “proof of stake” instead: the Internet user must prove that he or she has “tokens” or a certain amount of cryptocurrencies in order to validate an additional block of the chain. With proof of work, we talk about miners; with proof of stake, we talk about forgers.

Public or private blockchain: a crucial choice

Behind the technical dimension of this question lies a strong governance issue.
The blockchain has an open architecture, and anyone can access it, carry out transactions or take part in the consensus. In this case, we speak of a public blockchain. But this open architecture can be modified by introducing restrictions on the nodes of the network authorized to validate transactions or on the identity of participants who can be part of a transaction.
This is known as a “permissioned” blockchain or a “private” blockchain, if both the registry and the transactions private blockchains, if the registry and the transactions are only open to a closed list of list of participants, for example within a group with different subsidiaries or between several organizations.
This classification into public blockchain, private blockchain is, however, reductive, given the many features that can be played with.
The table below presents an example of classification. In practice, this classification is always imperfect: with the open source software used in blockchains, it is possible to create many variants and to play with multiple parameters, depending on the intended use. Some of these parameters are technical, while others relate to the governance of the system.

Source: Global Blockchain Benchmarking Study, Michel Rauchs, Garrick Hileman 2017

Three parameters – among others – give rise to many variations:

  • The identify can be a pseudonym generated autonomously by any person wishing to use the person wishing to use the chain, a real identity verified by a third party certifier third party certifier, for example to meet regulatory obligations (KYC).
  • The incentive to maintain the registry and validate transactions can be provided by allocating cryptocurrency for the validation of transactions, typically in the case of a public blockchain. It can use another incentive mechanism, for example by making the possibility of carrying out transactions conditional on the fact of validating other transactions, for example in the case of IOTA. Finally, it can use a governance mechanism external to the blockchain that ensures the validation of transactions (contractual agreement between stakeholders, typically in the case of a private blockchain like SetL).
  • The information entered in the register can take different forms, from full disclosure of transaction information (amount, recipient), encrypted information limited to the information limited to the footprint of a transaction, to full encryption of the data with encryption of the data with access restricted to stakeholders only.

Blockchain: appealing features

The blockchain is a sort of gigantic database that obeys several innovative principles that will bring about profound changes. We will focus here on the most common characteristics, keeping in mind that they may vary according to the uses envisaged.

A decentralized system

Unlike most digital platforms, the blockchain is first and foremost a decentralized decentralized system: each participant has a constantly updated copy of the updated copy of the large register. There is no central server but a collaborative management which is in principle a protection against forgery and other attacks. This disintermediation should also be a factor in lowering costs.

A transparent system

The system is also entirely transparent: the register and therefore the history of transactions is permanently available to any Internet user (or to all members of the all the members of the network). It is thus possible to ensure the complete traceability of of an asset or a product that has been the subject of a transaction via a blockchain. A participant intervenes under a pseudonym, but all his operations are traceable.

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A reliable system

The blockchain is unforgeable and inviolable. Once recorded in the blocks, the information cannot be information can no longer be modified or deleted. With this technology, the electronic document could have as much or more probative value than paper. paper. The decentralized system, by multiplying the copies, also offers a guarantee guarantee against piracy.

An automated system

The blockchain promises ultimate autonomy, up to a form of infallible monitoring without recourse to a third party. The transactions are carried out by computer programs. Smart contracts” will be self-executing. self-executing.

An efficient system

All the advantages of blockchain combine to promise optimal economic efficiency efficiency: time savings and reduced costs through the elimination of intermediaries and intermediaries and automation, reduced error rates and litigation, etc. It is understandable that such assets can attract attention, at a time when the lack of trust is often cited as one of the confidence is often cited as one of the main obstacles to growth. But But these advantages have their downside. To succeed, the blockchain revolution will have to overcome revolution will have to overcome numerous barriers, which are technical, organizational but also societal barriers.

A scalable system

Blockchain protocols work because they manage masses of data that are still limited. Will they find the technical solutions to support the change of scale scale in case of massive diffusion? To give an idea, the Bitcoin network processes a handful of transactions per second, while a credit card operator processes thousands The historical validation mechanism of the blockchain, with its multiple nodes and cryptographic processes, is a source of slowdown. of slowdown.

Conclusion

Blockchain is an infrastructure technology, on which many applications will gradually be grafted. The variants that are emerging suggest that the future could move blockchain away from its initial project.
The history of digital technology has also taught us that the history has also taught us that the historical actors of a sector are rarely the actors of disruption, even when, like Kodak, they are the inventors. It is indeed very complicated for a company to develop services that compete with its core business and jeopardize its immediate profits.